IRD has made a determination (Determination EE002) regarding payments made by employers to their employees to reimburse costs incurred as a result of the employees working from home during the COVID-19 pandemic.
This determination means that employers can pay employees, who are working from home, up to $20 a week tax-free for their home office expenses such as additional heating costs. They do not have to estimate or show what the employee’s actual expenses were. In addition to this employers can also make a tax-free payment of up to $400 per employee for furniture costs.
The determination only applies to payments for expenses incurred between March 17 and September 17 2020.
For this Determination to apply:
- An employer must make a payment to an employee.
- The payment must be for expenditure or a loss incurred (or likely to be incurred) by the employee.
- The expenditure or loss must be incurred by the employee in deriving their employment income and not be private or capital in nature.
- The payment must be made because the employee is doing their job and the employee must be deriving employment income from performing their job.
- The expenditure or loss must be necessary in the performance of the employee’s job.
- The expenditure or loss must be incurred by the employee as a result of the employee being required to work from home because of the COVID-19 pandemic.
This Determination does not apply to:
- Expenditure on account of an employee.
- Any payments made for a period after an employee ceases to work from home.
- An amount paid under a salary sacrifice arrangement.
- To a payment made to an employee to compensate the employee for the conditions of their service.