The government has updated legislation regarding payments made to people who volunteer their time and service.
Who is a volunteer?
For the purposes of honoraria and reimbursement payments, a volunteer is defined as
A person who freely undertakes an activity in New Zealand—
- a. chosen either by themselves or by a group of which they are a member; and
- b. that provides a benefit to a community or another person; and
- c. for which there is no purpose or intention of private pecuniary profit for the person.
What expenditure can a volunteer claim for the work that they have done, without attracting tax?
When a volunteer, in undertaking a voluntary activity, derives an amount that is a reimbursement payment to cover actual expenses incurred by them, the amount is exempt income of the volunteer. This means that the reimbursement will not be subject to schedular payments.
The volunteer can also have estimated expenditure reimbursed before the actual costs are incurred.
Estimated expenditure is defined as follows –
- a. a person may make a reasonable estimate of the amount of expenditure likely to be incurred by the volunteer for which reimbursement is payable; and
- b. the amount estimated is treated as if it were the amount incurred.
Can a volunteer be given some kind of monetary reward for their services?
The law already allows a payment to be made, however it has never been very clear. The payment is called an Honoraria payment.
An honorarium means an amount that a person receives for providing services that—
- a. is paid at a rate that is less than the market rate for providing the services; and
- b. is an amount for which, in the normal course, no payment is fixed for the services provided.
Honoraria are liable for tax as they are classed as
schedular payments and as such the organisation must deduct as part of PAYE.
Can a volunteer receive both a reimbursement and Honoraria?
If the person paying the amount to the volunteer makes a payment to them that is only partly a reimbursement of expenses, the person must identify the portion of the amount that is the reimbursement, and treat the remainder as an honorarium, being a schedular payment to which the PAYE rules apply.
From www.ema.co.nz, contact EMA Advice line for further details