On January 22nd, The IRD issued a determination to Samurai Pictures (New Zealand Ltd) which described the taxation treatment of per diems and accommodation allowances paid to New Zealand film crew (independent contractors). On January 22nd, The IRD issued a determination to Samurai Pictures (New Zealand Ltd) which described the taxation treatment of per diems and accommodation allowances paid to New Zealand film crew (independent contractors).On February 4th, the IRD issued a 2nd determination that applied to both New Zealand and International actors and on screen performers.

The determinations:

1) That all per diems and accommodation allowances paid directly to independent contractors are to be treated as (gross) taxable income.
2) If payments to the contractor are subject to withholding tax, then withholding tax must be deducted from the per diem payments.

These determinations have effectively ended 25 years of tax free per diem and accommodation payments in the New Zealand screen production industry.

Samurai Pictures, The Technicians Guild and Investment New Zealand have successfully lobbied the Minister of Revenue, Dr Michael Cullen to request that the IRD defer the imposition of the withholding tax on payments to the New Zealand film crew until after consultation with the industry.

At this time, it 's unclear if the determinations will result in the retrospective treatment of per diems and accommodation allowances as taxable income.

The major problem for crew and producers will be the cash flow shortfall for meals and expenses caused by withholding tax deductions from per diems.

Of equal importance is the IRD's inability to advise the industry of a consistent tax policy. Despite asking the IRD well before the start of production as to the taxation status of per diems and accommodation allowance, it was not until after the start of production that a determination was made. International film producers and investors cannot be expected to have any confidence in filming in New Zealand when a government department changes the interpretation of law and regulations without reasonable notice and discussion.

The Techos' Guild's Recommendation:

The Guild seriously recommends that all film industry personnel, including producers, directors, actors, performers and crew keep all receipts and invoices for all per diems expenses (meals, food, laundry, etc) and all invoices for accommodation paid by crew and reimbursed or paid by allowance by a production company.

This is extremely important to the crew of The Last Samurai who are being paid an accommodation allowance for private housing. While it's impossible to obtain receipts for past meals and expenses, the 'Last Samurai' crew should ensure that they have legitimate receipts for all their accommodation from the moment they arrived in New Plymouth. The IRD may well wish to talk to the people that own the properties you have been renting about their taxable income.

This recommendation applies to all productions throughout New Zealand until this issue has been resolved.

Production companies must now consider receiving tax invoices from crew for per diems payments.

Crew members who are not GST registered and regularly receive per diems or accommodation allowances should consider GST registration. This is compulsory for all individuals whose income exceeds $40,000.

Techos Guild members can read more about this issue in the next edition of NZTECHO magazine due out on the week of March 3rd.

For further information contact David Madigan on 021 741 810.