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McLEAN AND CO.
The Size of the Hidden Economy
Do Payments to Volunteers need to be taxed?
KEY CHANGES IN THE 2010 BUDGET
|Income||Current rate||New rate|
|$0 - $14,000||12.5%||10.5%|
|$14,001 - $48,000||21.0%||17.5%|
|$48,001 - $70,000||33.0%||30.0%|
THE SIZE OF THE HIDDEN ECONOMY
The size of
DO PAYMENTS TO VOLUNTEERS NEED TO BE TAXED?
If your organisation has volunteers you reimburse, pay to attend meetings or make any other kind of payments to, you may need to deduct tax from these payments. .
A volunteer is someone who freely undertakes an activity in New Zealand, chosen either by them or a group they belong to that benefits others without financially benefiting them.
The types of payments volunteers may receive are reimbursements for expenses and honoraria for services.
Reimbursements are payments made for actual expenses incurred during volunteer activities and are tax free. Reimbursement payments may be based on actual expenditure or a reasonable estimate of an expense likely to be incurred by a volunteer. It is important to keep the receipts or a record of the expenses because the organisation may be able to claim these as an expense.
Honoraria are payments given in return for a service and:
If the payment is made to an employee as part of their normal employment duties you'll need to deduct tax. You can use our PAYE tables to help you calculate the correct amount. The IR340 and IR341 PAYE tables can be found under "Work it out" on www.ird.govt.nz
Before you make a payment to a volunteer they'll need to complete a Tax code declaration (IR330) and you'll need to deduct tax at 33%. Show the details on your Employer monthly schedule (IR348) and send your payments with the Employer deductions (IR345) form the same as you would for any other employee.
If you're not an employer you'll need to either:
Sometimes a person receives both honoraria and reimbursement payments. When the payment is a combination, and the honoraria and reimbursement portions are clearly identified and recorded, the honoraria will be taxable and the reimbursement will be tax free. However, if there's no distinction between the honoraria and the reimbursement then the entire payment is treated as an honorarium and needs to have tax deducted.
Miriama is a voluntary regional coordinator for a national sports organisation, SportCo. Some travel to local centres as well as attendance at tournaments is involved. Miriama uses her own car.
SportCo pays Miriama an honorarium of $50 per month for six months of the year. This will be subject to tax at 33% ($16.50 per month).
SportCo estimates that Miriama travels an average of 250 kilometres per month in the course of her voluntary activities, including her travel to and from her home.
SportCo decides to reimburse Miriama's travel expenses by paying her a travel allowance of 70 cents per kilometre. As this is considered a reasonable estimate of the cost Miriama will incur it's classed as a reimbursement and is not taxable.
The honorarium and travel allowance are paid together. Miriama receives a total payment of $225 (250 km at 70c = $175, plus $50) for each month of the six months.
The amount of $50 is shown on the employer monthly schedule as a schedular payment and the $16.50 is paid to Inland Revenue with any other PAYE deductions for the month with the employer deduction form.
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