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This statement may be cited as "Determination 09/03: Determination of expenditure incurred for honoraria payments made by the Royal New Zealand Plunket Society (Inc)".
This determination also appears in Tax Information Bulletin Vol 21, No 6 (August 2009).
All legislative references are to the Income Tax Act 2007 ("the Act").
This determination sets out the amount regarded as expenditure incurred in the production of schedular payments (formerly withholding payments) when those payments are honoraria paid to members of the Royal New Zealand Plunket Society (Inc) ("Plunket").
Section RA 5 of the Act requires anyone who makes an employment-related payment to deduct tax when making it.
Under section RD 3(1) of the Act a schedular payment is included in the definition of "PAYE income payment". Consequently, any person who makes a schedular payment must deduct tax from it at the time it is made, unless an exemption applies.
Honoraria paid to Plunket members come within the definition of "schedular payment" under section RD 8 of the Act. Schedule 4, Part B of the Act requires PAYE to be deducted from honoraria at the rate of 33%.
Section RD 8(3) of the Act allows the Commissioner to determine an amount or proportion of any schedular payment that is considered to be expenditure incurred in the production of that payment. If the Commissioner has made such a determination, the person making the schedular payment is only required to deduct tax from the amount that exceeds the determined expenditure amount.
This determination applies to payments made to Plunket members as reimbursement of costs incurred in undertaking Plunket related matters. It applies to honoraria paid on or after 1 April 2008.
This determination will apply until it is replaced or withdrawn.
When any Plunket member receives honoraria as reimbursement of expenditure that member had incurred in carrying out Plunket related activities that payment, up to a maximum of $700 per annum, shall be regarded as expenditure incurred in the production of that payment. However, if the member receives any reimbursement (in addition to honoraria) for expenditure they have incurred, the amount exempted under this determination ($700) shall be reduced by that additional reimbursement.
LTS Manager, Technical Standards
30 June 2009
A Plunket member receives honoraria of $500 in respect of the Plunket related activities carried out during the year. No other reimbursement had been paid during the year. The payer does not have to deduct withholding tax because the total payment does not exceed $700.
A Plunket member receives a payment of $625 at the end of February. During the year, in May and August the member had also received two smaller payments of $100 each as reimbursement of expenses incurred for Plunket related activities, making a total of $825 for the year. Because the Plunket member had received reimbursement payments of $200 earlier in the year, only $500 of the honorarium received in February could be regarded as expenditure incurred under this determination. Therefore, tax of $41.25 should be deducted from the balance ($125) of the honorarium.