In the midst of New Zealand’s second nationwide COVID lockdown, Inland Revenue issued updated guidance for businesses in Determination EE003, “Payments provided to employees that work from home; employee use of telecommunications tools and usage plans in their employment”

This Determination is broadly a rehash of previous statements released during 2020 and earlier in 2021. It will apply to payments made from 1 October 2021 to 31 March 2023 and will replace previous Determinations EE001, EE002, EE002A, and EE002B.

As was the case last year, this is not a recommendation as to whether a business should be paying such allowances or not. However, the statement provides guidance on the tax treatment of such payments where businesses choose to pay them.

In this Determination, the IRD states that where an employer pays an employee who is working from home an allowance, or pays an allowance in respect of the employee’s use of their personal telecommunications equipment and/or usage plans (an “affected employee”), certain amounts can be treated as exempt income of the affected employee.

The appropriate amount will vary based on the circumstances, including whether the employee works from home or not, whether they are using their own telecommunications devices and/or usage plans, and the degree of business or private use.