Q: We have a client who is paying their staff a clothing allowance. This is a substantial amount that is being paid each week and over the course of 6 months equates to $14,786. We feel that this is actually a taxable benefit to the staff and should infact have PAYE deducted, can you please advise?
A: What is the purpose of this allowance, as the employer would normally provide protective clothing? Does the employee have to account for and show that the allowance has been fully used to purchase protective clothing (receipts)? How was the rate for this allowance determined?
Q: The employer is paying the staff $7.00/hour that they work as a Protective clothing allowance. So as you can imagine on a 40-hour week each employee is receiving an allowance of approx. $280.00.
As far as I am aware they are not requesting receipts from the staff, their reasoning to me was ‘the clothing allowance is for them to buy work clothes due to the job they are currently doing which is poisoning pine trees as they aren’t using chain saws’ however as this has been ongoing for 6 months we believe that this should have PAYE deducted.
A: There is no way they could defend this to IRD if they were audited, as it is not a reasonable amount for clothing, with no receipts, no checks on the money being spent, etc.
The business could have a reimbursing allowance based on receipts provided by the employee.