Firms which pay for employees' home broadband usage are to be hit with more tax.
The proposal is contained in Inland Revenue’s latest bid to get more tax out of employee benefits such as meal money and travel allowances.
As outlined in a discussion document on employee allowances, internet and other communication services supplied by the employer are to be taxed as though they are providing a personal benefit to the employee and not as though they are, wholly or partly, something to help the employee do their job.
IRD proposes that payments to meet internet and other electronic communication costs should be taxed in full when meeting mixed work-related and private expenses and there is no separately identifiable work or private element.
Most of the other proposals in the document are not unexpected and are "reasonably pragmatic", Deloitte New Zealand chief executive Thomas Pippos says.
"This one, though, doesn't seem to recognise the reality of today's workplace and has a whiff of overreach about it," he told NBR ONLINE.
"What they' re saying is that unless there is a clear business aspect to it this should all be taxed. But people work 24/7 these days and a broadband connection is just part of that."
The discussion document does suggest one alternative which is to just do a 50-50 split and tax half of the cost.
"I suspect we will end up with that," Mr Pippos says.
Other proposals in the paper include allowing meal money to remain tax-free and payments to meet meal and refreshment costs of employees are also not to be taxed so long as they are not part of regular remuneration.
Also included is a clearer steer on accommodation expenses for employees travelling away from the normal workplace. These are to stay exempt from tax, subject to a 12-month upper time limit, although this can be extended at IRD's discretion.
Meal money and accommodation allowances have been a long-standing area of tension between Inland Revenue and employers, and the IRD has had several previous attempts at tightening the revenue take in this area.
The latest proposals are, however, "a welcome dose of pragmatism", with the exception of the surprise over-reach on home broadband connections, Mr Pippos says.