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Inland Revenue

Tax Policy

Fact sheet - Welfare contributions by employers


Some employers have provided a range of welfare benefits to their employees to help them cope with the earthquakes. Ordinarily, these benefits could be taxable. This fact sheet contains detailed information of the exemptions of certain of these welfare benefits announced by Ministers today. It is proposed that retrospective amending legislation be introduced and enacted in May 2011.

Inland Revenue will not be reviewing positions taken by employers in the areas addressed by this fact sheet in the period up to the enactment of the amending legislation.

Three exemptions were approved. Certain general criteria apply to all three. Two of the exemptions then have more specific criteria that also apply.

General criteria for all three exemptions

These exemptions apply to specified welfare contributions of cash and benefits, including accommodation, provided by employers to their employees for the purpose of alleviating the effects of the earthquakes on employees. This applies to either the 4 September 2010 Canterbury earthquake or the 22 February 2011 Christchurch earthquake.

The exemptions apply to cash and benefits provided within eight weeks of each of the earthquakes if the amounts provided:

  • are not in lieu of wages or salary;
  • do not depend on the seniority of the employee; and
  • if a person is associated with the owner, a non-associated full time employee also qualifies for the same assistance.

Accommodation provided to employees

All accommodation that meets the general criteria is tax exempt.

Sundry benefits provided to employees

All “sundry benefits” that meet the general criteria and qualify as below are exempt from fringe benefit tax (FBT).

The more specific criteria are:

  • The employer cannot estimate the benefit that each employee has received;
  • That have generally been made available to affected Canterbury employees; and
  • Whose uptake does not depend on an individual employee’s specific circumstances.

This is intended to exempt benefits provided by or at “drop in” centres and other similar sundry benefits, particularly where it is likely that the employer will not know which employees have received what benefits.

Specific benefits and cash payments

The first $3,200 maximum per employee for each earthquake of benefits in cash or kind provided to affected Canterbury employees that meet the general criteria and that are not already exempted under the previous accommodation or “sundry benefits” exemptions are tax exempt, including being exempt from FBT. Any excess over $3,200 per employee will remain taxable.

Where both cash and benefits subject to FBT have been provided that exceed $3,200 per employee, the exemption applies to the cash first. This is to ensure that employers can move quickly to finalise their 2010–11 payroll positions.

Basis for the exemptions

The $3,200 maximum and the eight week period are both based on the criteria for the “earthquake job loss cover” benefit administered by the Ministry of Social Development which is $400 per week for eight weeks after the 22 February earthquake, for a maximum of $3,200. This benefit is tax free to recipients.