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Individualised Funding: Individualised Funding Clients (or Managers)

Tax obligations for Individualised Funding Clients (or Managers)

An Individualised Funding Client (IF Client) or Individualised Funding Manager (IF Manager) is the individual who receives the funding for disability services. This may be a nominated person (such as the parent of a child with a disability) and they are often known as the 'agent' for the Individualised Funding.

Goods and services tax (GST)

If you're an IF Client, or an agent for the IF Client, you aren't:

  • liable to pay GST for funds used to purchase disability support services, and
  • entitled to claim GST for any Individualised Funding expenses.
Note  
You may be charged GST by the IF Service Provider if the provider is a GST-registered supplier.

Income tax

If you're an IF Client, or an agent for the IF client, you won't be liable to pay income tax for funds used to purchase disability services.

The funding you receive doesn't need to be declared as income on an Individual tax return (IR3) or on a Personal Tax Summary (PTS).

What to do if you employ an IF Service Provider (support worker)

Your obligations will depend on whether the IF Service Provider (the support worker) is:

  • an employee
  • a contractor, or
  • a private domestic worker.

Find out more about employees and self-employed contractors

Employees

If you employ an IF Service Provider and they aren't a private domestic worker, you'll need to register as an employer. This means you'll need to deduct PAYE and any other employer-related deductions (child support, KiwiSaver and student loan) from the funding you pay on to the IF Service Provider.

Find out more about becoming an employer

Because you're registered as an employer we'll send you an Individual tax return (IR3) after the end of the tax year (31 March). You'll need to complete this return if:

  • you would normally complete an IR3 for untaxed income such as:
    • rental income
    • self-employed income, or
    • income from a partnership or business
  • you or your partner are entitled to Working for Families Tax Credits (WfFTC)
  • you are a student loan borrower and have adjusted net income of $1,500 or more, or
  • you earned over $200 of interest and/or dividends and/or taxable distribution from a Māori authority taxed at an incorrect rate.

If none of these situations apply to you, contact us so we can update your account.

Contractors

If the IF Service Provider is a contractor (self-employed) you won't need to register as an employer. The contractor will take care of their own tax affairs. The contractor may charge you GST for their services.

Private domestic workers

If you employ an IF Service Provider, they'll be a private domestic worker if they meet all of the following conditions:

  • You pay the IF Service Provider directly.
  • You occupy a house and the house is used exclusively for residential purposes.
  • The IF Service Provider works for you in your house.
  • The IF Service Provider does work that isn't related to your business (if applicable).
  • The IF Service Provider doesn't work for you in regular full-time employment (more than 30 hours per week).

If the IF Service Provider is a private domestic worker, they're required to register themselves as an 'IR56 taxpayer' and take care of their own tax affairs. This means you'll pay them and also keep records. There is no need to deduct tax from payments you make to the IF Service Provider.

Record keeping

If you're an employer, you must keep all wage records for at least seven years, including all pay sheets and PAYE payment receipts.

If your IF Service Provider is a contractor, you must keep full and accurate records of who you paid, the amount and the date of each payment.

You must keep records of the amount and date of each payment of Individualised Funding you've received.