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Articles by Matthew Gilligan.
Late last year the IRD issued a raft of statements including draft new legislation and new interpretations of existing rules.
A few important ones that clients should note as potentially relevant are:
- The IRD have issued a new interpretation statement (not in draft form) on the taxation of accommodation benefits. Up until now it has been accepted by all in practice and the IRD themselves, that where an employer provides accommodation to an employee, the employee is only taxable on the net benefit. In other words, if the employee were incurring the cost of maintaining a home in another centre, they would only be taxable to the extent that the value of the accommodation provided exceeded the cost of maintaining their existing home. The IRD have done an about face on this position. They are now arguing that legislation does not support a net benefit approach and that any accommodation provided should be taxable on a gross basis. As noted, this is not a draft position. The IRD have released this statement as reflecting their current interpretation, and have invited taxpayers to consider their position in relation to this and if necessary lodge voluntary disclosure. If you are the provider or recipient of accommodation benefits and have any questions, please contact your Client Services Manager at GRA.
- Lease inducements and lease surrender payments are going to be taxable and deductible from 1 April 2013. Up until this date the general position is that a lease inducement payment paid by a landlord to a tenant is deductible to the landlord but not taxable to the tenant. This is on the basis that the payment would occur in the natural course of the landlord's business, but the receipt of a lease inducement payment by a tenant would be a relatively infrequent event and not a natural part of their business. This lack of symmetry has long concerned the IRD, so they are introducing legislation to reverse it. From 1 April 2013 all such payments will be deductible to the landlord and assessable to the tenant over the life of the lease. The same symmetry will apply to lease surrender payments where a tenant makes a payment to a landlord to exit a lease early. In that case, the payment will be deductible to the tenant and assessable to the landlord in the year in which it occurs.
- There is a significant rule change in relation to Fringe Benefit Tax application to carparks. At present, if a carpark is provided on premises to an employee it is generally not subject to FBT. Legislation is being introduced so that from 1 April 2014 all carparks provided in the Auckland CBD area will be subject to FBT regardless of whether they are on premises or not. Furthermore, outside of the Auckland CBD if the carpark is in a commercial carparking building, costs more than $210 a month and is provided by the employer to the employee, then it will also be subject to FBT. Finally, if the provision of the carpark is specifically in lieu of an increase in salary, then it is again subject to FBT. In other words, if you sacrifice salary which otherwise would have been taxable in order to obtain a carpark then the value of the carpark (which is equivalent to the salary sacrificed) is deemed to be a fringe benefit and subject to Fringe Benefit Tax.
As always, these comments are of a general nature only and not a substitute for advice on your specific circumstances. Please contact us at GRA if you wish to discuss any aspects of the above.
Matthew Gilligan
Managing Director and Property Services Partner
© Gilligan Rowe & Associates LP
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Disclaimer: This article is intended to provide only a summary of the issues associated with the topics covered. It does not purport to be comprehensive nor to provide specific advice. No person should act in reliance on any statement contained within this article without first obtaining specific professional advice. If you require any further information or advice on any matter covered within this article, please contact the author.
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