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Office for the Community and Voluntary Sector (OCVS),
The Taxation (International Taxation, Life Insurance, and Remedial Matters) Bill passed has passed its third reading in Parliament – paving the way for the introduction of payroll giving.
Payroll giving enables donations to go directly from a person’s pay to a chosen community organisation. The scheme will be administered through the PAYE tax system, so people whose employers sign up for the scheme will receive the tax benefits of their donations each payday, without having to present donation receipts or wait to claim at the end of a tax year.
There will be a three month delay before the new payroll giving scheme is introduced – giving Inland Revenue, the Office for the Community and Voluntary Sector and the community sector time to communicate how employers can go about setting up payroll giving schemes with their employees.
From January 2010, the first businesses and employees will be able to sign up to payroll giving and the first community organisations will start to benefit. Resources promoting these changes will be available in October, including a mail-out to employers from Inland Revenue. The OCVS will be working with a range of community organisations to spread the word and offer guidance.
Payroll giving will be voluntary for employers and employees and will only be available for organisations that file their PAYE returns online. If New Zealand follows overseas trends, uptake of payroll giving may take time but, as people recognise the benefits, its popularity will grow.
As part of the tax bill, the Government also simplified the reimbursement of volunteers' expenses. Reimbursement for expenses is now tax exempt, reducing tax and compliance costs for voluntary organisations and volunteers. Honoraria remain taxed as they are payments made for service.
These changes build on the earlier removal of donation tax credit and deduction thresholds for individual, businesses and Maori Authority donors. Since 1 April 2008, people have been able to claim back one third of all qualifying donations they make to donee organisations up to the level of their taxable income.