On 30 March 2022 the IRD released an interpretation statement (IS 22/01) regarding the deductibility of costs incurred due to Covid-19. It addresses the uncertainty around the deductibility of costs incurred as a result of the pandemic. Employee-related costs incurred due to Covid-19 include:
- relocating employees,
- retaining teams in New Zealand,
- incentive payments,
- provision of health and wellbeing services, and
- redundancy payments.
IS 22/01 states that in general, costs that relate to the employees of a business should be deductible but note that consideration may be required to determine if the costs are capital in nature and therefore non-deductible, such as persons engaged to work on the installation of a capital asset.
Repairs and maintenance in relation to assets that are temporarily unavailable for use in deriving income due to Covid-19 restrictions or temporary downsizing of the business should generally be deductible.
Finally, payments to terminate a lease or incentivise new tenants to enter a lease should be deductible under section DB 20C and section DB 20B respectively. While costs incurred to keep teams appropriately distanced in a workplace should also be deductible, unless they are capital in nature (such as a renovation to expand a building).
