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It can be common to give money, goods or services as koha when someone provides you a service. You may need to deduct and pay tax on this kind of koha.

Reimbursing expenses

Generally, you do not need to deduct and pay tax when you are paying somebody for their actual costs. This means that you do not need to deduct PAYE or treat the payment as schedular income.

You may pay someone back for expenses like:

  • the cost of travel to attend a hui
  • administrative costs for voluntary work done at home.

You need to keep records of your expenses and payments. Any amount paid over the actual expenses is taxable income.

Paying someone who is self-employed

Do not deduct PAYE or withholding tax if you’re paying someone who is self-employed. They should count any income over their actual expenses as taxable self-employed income.

Honoraria payments

Whether you need to pay tax on honoraria payments depends on what the payment is for.

You generally do not need to pay tax on an honorarium that pays someone back for their expenses.

However, you need to deduct or withhold tax if the payment is a recognition for the services someone has given.

If you pay an honorarium that both covers someone’s expenses and recognises their services, any amount above their actual expenses is taxable.

Volunteer payments and expenses

Example: Kaumatua provides support at work

JKL Limited is a company that works at the Port of Napier, loading and unloading cargo ships.

After a worker loses his life during an unloading operation, the company asks a kaumatua to come to the port and provide cultural support to the man’s grieving co-workers.

The company gives the kaumatua a koha of $200.

The kaumatua must pay income tax on the koha, because they gave a service to the company.

Example: Charity reimburses volunteer’s travel costs

PQR is a charity that runs a chain of low-cost second-hand clothing shops around New Zealand.

The charity calls on a volunteer to travel out of town to help out at the local shop when the usual volunteer is off on sick leave.

PQR reimburses the volunteer for their travel costs, which come to $95.

Reimbursement payments to volunteers are exempt income so the volunteer does not need to pay tax on the $95.

Example: Honorarium paid to accountant for volunteer work

Every year, a New Plymouth quilting club asks a local accountant for help preparing the club’s annual financial statements.

The accountant, who’s married to the club chair, volunteers his time and does not charge his usual fee. However, the club pays him an honorarium of $250 as a thank you for his service.

The accountant must pay income tax on the honorarium because the money recognises the service he provided. It was not a reimbursement of expenses.

The honorarium is a schedular payment so the quilting club must deduct tax before paying the accountant.

Last updated: 30 Jul 2025
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