Travel Allowance Taxable In Nz: What You Need To Know

In New Zealand, employers can choose to provide allowances on top of their employees' usual pay to cover expenses such as travel costs. These allowances may be taxable or tax-free, depending on the circumstances. In general, travel allowances are taxable via PAYE, but there are several situations in which they are tax-free. For example, if an employee is working outside their normal hours, carrying work-related tools or equipment, or travelling due to a temporary change in the workplace, their travel allowance is typically tax-free. Additionally, if there is a lack of adequate public transportation, only the first $5 of the daily travel allowance is taxable, with any additional amount being tax-free.

Tax-free travel allowances

In New Zealand, travel allowances are taxable through the PAYE system. However, there are certain circumstances under which they are tax-free.

If an employee is travelling between their home and work, the following conditions must be met for the travel allowance to be tax-free:

• They are working outside their normal hours, e.g. overtime, shift or weekend work.
• They need to carry work-related tools or equipment, e.g. they usually commute by bus but need to take a taxi or their own vehicle to transport work gear.
• They are travelling to fulfil a statutory obligation.
• They have a temporary change in the workplace.
• They have some other work-related condition that requires them to travel.
• They cannot access adequate public transport.

In the case of inadequate public transport, only the first $5 of the daily travelling allowance is taxable, with any additional amount being tax-free.

The tax-free amount is the actual cost of travelling between home and work, less the employee's usual travel costs. This applies to all circumstances except the lack of adequate public transport.

It is important to note that the proposed rule refinements by the Inland Revenue include specifications such as the additional cost benefiting the employer and not the employee, the maximum distance of 70km (35km each way) for an employee to be paid, and the distinction between the difficulty of accessing public transport from an employee's home and the distance of the employer's premises from public transport.

Taxable travel allowances

In New Zealand, travel allowances are taxable through the PAYE system. However, there are certain circumstances under which they are tax-free.

If an employee is travelling between their home and work, this is usually taxed through PAYE. However, it will be tax-free for employees working outside their normal hours, such as overtime, shift or weekend work, or those carrying work-related tools and equipment. It will also be tax-free for employees travelling to fulfil a statutory obligation, those with a temporary change in the workplace, or those with no adequate public transport system serving their workplace. In this last case, only the first $5 of the daily travelling allowance is taxable, with any additional amount being tax-free.

There are also tax exemptions for travel allowances relating to accommodation. For example, if an employee is attending a work-related meeting, conference or training course that requires an overnight stay, or if they are working somewhere they can't travel to every day, any accommodation allowance is tax-free.

It's important to note that reimbursements for travel expenses are generally not taxed as allowances. These are added to the employee's net salary after PAYE has been taken out. However, if the reimbursement exceeds the employment-related expense, the difference is subject to PAYE.

Employer-provided travel from home to a distant workplace

In New Zealand, employers can choose to provide allowances on top of their employees' usual pay. These allowances are extra payments for things like travel costs and are taxed through the PAYE system. Some allowances are taxable, while others are tax-free, depending on the circumstances.

When it comes to employer-provided travel from an employee's home to a distant workplace, there are a few scenarios to consider. Firstly, if an employee is working outside their normal hours, such as overtime, shift work, or weekend work, the travel allowance is usually tax-free. This also applies if the employee needs to carry work-related tools or equipment and cannot use their usual mode of transportation, such as a bus. Additionally, if there is no adequate public transportation system serving the workplace, the travel allowance may be tax-free.

In most cases, the tax-free amount of the travel allowance is the actual cost of travelling between home and the distant workplace, less the employee's usual travel costs. However, if the only reason for the travel allowance is the lack of adequate public transportation, only the first $5 of the daily travelling allowance is taxable, and any additional amount is tax-free.

It is important to note that the rules around travelling distances for work are not always clear, and what constitutes a "reasonable" distance can vary depending on the specific circumstances. Employers should refer to the employment contract and consider the scope of any mobility clause that allows for relocation. Additionally, offering financial incentives, such as travel expenses, can help mitigate objections and foster positive working relationships.

Temporary change in workplace

A temporary change in the workplace can impact the taxability of travel allowances. In New Zealand, employers can pay a cash allowance to employees for travel between their home and workplace. This allowance is typically taxable via the PAYE system, but there are certain circumstances under which it is tax-free.

One such circumstance is when an employee experiences a temporary change in their workplace. In this case, the travel allowance is considered tax-free, reimbursing the employee for their additional transport costs. This scenario is outlined in Operational Statement 23/01, which clarifies when tax-free travel allowances apply and guides employers in determining the amount of tax payable.

It is important to note that the tax-free amount of the allowance should be added to the employee's net salary or wages after PAYE deductions. Additionally, the taxable amount should be included in the employee's gross pay, with the necessary PAYE deductions made. Proper record-keeping is crucial, and these records must be maintained for a minimum of seven years.

Employers should carefully review the relevant guidelines and consult official sources, such as the Inland Revenue Employer's Guide, to ensure they are complying with the applicable tax regulations when providing travel allowances to employees during a temporary change in the workplace.

Taxable and non-taxable amounts

In New Zealand, travel allowances are extra payments made by employers to their employees to cover travel costs between home and work. These allowances can be taxable or tax-free, depending on the circumstances.

If an employee is unable to access adequate public transportation, only the first $5 of the daily travel allowance is taxable. Any additional amount is tax-free. This means that if an employee's travel allowance exceeds $5 per day due to inadequate public transportation, only the first $5 will be subject to tax.

On the other hand, if there is adequate public transportation available, the tax-free amount is the employee's additional costs. This refers to the actual cost of travelling between home and work, excluding the employee's usual transport costs. In this case, the employer can use kilometre rates to calculate the tax-free amount if the actual cost is not available.

There are several scenarios where travel allowances may be tax-free. These include, but are not limited to, situations where employees:

• Work outside their normal hours, such as overtime, shift work, or weekend work.
• Need to carry work-related tools or equipment that cannot be easily transported using public transportation.
• Are travelling to fulfil a statutory obligation.
• Have a temporary change in their workplace location.
• Have a workplace that is not easily accessible by public transportation.

It is important for employers to correctly calculate and account for travel allowances. Taxable amounts should be added to the employee's gross pay, with applicable PAYE deductions made. Tax-free amounts should be added to the employee's net salary or wages after PAYE has been calculated. Proper records of both taxable and tax-free allowances should be maintained, as per Inland Revenue guidelines.

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