Muddled advice from Inland Revenue is confusing childcare agencies on how to tax their caregivers, says National's Revenue spokesperson Annabel Young.

"Some agencies are treating their home caregivers as employees and deducting PAYE. This is then affecting those employees' entitlements to a benefit. Other agencies are claiming that they have IRD approval to treat payments as 'expenses', which makes the payment tax-free and doesn't affect benefit entitlement.

"This is hitting the 'employees' hard because if they're looking after several children, their income is high enough to severely affect their benefit entitlement.

"This, in turn, is hurting agencies because if they follow the rules and deduct PAYE, they end up struggling to get people to work for them.

"Inland Revenue must sort out this confusion and provide consistent advice to all agencies. It is seriously undermining the importance of the role of these agencies and their caregivers.

"The penalties the Department imposes for incorrect tax payments are severe, when all these agencies are trying to do is comply with the law. Caregivers will also face huge penalties if their tax is under-deducted or if they wrongly receive a benefit while also getting paid," says Ms Young.

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