As a result of Covid19 and a major shift in the workforce, many of us found ourselves setting up our workstations at home. IRD released a temporary ruling which made it easier for employers to reimburse their employees for additional costs they may face as a result of working from home, like increased internet, electricity or phone bills.
There have been conflicting media reports recently regarding the impact this determination. It allows employers to reimburse their staff up to $20 a week tax-free, without having to satisfy the usual requirements regarding proof of the actual expenses incurred.
Employers are also able to pay up to $400 tax-free to employees under the new determination, where the employee has incurred expenses in purchasing equipment or furniture to work from home.
Previously, employers were only able to pay employees $5 a week tax-free for phone expenses, before requiring evidence that any further expense was a result of working from home.
IRD’s measures are a temporary response, recognising the shift in the workforce as a result of our Covid19 response, and these payments will only apply to expenses incurred between 17 March and 17 September.
IRD was quick to point out that despite the ruling, this did not necessarily mean that employers are obliged to make these payments to staff who were working from home – acknowledging that many businesses may not be in a financial position to make the additional payments to staff working from home. That said, employers have a common law obligation to indemnify their employees for any costs incurred in the reasonable performance of their duties.