The Institute of Chartered Accountants (NZICA) has joined the chorus of dismay over the Inland Revenue Department's decision to retrospectively tax accommodation allowances.
The accounting industry body says it is "deeply concerned" about the new tax, and says it will affect the Christchurch rebuild.
The change will have a significant impact on industries which rely on itinerant workers, such as agriculture, the film industry, and the effort to rebuild the quake-shattered city, NZICA says.
The new rule, announced in a statement yesterday, will mean that employers have to pay PAYE on any accommodation allowance an employee gets when working away from home.
NZICA acting general manager tax, Jolayne Trim, said the decision to make the rule change retrospective was a particular surprise.
IRD was recommending firms voluntarily disclose accommodation allowance payments going back as far as four years, she said.
It may also have an impact on payments such as Working for Families. "It could affect Kiwi families if it suddenly turns out their income is higher.
"NZICA considers this to be a retrospective law change of the worst kind.
"Inland Revenue is taking the chance that taxpayers will not have the resources available to question the commercial impracticality of its announcement," Trim said.
KPMG said the IRD's statement was "contrary to long-standing practice", where it was considered there was no benefit from such an allowance and no tax payable, if a worker had a home elsewhere.
The IRD "seems to be trying to rewrite history", KPMG said. "We are not convinced IRD has this right from either a technical or policy point of view." A retrospective change was not justified nor in line with good tax policy.
Accommodation may not be taxable when it was just overnight or for a short-term stay by a worker when they have to be away from home for work.
Deloitte chief executive Thomas Pippos said the IRD approach would be seen as "disappointing and unreasonable" by the tax community.
"The reality is that from a revenue perspective the amounts involved are trivial in aggregate, but can add up to a reasonable amount on a case by case basis."
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