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Tax grab for employees' home broadband use proposed

Firms which pay for employees' home broadband usage are to be hit with more tax. 

The proposal is contained in Inland Revenue’s latest bid to get more tax out of employee benefits such as meal money and travel allowances. 
 
As outlined in a discussion document on employee allowances, internet and other communication services supplied by the employer are to be taxed as though they are providing a personal benefit to the employee and not as though they are, wholly or partly, something to help the employee do their job. 
 
IRD proposes that payments to meet internet and other electronic communication costs should be taxed in full when meeting mixed work-related and private expenses and there is no separately identifiable work or private element.
 
Most of the other proposals in the document are not unexpected and are "reasonably pragmatic", Deloitte New Zealand chief executive Thomas Pippos says.
 
"This one, though, doesn't seem to recognise the reality of today's workplace and has a whiff of overreach about it," he told NBR ONLINE.
 
"What they' re saying is that unless there is a clear business aspect to it this should all be taxed. But people work 24/7 these days and a broadband connection is just part of that."
 
The discussion document does suggest one alternative which is to just do a 50-50 split and tax half of the cost.
 
"I suspect we will end up with that," Mr Pippos says.
 
Other proposals in the paper include allowing meal money to remain tax-free and payments to meet meal and refreshment costs of employees are also not to be taxed so long as they are not part of regular remuneration.
 
Also included is a clearer steer on accommodation expenses for employees travelling away from the normal workplace. These are to stay exempt from tax, subject to a 12-month upper time limit, although this can be extended at IRD's discretion.
 
Meal money and accommodation allowances have been a long-standing area of tension between Inland Revenue and employers, and the IRD has had several previous attempts at tightening the revenue take in this area.
 
The latest proposals are, however, "a welcome dose of pragmatism", with the exception of the surprise over-reach on home broadband connections, Mr Pippos says.
 

More by Rob Hosking

Comments and questions

What about employer provided smartphones? They're always on... tax grab chance there too?

If this is Dunne and the Key govt's focus......then I'm going to vote Winston so that they are forced to deal with him and he will show them what real baubles and perks are about....

What about smart phones which are used for both and businesas and private purposes?

This is not quite right. Employer supplied communication equipment such as Marvin's smartphone will be outside the new rules and continue to fall within the FBT business tools exemption. This is where an employee has a signnificant ongoing need to be contacted or works away from their office. This is where there is incidental private use.

I agree with Mr Pippos that the 50% rule is a more realistic approach to this but you have to have some sympathy for a home internet connection being essentially a private benefit to a person that is, on occasion, used for business and should be subject to tax.

Exactly. In the interests of consistency and fairness 50% is hard to argue with.

So glad National is pushing back the nanny state.

Unlike IRD, not everyone clocks off work precisely at 5:00pm each night. As a company with international clients, we are often skyping or working from home before and after hours to connect with clients/colleagues and suppliers in different time zones.

Seems pretty desperate to start chasing tax at this level but then again the never satisfied bloated beast demands to be fed.

Perhaps companies should start similarly eliminating any revenue that is earned from the work done by employees from home.

All sounds a bit too desperate and shows civil servants have no clue as to what goes on in the real world.
Clearly some pen-pushing bozo is hankering for a promotion.

Sounds pretty desperate. Be better to encourage business to do more & tax the increased activity than to try and screw a few cents out the existing tax payers.

So how does this help remote working to reduce traffic congestion, reduce carbon emissions, improve work flexibly and productivity? It does not...another stupid idea by the tax scrooges!

Don't suggest it..

Instead of nit-picking on PAYE tax the foreigners who are making money out of NZ property.

How about you take back the freeloaders living here in Aus. Whilst your at it, tell all your Kiwi brothers and sisters that they shouldn't be buying houses and property here in Aus as well. Your comment reeks of jealousy probably due to the fact you can't afford property so thus you get peeved at others that can.

I suppose when the country is broke they have to dream up all sorts of stuff, the more complicated the better to at least keep some govt drones engaged thinking they are doing something productive.
I wouldn't expect any ideas for us to follow the lead from across the ditch to have a good wad of initial earnings tax free. That wouldn't encourage anything would it?

John Key's Socialism. Just a slower way to bankruptcy.
Pathetic.

Now watch Peter Dunne step in and stop this trivial nonscence.

Peter Dunne... can anyone tell me how much has been sunk into the Families Commission who we hear nothing from ever... $250 - $500 million? since he's been there just to keep him 'on board'. This man is a national disgcrace, how can we send the bill to the voters in Ohariu Belmont., you lot have a lot to answer for.

Must be time to start claiming a deduction for the cost of the clothing I have to wear. Afterall, there is no personal benefit. It is only worn to avoid the wholesale departure of clients.

when large corporations can pay less % tax than a PAYE slave then the system is wrong... tax companies properly and we wouldnt have to penny pinch the people

Companies don't incur tax - the tax is paid on behalf of the shareholders, or paid by reduced wages on employees or higher costs by other taxpayers.

The net effect is, generally accepted, as being a greater cost than the tax raised. However it is impossible to cut corp tax to nil as it is a nice easy one to tax - and not too many people get annoyed by it. Even though they have to pay more in the long run.

What absolute cr*p!!!!!! Companies DO incur tax, it's called a company tax you moron. Please try running a company first before shooting your mouth off at something you have NO IDEA about.

I run an ISP. As part of my operation, I extend my network to home. I operate the network from home as a teleworker. I don't charge myself for this connection. The IRD can go jump. Great way to hold back the development of a nation.

Rubbish. It's trivial and y' gotta say, fair.

How about treating as a non deductible expense the costs of a staff members partner (wide definition) travelling with the staff member? One might start with the PM and Cabinet but it applies in both the Govt and private sector.

Why doesn't Sanitarium pay tax ?

For the same reason the Salvation army, with their nationwide chain of shops. don't..

Except the Sallies don't go out threatening other 2nd hand dealers with court action and secretly setting up other outlets under different names and being large enough with secret whispers get NZ Customs to kick down doors and vandalise.
Sanitarium are a full on business just as Greenpeace has been found to be a political organisation and should not enjoy unfair tax free status compared to those like Hubbard etc.

IRD has completely forgotten they are an enforcement branch of govt. NOT a policy-making branch.

I blame the Statist-sympathetic judges and courts who have given the IRD a free pass at every turn they have made to over-reach their already formidable policing powers these last few years.

Reign these buggers in before NZ forgets who makes the rules and who pays for the rule-makers. IRD should not be making stuff up like this, they are enforcement. How would it work if the police made up the laws as they went along??

It doesn't.

We should be aiming at Peter Dunne over this IRD intention.

Great point, the best way to stop this sort of thing is through pressure on our elected representatives. If people stop voting for Dunne, and let him know this is one of the reasons why, then some notice will be taken.

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