Workers who have relocated to Christchurch at their employers' expense risk having their accommodation costs treated as income under a new tax department ruling described by one major accounting firm as "a significant and unwelcome change in approach".
The Inland Revenue Department issued a special "Commissioner's Statement" on the issue on Thursday, saying employers will be required to count accommodation costs as income when paid on behalf of staff if they are spending any more than a few nights away from home.
"Inland Revenue acknowledges that a number of people around the country spend time working away from their home and they continue to meet the costs of their home," said IRD group counsel Graham Tubb.
"However, accommodation payments by the employers in some circumstances can constitute an additional income stream that is subject to tax.
"It is important that the correct treatment is applied."
KPMG tax partner Murray Sarelius accused the tax department of rewriting the rules in order to deal with what appeared to be "a few extreme cases on audit".
The new position was contrary to common practice and "is stretching to justify its position in a way that applies much too broadly. The result penalises the majority of situations where there should not be an issue".
The ruling was likely to have an impact on employers and employees relocated temporarily to help with the Christchurch earthquake rebuild.
"Inland Revenue is suggesting they should be taxed on their accommodation, regardless of the fact that they and their families live elsewhere," Mr Sarelius said, warning it could increase student loan repayment requirements or reduce Working Families entitlements because accommodation paid by the employer would be counted as increasing the employee's total income.
"Inland Revenue seems to have missed the modern reality of workforce mobility."