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Inland Revenue

Tax Policy

Other allowances should also be specifically exempted

Clauses 35, 548 and 616


(32 – KPMG, 68 – New Zealand Institute of Chartered Accountants)

The present proposal to allow only two specific forms of tax-free allowances does not go far enough and should be expanded to other allowances that are commonly paid by employers – for example, clothing and footwear.


We do not consider this to be necessary. As noted in an earlier response:

  • The bill does not remove the more general provision that determines whether allowances are tax-free or taxable.
  • To assist in determining whether other allowances are non-taxable, Inland Revenue intends to finalise the interpretation guideline of the current law in this area that it first circulated for comment in late 2007.

Although it ultimately depends on the detail of each specific case, it would appear on the information available that many of the examples of allowances raised to date would likely continue to be non-taxable. The interpretation guideline, for example, discusses the circumstances in which clothing and footwear allowances would be non-taxable, such as when they involve protective clothing or uniforms.


That the submission be declined.