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IRD confirms: no appeal pending on Diamond residency case

The IRD has confirmed it will not be appealing the recent Court of Appeal decision in C of IR v Diamond [2015] NZCA 613.

This is good news for taxpayers (and their advisers) as it provides a degree of clarity and certainty to the law on residency.

The Court of Appeal decision – which was a win for the taxpayer – explicitly rejected the notion that having a rental property “available” to the overseas-based taxpayer was sufficient to amount to having a permanent place of abode in New Zealand.

The Court also concluded by saying that the fact that a taxpayer provides a home for his family in New Zealand while living overseas would not necessarily be sufficient to establish that the taxpayer had a permanent place of abode in New Zealand.

Refer to James Coleman’s blog to read the background facts to the Diamond case.

FBT on car parks

In the past, the Commissioner’s view has been that car parks provided to employees under a license agreement did not qualify for the on-premises exemption and were therefore subject to FBT. However, the question of whether or not FBT applies to a car park now focuses on whether the employer has a right over the car park which is substantially exclusive. So if the employer has a right which is in fact, or effect, substantially exclusive, then the car park will not be subject to FBT.

In a nutshell, the higher the degree of control the employer has over the car park, the more likely it is that the right is substantially exclusive.

Going back a step, there is an FBT liability when an employer provides a free car park to an employee. However, there is an exemption for fringe benefits which are provided on the employer’s premises. This is sometimes referred to as the “on premises exemption”. The “premises” of an employer includes land which owned and leased by the employer.

A recent Inland Revenue ruling (BR Pub 15/11) states that when deciding on the question of FBT, employers will have to look closely at the nature of the car parking arrangement and whether it gives the employer a right to use the car park which is in fact, or effect, substantially exclusive. So a car park which is subject to a license can now be exempt from FBT if the employer has a substantially exclusive right to use it.

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