Appendix - Commissioner’s Operational Approach to Temporary Shifts

CS 12/01 Appendix illustrates the treatment of temporary shifts for work purposes, and factors in determining when a shift is likely to be temporary.

Important	New tax rules on accommodation
On 30 June 2014 the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 was enacted. This legislation introduced changes to the tax rules that deal with the taxation of employer-provided accommodation, accommodation payments, and other allowances and payments made by employers to cover employee expenditure. In general these new tax rules, as they relate to accommodation, apply from 1 April 2015. However, in some circumstances it is possible for employers to elect that some of the changes regarding employer-provided accommodation and accommodation payments can apply to a period prior to 1 April 2015 in accordance with section CZ 30 of the ITA 2007. In circumstances where an employer chooses to apply the new accommodation rules retrospectively, to the extent that these new rules differ from the existing rules, CS 12/01 and its appendix will no longer apply to that arrangement from the retrospective date chosen by the employer. However, where no election is made by the employer to apply the new rules retrospectively or the employer is unable to make such an election (e.g. the employer had taken a tax position that the accommodation was taxable before 6 December 2012 - section CZ 30(2)), and to the extent that the current rules continue to apply until 1 April 2015, the Commissioner considers that CS 12/01 and its appendix still sets out her position as to how those existing rules apply. A special report on the new rules is on the Tax Policy website in advance of full coverage of the new legislation in the Tax Information Bulletin Vol 26, No 7, August 2014.

Important

New tax rules on accommodation

On 30 June 2014 the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 was enacted. This legislation introduced changes to the tax rules that deal with the taxation of employer-provided accommodation, accommodation payments, and other allowances and payments made by employers to cover employee expenditure. In general these new tax rules, as they relate to accommodation, apply from 1 April 2015. However, in some circumstances it is possible for employers to elect that some of the changes regarding employer-provided accommodation and accommodation payments can apply to a period prior to 1 April 2015 in accordance with section CZ 30 of the ITA 2007. In circumstances where an employer chooses to apply the new accommodation rules retrospectively, to the extent that these new rules differ from the existing rules, CS 12/01 and its appendix will no longer apply to that arrangement from the retrospective date chosen by the employer.

However, where no election is made by the employer to apply the new rules retrospectively or the employer is unable to make such an election (e.g. the employer had taken a tax position that the accommodation was taxable before 6 December 2012 - section CZ 30(2)), and to the extent that the current rules continue to apply until 1 April 2015, the Commissioner considers that CS 12/01 and its appendix still sets out her position as to how those existing rules apply.

A special report on the new rules is on the Tax Policy website in advance of full coverage of the new legislation in the Tax Information Bulletin Vol 26, No 7, August 2014.

The following should be read with the Commissioner's Statement CS 12/01. It illustrates the treatment of temporary shifts, and the factors that need to be taken into account in determining when a shift is likely to be regarded as temporary.

The comments below are illustrative, but different factors may alter the tax treatment.

Generally, accommodation payments made by an employer or the value of accommodation provided by an employer are taxable in the hands of the employee. However, these payments or the value of the accommodation provided may not be taxable when they relate to a temporary shift for work purposes.¹ This is because expenditure related to this accommodation is unlikely to be of a private or domestic nature. A temporary shift for work purposes is where the employee, in the course of doing their job, is required to stay temporarily away from the place where they live (i.e. their home base).

It is not unusual for an employee to work away from home on temporary assignment. In these situations the employer may provide or pay for accommodation for the period of the assignment. While the employee is physically absent from their residence or home base, generally they have not relocated. While it is a matter of fact in every case, it is expected that the place where they "live" for all practical purposes remains their home base. In the Commissioner's view, for the purposes of determining the tax treatment of accommodation, where a person lives is not determined solely by the location of the house or dwelling that they live in on any particular day. Rather it is determined on the basis of the person's circumstances. Clearly, if the location of the house or dwelling is also the centre of their domestic life and where their substantive employment is located, that location is the place where they live.

The Commissioner considers that the appropriate test for determining whether an employee has temporarily shifted to another location (or alternatively whether they have relocated), is to determine whether they live in their home base or in the new location.

Determining where a person lives involves a weighing of all the factors.

Factors to consider when determining whether a current employee has made a temporary shift include:

Has the employee relocated and established that they are living in a new location?
Does the employee retain their substantive employment position in the original location, or has the employee relocated to take up new employment?
What is the duration of the transfer? The shorter the transfer period the more likely it is that the transfer is temporary. Equally, the longer a transfer the more likely it is that the transfer is more than temporary.
Does the original location (where their substantive job is) remain the centre of the person's domestic life?
Is the payment from the employer effectively paying the employee's mortgage for a property at the new location? The acquisition of property in the new location suggests a more than temporary move.
Has the employee retained a home (either owned or rented by them) in their old location which is available to them? This is relevant not because of the costs incurred but rather what it suggests about the nature of the arrangement. Along with other factors, the retention of a home can sometimes suggest an intention to return and may imply that the arrangement is temporary and work related rather than personal. However this factor alone is not determinative.

When an employee shifts to take up a new job with a new employer this is not considered to be a temporary shift. This is because they have not shifted in the course of doing their job. Rather, they have shifted to enable them to take up new employment. This new employment may be on a temporary or permanent basis. Any accommodation or accommodation payment they receive from their new employer will be subject to tax unless the exemption in section CW 17B for work-related relocations applies.

Examples
The following examples are intended to demonstrate the application of the above factors. The examples do not cover the way in which the accommodation to the employee is provided or paid, which can affect the tax treatment of the accommodation. A works for a firm of accountants. The accountants have two offices - one in Auckland and a smaller office in Dunedin. A's job is based in Auckland, where he lives with his parents. A is sent to Dunedin to assist with an audit. He is away from Auckland for three nights, and stays in a hotel in Dunedin. After the audit, he returns to Auckland. A is staying short-term away from his home location in the performance of his employment duties. Therefore, the cost of his hotel is not taxable. When one of the accountants in the Dunedin office falls ill, and is required to be away from work for six weeks, A is asked to fill-in for that 6 week period. A agrees with his employer that he will come back to Auckland for a 3 day weekend after 3 weeks, but otherwise will stay in Dunedin for the whole period. His employer will put him up in a motel for the whole period (including the period he is back in Auckland). A is undertaking the work in Dunedin at the request of his employer. The duration of the work in Dunedin clearly indicates that this is a temporary shift. His job remains open in Auckland and he is staying in a motel while he is in Dunedin. Therefore, it is considered that A has not relocated to Dunedin. The cost of his motel is not taxable as this is a temporary shift to another location as part of the performance of his current employment duties. Due to unforeseen circumstances, it turns out that the Dunedin staff member cannot return to work. The staff member's position is being advertised, but A has agreed to extend his stay in Dunedin for an additional 10 weeks (four months in total). Other than a couple of long weekends in Auckland during the extended period, A will stay in Dunedin (and the motel paid for by his employer) for the whole time. A has made it clear to his employer that he is not staying in Dunedin and will be returning to Auckland at the end of 4 months. The job in Auckland remains available to A and the intention of the parties is that he will return to Auckland at the end of the four-month period. While the duration of his stay is longer than the original 6 weeks, it still indicates a shift which is temporary in nature because it is of a limited duration. It is considered that A has not changed the place where he lives. Rather, it suggests that this shift is temporary in nature and therefore the cost of his motel is not taxable as the shift occurred as part of the performance of his current employment duties. A's circumstances change as he has established a new relationship in Dunedin and wants to live in Dunedin permanently. He applied for the vacant Dunedin position, and has been appointed, becoming a permanent staff member in Dunedin at the end of the four month period. However, the firm has agreed to pay for a further six weeks in the motel, after which he will be expected to find (and pay for) his own accommodation. As A has now become a permanent staff member in Dunedin it is considered that he has relocated to Dunedin. The additional six weeks in the motel will be taxable to A, unless the requirements in the relocation exemption in section CW 17B are met.² Some time later, A is now settled in Dunedin. He is married, has a mortgage, and a young child. His employer asks him to temporarily manage the firm's Auckland office and he agrees to be the temporary manager there for three months. He travels from Dunedin to Auckland each Monday morning, returning on Friday evening. During this time the firm brings in a contractor to cover A's job in the Dunedin office. Although A is now working in Auckland on a temporary basis, as his wife and family and the home that they own remain in Dunedin, the centre of his domestic life is Dunedin. The shift to Auckland is intended to be temporary in nature and it is envisaged that he is able to return to his substantive job in Dunedin at the end of the three-month period. A has not changed the place where he lives and therefore it is considered that this is a temporary shift undertaken at the request of the employer. As such, the cost of the hotel accommodation in Auckland is not taxable to A. The job in Auckland turns out to be bigger than expected, and is extended for a further three months (making six months in total). Commuting is becoming too difficult, so A's family join him in Auckland for the period, and they all move into a serviced apartment, which the firm pays for. He keeps his house in Dunedin, where it remains empty. The contractor covering A's job in Dunedin has their contract extended indefinitely. The total period for A's temporary shift is now six months and for the final three months the family is now based in the apartment in Auckland. This could be seen as suggesting a more than temporary shift. However, A's job in Dunedin remains available to him. In addition, his house in Dunedin remains empty. A and family are clearly living in temporary accommodation. The total duration of six months could still be seen as temporary. The intention of the parties is that the arrangement is temporary. After an evaluation of these factors, it is considered that this is still likely to be a temporary shift and that the cost of the serviced apartment is not taxable to A. The job in Auckland is extended for a further nine months. A and his family move into a rented house in Auckland that the firm pays for. A rents out his house in Dunedin for a nine month lease. A has moved the family to Auckland and they are living in rented accommodation in Auckland. The Dunedin house has been rented out. It is considered that the centre of A's domestic life has moved to Auckland. The duration of the arrangement, being a further nine months, also tends to suggest that A may have relocated where he lives to Auckland. While A's job in Dunedin remains open and he continues to own a house in Dunedin, it is considered based on an evaluation of all the factors that A has now relocated the place where he lives to Auckland. As such, the shift is more than temporary in nature and the accommodation payment received is taxable to A. A agrees to continue in his job in Auckland permanently and A and his family continue to live in the house rented by his employer. The employer pays market rent of $500 a week but as part of A's new contract, A will pay $200 per week to the employer as a contribution to the rental. As A has permanently relocated, this is no longer a temporary shift and the accommodation is taxable. As the employer is providing A with subsidised rental accommodation, A is taxable on the market value of the subsidised accommodation A is receiving, which is $300 per week. A's employer is seeking to appoint a new partner to the firm. B, formerly employed in Sydney, takes up the new partnership position in the firm and shifts to Auckland. B retains her house in Sydney and leaves her adult children living in the Sydney house. As part of B's contract, her new employer agrees to pay B an accommodation payment of $100,000 annually. As B has relocated to Auckland to take up a job with her new employer, the accommodation payment will be taxable, unless the requirements in the relocation exemption in section CW 17B are met. C, a Dunedin-based employee of a national firm is asked to work in Christchurch as part of the rebuild for nine months. C's employer owns an apartment in Christchurch which is provided to C during the period he is working in Christchurch. C's temporary secondment to Christchurch is extended to 12 months. C commutes to Christchurch every week on Monday and returns to Dunedin on Friday evenings. Throughout this period C's family remain in the family home in Dunedin. The total period of C's temporary work shift is 12 months and this could be seen as strongly suggesting a more than temporary shift. However, C's job in Dunedin remains available to C and the intention of the parties is that C will return to Dunedin at the end of the 12 month period. C's family remain in the family home in Dunedin. C commutes back from Christchurch to Dunedin every weekend. After an evaluation of these factors, it is considered that, on balance, this is still likely to be a temporary shift and that the accommodation provided to C is not taxable to C. The Commissioner considers that a shift of between 6 and 12 months could potentially be a temporary shift but that a shift of over 12 months is likely to be more than a temporary shift unless exceptional circumstances exist. D is an engineer in a national firm, based in Auckland. He is offered a development opportunity by the firm to manage the firms engineering work in Christchurch for the length of the Christchurch rebuild. This involves living in Christchurch and it is anticipated that this will continue for several years. His wife and children remain in Auckland and continue to live in the family home. D travels home most weekends to see his family. While in Christchurch, D lives in an apartment paid for by the firm. It is considered that in spite of the fact that D's family remain in Auckland and the fact that ultimately the Christchurch rebuild will have a finite life, the length of time involved indicates that the work arrangement that has been entered into is more than temporary. Where D works is now Christchurch. Effectively D has relocated for work purposes and is taxable on the market value of the accommodation provided, unless the requirements in the relocation exemption in section CW 17B are met. E is employed by a multinational firm. E has been sent to Auckland from her home in Sydney on a two year contract assisting the firm's New Zealand operations. The firm has provided E with a serviced apartment to live in Auckland. E's family remain in Sydney and E travels to visit them regularly. However, E spends most of her time (including weekends) in Auckland. Although E's family remain in Sydney it is considered that E lives, for the duration of the contract, in Auckland. Auckland is where her work is and where she spends most of her time. In addition, the length of the contract strongly suggests the arrangement is more than temporary. E is taxable on the market value of the serviced apartment, unless the requirements in the relocation exemption in section CW 17B are met.

Examples

The following examples are intended to demonstrate the application of the above factors. The examples do not cover the way in which the accommodation to the employee is provided or paid, which can affect the tax treatment of the accommodation.

A works for a firm of accountants. The accountants have two offices - one in Auckland and a smaller office in Dunedin. A's job is based in Auckland, where he lives with his parents.

A is sent to Dunedin to assist with an audit. He is away from Auckland for three nights, and stays in a hotel in Dunedin. After the audit, he returns to Auckland.

A is staying short-term away from his home location in the performance of his employment duties. Therefore, the cost of his hotel is not taxable.
When one of the accountants in the Dunedin office falls ill, and is required to be away from work for six weeks, A is asked to fill-in for that 6 week period. A agrees with his employer that he will come back to Auckland for a 3 day weekend after 3 weeks, but otherwise will stay in Dunedin for the whole period. His employer will put him up in a motel for the whole period (including the period he is back in Auckland).

A is undertaking the work in Dunedin at the request of his employer. The duration of the work in Dunedin clearly indicates that this is a temporary shift. His job remains open in Auckland and he is staying in a motel while he is in Dunedin. Therefore, it is considered that A has not relocated to Dunedin. The cost of his motel is not taxable as this is a temporary shift to another location as part of the performance of his current employment duties.
Due to unforeseen circumstances, it turns out that the Dunedin staff member cannot return to work. The staff member's position is being advertised, but A has agreed to extend his stay in Dunedin for an additional 10 weeks (four months in total). Other than a couple of long weekends in Auckland during the extended period, A will stay in Dunedin (and the motel paid for by his employer) for the whole time. A has made it clear to his employer that he is not staying in Dunedin and will be returning to Auckland at the end of 4 months.

The job in Auckland remains available to A and the intention of the parties is that he will return to Auckland at the end of the four-month period. While the duration of his stay is longer than the original 6 weeks, it still indicates a shift which is temporary in nature because it is of a limited duration. It is considered that A has not changed the place where he lives. Rather, it suggests that this shift is temporary in nature and therefore the cost of his motel is not taxable as the shift occurred as part of the performance of his current employment duties.
A's circumstances change as he has established a new relationship in Dunedin and wants to live in Dunedin permanently. He applied for the vacant Dunedin position, and has been appointed, becoming a permanent staff member in Dunedin at the end of the four month period. However, the firm has agreed to pay for a further six weeks in the motel, after which he will be expected to find (and pay for) his own accommodation.

As A has now become a permanent staff member in Dunedin it is considered that he has relocated to Dunedin. The additional six weeks in the motel will be taxable to A, unless the requirements in the relocation exemption in section CW 17B are met.²
Some time later, A is now settled in Dunedin. He is married, has a mortgage, and a young child. His employer asks him to temporarily manage the firm's Auckland office and he agrees to be the temporary manager there for three months. He travels from Dunedin to Auckland each Monday morning, returning on Friday evening. During this time the firm brings in a contractor to cover A's job in the Dunedin office.

Although A is now working in Auckland on a temporary basis, as his wife and family and the home that they own remain in Dunedin, the centre of his domestic life is Dunedin. The shift to Auckland is intended to be temporary in nature and it is envisaged that he is able to return to his substantive job in Dunedin at the end of the three-month period.

A has not changed the place where he lives and therefore it is considered that this is a temporary shift undertaken at the request of the employer. As such, the cost of the hotel accommodation in Auckland is not taxable to A.
The job in Auckland turns out to be bigger than expected, and is extended for a further three months (making six months in total). Commuting is becoming too difficult, so A's family join him in Auckland for the period, and they all move into a serviced apartment, which the firm pays for. He keeps his house in Dunedin, where it remains empty. The contractor covering A's job in Dunedin has their contract extended indefinitely.

The total period for A's temporary shift is now six months and for the final three months the family is now based in the apartment in Auckland. This could be seen as suggesting a more than temporary shift.

However, A's job in Dunedin remains available to him. In addition, his house in Dunedin remains empty. A and family are clearly living in temporary accommodation. The total duration of six months could still be seen as temporary. The intention of the parties is that the arrangement is temporary.

After an evaluation of these factors, it is considered that this is still likely to be a temporary shift and that the cost of the serviced apartment is not taxable to A.
The job in Auckland is extended for a further nine months. A and his family move into a rented house in Auckland that the firm pays for. A rents out his house in Dunedin for a nine month lease.

A has moved the family to Auckland and they are living in rented accommodation in Auckland. The Dunedin house has been rented out. It is considered that the centre of A's domestic life has moved to Auckland. The duration of the arrangement, being a further nine months, also tends to suggest that A may have relocated where he lives to Auckland.

While A's job in Dunedin remains open and he continues to own a house in Dunedin, it is considered based on an evaluation of all the factors that A has now relocated the place where he lives to Auckland. As such, the shift is more than temporary in nature and the accommodation payment received is taxable to A.
A agrees to continue in his job in Auckland permanently and A and his family continue to live in the house rented by his employer. The employer pays market rent of $500 a week but as part of A's new contract, A will pay $200 per week to the employer as a contribution to the rental.

As A has permanently relocated, this is no longer a temporary shift and the accommodation is taxable. As the employer is providing A with subsidised rental accommodation, A is taxable on the market value of the subsidised accommodation A is receiving, which is $300 per week.
A's employer is seeking to appoint a new partner to the firm. B, formerly employed in Sydney, takes up the new partnership position in the firm and shifts to Auckland. B retains her house in Sydney and leaves her adult children living in the Sydney house. As part of B's contract, her new employer agrees to pay B an accommodation payment of $100,000 annually.

As B has relocated to Auckland to take up a job with her new employer, the accommodation payment will be taxable, unless the requirements in the relocation exemption in section CW 17B are met.
C, a Dunedin-based employee of a national firm is asked to work in Christchurch as part of the rebuild for nine months. C's employer owns an apartment in Christchurch which is provided to C during the period he is working in Christchurch. C's temporary secondment to Christchurch is extended to 12 months. C commutes to Christchurch every week on Monday and returns to Dunedin on Friday evenings. Throughout this period C's family remain in the family home in Dunedin.

The total period of C's temporary work shift is 12 months and this could be seen as strongly suggesting a more than temporary shift.

However, C's job in Dunedin remains available to C and the intention of the parties is that C will return to Dunedin at the end of the 12 month period. C's family remain in the family home in Dunedin. C commutes back from Christchurch to Dunedin every weekend.

After an evaluation of these factors, it is considered that, on balance, this is still likely to be a temporary shift and that the accommodation provided to C is not taxable to C.

The Commissioner considers that a shift of between 6 and 12 months could potentially be a temporary shift but that a shift of over 12 months is likely to be more than a temporary shift unless exceptional circumstances exist.
D is an engineer in a national firm, based in Auckland. He is offered a development opportunity by the firm to manage the firms engineering work in Christchurch for the length of the Christchurch rebuild. This involves living in Christchurch and it is anticipated that this will continue for several years. His wife and children remain in Auckland and continue to live in the family home. D travels home most weekends to see his family. While in Christchurch, D lives in an apartment paid for by the firm.

It is considered that in spite of the fact that D's family remain in Auckland and the fact that ultimately the Christchurch rebuild will have a finite life, the length of time involved indicates that the work arrangement that has been entered into is more than temporary. Where D works is now Christchurch. Effectively D has relocated for work purposes and is taxable on the market value of the accommodation provided, unless the requirements in the relocation exemption in section CW 17B are met.
E is employed by a multinational firm. E has been sent to Auckland from her home in Sydney on a two year contract assisting the firm's New Zealand operations. The firm has provided E with a serviced apartment to live in Auckland. E's family remain in Sydney and E travels to visit them regularly. However, E spends most of her time (including weekends) in Auckland.

Although E's family remain in Sydney it is considered that E lives, for the duration of the contract, in Auckland. Auckland is where her work is and where she spends most of her time. In addition, the length of the contract strongly suggests the arrangement is more than temporary. E is taxable on the market value of the serviced apartment, unless the requirements in the relocation exemption in section CW 17B are met.

Operational Application

If an employee, while working for their current employer, shifts to a new location for work related purposes for a period of less than six months (and it was always intended that the shift be less than six months), the Commissioner generally considers that the shift is likely to be temporary in nature and, therefore, the accommodation payments or the value of the accommodation provided is not taxable. In these circumstances, the CIR has decided, pursuant to the CIR's care and management powers, that Inland Revenue will not be devoting any resources to investigate such arrangements that are less than six months in duration. This approach does not apply if the person has shifted to take up a new job with a new employer.

¹This tax treatment can result from applying a number of sections in the Income Tax Act 2007 (i.e. sections CE 1, CE 5, CW 17, CW 17B and CX 20) depending on the particular circumstances.

²For guidance refer to Determination 09/04 Eligible relocation expenses.

Reference

CS 12/01

Issued

2012