Payroll giving, where offered by your employer, gives you the opportunity to donate to approved donee organisations direct from your pay and receive immediate tax credits that reduce your PAYE payable. You don't need to wait until the end of the year to claim your tax credit.
Only employers who electronically file their employer monthly schedule and deduction form can choose to offer payroll giving to their employees.
Definition of donee organisation
A donee organisation is an organisation that has Inland Revenue-approved donee status. Anyone on the approved list is eligible to receive payroll giving donations.
Payroll giving and employees
If your employer offers a payroll giving scheme and you want to join, you need to:
- check the donee organisation you wish to donate to is on our approved donee list
give your employer the:
- name of the donee organisation
- amount of the donation you want to make
- pay period, or periods, you want the donation to be made
- the donee organisation's bank account or postal address.
If your employer’s scheme allows, you can alter the frequency, amount and donee organisations you choose to donate to.
How tax credits for payroll donations work
Tax credits for payroll donations are calculated at 33.33 cents for each dollar donated which is deducted from you PAYE.
Employers are responsible for calculating the correct tax credits for each payroll donation made by their employees.
The tax credit for payroll donations is 33.3333 cents for each dollar donated. Once the tax credit has been calculated, the employee’s PAYE is reduced by the amount of the tax credit.
Example showing how the tax credit affects tax payable on salary or wages
Hannah makes a payroll giving donation of $12 to her church. She is paid $2,140 every four weeks. This is her only job so her tax code is "M". Before the tax credit is applied her PAYE is $435.48.
The tax credit for Hannah's payroll donation is $3.99. Her employer applies the tax credit when working out Hannah's pay and Hannah's PAYE is reduced to $431.49 for that pay period.
Hannah's new take-home pay is now:
|plus||tax credit for payroll donation||
|equals||take home pay||
You will not be given receipts for your payroll donations
Individual employees will not be issued with receipts as the tax credits for donations made as part of payroll giving will be immediate in the form of reduced PAYE. They will not be eligible to be claimed again through the end of year Tax credit claim form (IR526).
If you have made donations directly to an approved donee organisation
If you have made donations directly to an approved donee organisation and you have receipts you claim them on the Tax credit claim form (IR526).
See how some people have decided to donate to their favourite charity or organisation through payroll giving.
Wally has brought a new kitten home from the SPCA . He could only take one kitten home but the need of the other homeless kittens made him remember hearing about payroll giving on TV the night before. Wally decided to talk to his employer the next day about making a donation to the SPCA every fortnight.
Olive's Mum had a heart attack. Her father dialled 111 and the Wellington Free Ambulance arrived in ten minutes. They performed CPR, stabilised her Mum and then took both her Mum and Dad into the nearest hospital. The service was free and the ambulance staff so professional and skilled that Olive felt obligated to make a donation so that the service can continue to be free. Her employer recently announced that payroll giving would start from 1 July so she decided to talk with her employer the next day.
- Since her father-in-law died of cancer six years ago Nadia had made monthly donations by automatic payment to the Cancer Society. She knew that she can claim tax credits each year for her donations but she couldn’t be bothered. Her colleague told her that she had started donating to the Cancer Society through payroll giving so she decided to do the same because its so easy to get a tax credit.
Date published: 23 Sep 2010
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