Paying tax when you reimburse koha
You may need to pay tax when you give money, goods or services - koha - as reimbursement to someone for providing a service. These kinds of reimbursements may be:
- the cost of travel to attend a hui
- administration costs for voluntary work done at home.
Most of the time, reimbursement of the person’s actual costs for giving the service is not liable for PAYE or schedular payments.
If you’re reimbursing someone who is self-employed, PAYE and withholding tax is not deducted. Any payment over the actual expenses should be seen by them as self-employed income.
You need to keep records of your expenses, reimbursements and payments. Any amount paid over the actual expenses would be classed as income and be taxable.
- services someone’s given (taxable)
- reimbursement of expenses (non-taxable).
Māori trust board pays its board members an attendance fee
The fee or honorarium cover costs for its members to attend their monthly meetings. The honorarium is $100 per meeting. In this case the Māori trust board deducts withholding tax.
Members must keep records of the actual expenses of attending the meeting. They can claim them back when putting in their income tax return at the end of the year. Members will also have to pay their own ACC levies.
Kaumatua provides cultural support to a bereaved whānau
The kaumatua provides the support at a 3 day tangi. The whānau gives the kaumatua a payment of $150.
The payment is taxable income to the kaumatua, because the kaumatua gave a service to the whānau.
The marae pays $200 to a farmer for giving them meat.
This is a payment for goods to the marae. This is the farmer’s taxable income and should be on their tax return as self-employed income. The marae does not deduct any income tax.
Kaumatua and kuia go with a group to a hui
They act in the traditional roles of kaumatua and kuia. They use their own vehicle to travel to and from the venue. So they're not out of pocket, the group gives a payment to the kaumatua and kuia for their actual travel costs. These payments are reimbursement of actual expenses. They are not income to the kaumatua and kuia. There is no need for tax deductions.