Topic 1: Employment Income

Acronym: C.R.E.F. (Remuneration Buckets)

Cash & Accommodation (PAYE), Reimbursing Allowances (Exempt), Employer Superannuation (ESCT), Fringe Benefits (FBT)[cite: 6].

Acronym: D.A.N. (Section CW 17 Exemptions)

Deductible (if DA 2(4) didn't exist), Actual expenditure incurred, Nexus to employment obligation[cite: 6].

Acronym: R.I.T. (Taxable Lump Sums)

Restrictive covenants (CE 9), Inducements (CE 10), Termination/Redundancy (CE 10)[cite: 6].

The 'C' in C.R.E.F. (Subpart CE)

Deems cash remuneration and employer-provided accommodation as assessable employment income subject to PAYE[cite: 6].

The 'R' in C.R.E.F. (Subpart CW)

Covers Exempt Reimbursing Allowances, allowing employers to reimburse employees tax-free if specific statutory tests (like D.A.N.) are met[cite: 6].

The 'E' in C.R.E.F. (ESCT)

Employer Superannuation Contribution Tax. Withheld at source by employers on KiwiSaver contributions, keeping them out of the employee's assessable income[cite: 6].

The 'F' in C.R.E.F. (FBT & Sections CX 3 to CX 5)

Fringe Benefit Tax. Levied directly on employers for non-cash perks; the value is classified as "excluded income" for the employee[cite: 6].

Section DA 2(4)

The strict prohibition preventing employees from claiming direct tax deductions for work-related expenses; this is why the 'R' in C.R.E.F. (exempt allowances) exists[cite: 6].

Section CE 1

The core charging provision that taxes salary, wages, bonuses, director's fees, and extra pay[cite: 6].

Section CE 5 ("Expenditure on Account of an Employee")

Occurs when an employer directly reimburses a personal expense or pays a third party on the employee's behalf; taxable unless it passes the D.A.N. test[cite: 6].

Section CE 1B (Accommodation)

The general rule stating that employer-provided accommodation (board, lodging, or residence) is taxable at its fair market value[cite: 6].

Mobile workplaces, Antarctica, & Remote sites

The specific locations where employer-provided lodging is strictly excluded from being taxed as accommodation income[cite: 6].

The 'R' in R.I.T. (Section CE 9)

Restrictive Covenants. Explicitly taxes lump sums paid for non-compete agreements, overriding old common law that treated them as capital[cite: 6].

The 'I' and 'T' in R.I.T. (Section CE 10)

Inducements & Termination. Taxes sign-on bonuses, compensation for loss of office, redundancy, and position abandonment[cite: 6].

Capital Exception to R.I.T. (Injury to Feelings)

Compensation awarded under the Employment Relations Act 2000 for humiliation or loss of dignity is a tax-free capital receipt, falling outside CE 10[cite: 6].

Section CW 17 (The D.A.N. Test in Law)

Exempts reimbursed expenditure if the expense passes the D.A.N. criteria: Deductible (barring DA 2(4)), Actual cost, and direct Nexus to employment[cite: 6].

Section CW 17(3) (The 'A' in D.A.N.)

Allows employers to use "reasonable estimates" to determine reimbursable amounts without tracking every individual receipt[cite: 6].

Round-sum Entertainment Allowance (No receipts)

Fails the 'A' in the D.A.N. test (not based on actual costs or reasonable estimates), making it taxable as salary or wages under CE 1[cite: 6].

Section CW 17CC (Distinctive Clothing)

Exempts employer payments for "distinctive work clothing" (uniforms, safety gear). Ordinary clothing fails the 'N' (Nexus) and 'D' (Deductible) tests of D.A.N.[cite: 6].

Section CW 18 (Transport Costs)

Standard commuting fails the D.A.N. test (private expense). Transport is only exempt for additional costs like unusual shifts, heavy equipment, or lack of public transport[cite: 6].

Sections CW 16B & CW 16C (Accommodation Exemption)

Provides tax exemptions for employer-provided accommodation during out-of-town secondments and specific projects (up to 2 or 3 years)[cite: 6].

Concept: Salary Sacrifice Anti-Avoidance

Statutory exemptions for employer-provided accommodation are completely invalidated if the employee gave up a portion of their taxable salary to receive the benefit[cite: 6].

Case: Louisson v CIR

Top-up payments to former employees joining the armed forces lacked a direct nexus to employment services, so they were not taxable employment income[cite: 6].

Case: Naismith v CIR

Harbour Board employees sharing salvage proceeds from a voluntary, out-of-hours operation did not receive taxable employment income[cite: 6].

Case: Reid v CIR

A university "studentship" allowance with a future teaching bond lacked employment nexus because an undertaking for future service does not create a current employment contract[cite: 6].