Treatment of volunteer reimbursements reviewed

Media statement
For immediate release
Thursday, 1 November 2007

Tax treatment of volunteer reimbursements to be reviewed

Clarifying and simplifying the law on how reimbursements and honoraria paid to volunteers in the non-profit sector should be taxed is the subject of an Inland Revenue Department issues paper released today for public consultation.

Finance Minister Dr Michael Cullen and Revenue Minister Peter Dunne welcomed the paper, saying it was “an important step closer towards resolving a long-standing dilemma for volunteers and non-profit organisations over how reimbursements should be taxed.

“Because the law is unclear, volunteers and non-profit organisations have often been uncertain about their tax obligations relating to reimbursement and honoraria payments to volunteers.

“As a result, an inconsistent range of administrative practices has developed over the years, which in turn has contributed to increased compliance costs for these organisations,” Mr Dunne said.

“This issues paper looks at a number of possible solutions to this long-standing problem.

“As part of the government’s tax policy consultation process, officials are seeking feedback on suggestions for dealing with the lack of clarity surrounding the taxation of reimbursements and simplifying the rules for honoraria paid to volunteers, with a view to making compliance less onerous for those in the non-profit sector.

“The paper suggests a number of options for making payments which reimburse volunteers for the costs they incur exempt from tax.

“The aim is to make the law relating to these types of payments clear and simple to apply, so that the compliance costs for volunteers and non-profit organisations are minimised as much as possible.

“Feedback on the issues explored in the issues paper will be considered by the government as part of its policy of further building a culture of charitable giving in New Zealand,” Mr Dunne said.

The closing date for submissions on the options raised in the issues paper is 14 December 2007.

The issues paper, The tax treatment of honoraria and reimbursements paid to volunteers, is published at www.taxpolicy.ird.govt.nz.

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