Federated Farmers: Call for extra focus on tax treatments

Nick Clark

Farming employers and employees are being urged to talk more about tax and benefit allowances, Federated Farmers manager general policy Nick Clark says.

Inland Revenue is consulting on the question of what the tax treatments should be for allowances paid and benefits provided to farm workers, and people have until Friday to make a submission.

Mr Clark said benefits allowances covered things such as boarding school fees, while reimbursement allowances were given for things such as wet weather gear and dogs.

''What the IRD is doing is to clarify existing tax treatments.

''Up until now there have been various benefit allowances and reimbursement allowances, while the accommodation allowance is slightly different and a separate issue.''

He said farm employers reimbursed their workers for items necessary for their job.

That included things like wet weather gear, protective clothing, mileage, shearing equipment, and if an employee provided a quad or motorbike, he would be reimbursed for maintenance, fuel, etc.

If an employee ran dogs, they could be reimbursed for feeding and registering them, and vet bills.

''These have always been not taxed and the employee does not have to consider them as part of PAYE,'' Mr Clark said.

However, some of the IRD's rates of reimbursement were very old, going back 40-50 years.

The amounts would be out of date so the IRD was updating the figures. Employers were being encouraged to make a reasonable estimate of costs.

The department was also clarifying issues around benefit allowances, and that might result in changes for some employers and employees, Mr Clark said.

He urged employers to talk to their accountants, and employees to talk to their employers, if there were any changes and to ensure they were compliant with any new rules.

Employers might provide a remote-living allowance or offer to pay for the employee's children's boarding school fees.

''Those top up the salary and become taxable.

''For the employer they remain deductable and he pays PAYE for the employee.''

It was important to ensure people were not disadvantaged by any changes in practices

and that was something that needed to be talked about, he said.

''However, most employers will do the right thing.''

Gifts of food, such as a sheep for the freezer for an employee, was subject to a fringe benefit tax but the IRD preferred that type of benefit to be monetised.

''IRD will be making things clearer down the line.''

Federated Farmers intended to make a brief submission around the clarification.

-By Yvonne O'Hara

Southern Rural Life