Tax treatment of allowances paid to members of boards, councils, and committees
November 2010
Jason Biggins, Director, Tax
The Income Tax Act 2007 has recently been amended to provide further clarity regarding the taxation of payments to members of boards, councils, and committees. The list of schedular payments has been expanded to include the following:
A payment has a 0.33 rate of tax for each dollar of the payment, if it is for work or services performed by––
- a local government elected representative:
- an official of a community organisation, society, or club:
- a chair or member of a committee, board, or council:
- an official, chair, or member of a body or organisation similar to one described in paragraph (b) or (c).
In general, payments for work or services performed by members of boards, councils, and committees are subject to withholding tax at the rate of 33%, unless Inland Revenue has issued an exemption certificate or special rate certificate.
Payments to members of board, councils, and committees were previously included in the honoraria category. The honoraria category of the withholding tax regulations referred to payments made to members of statutory boards, councils, committees, and other similar bodies. This amendment removes payments made to these individuals from the honoraria category and creates a new payment category.
As the new category refers to payments for work or services (rather than all payments), allowances and reimbursements paid to members of boards, councils, and committees are no longer subject to tax deduction. A significant number of public sector entities have previously deducted tax from mileage allowances paid to members of boards, councils, and committees. These entities can now stop deducting tax from these payments.
It is important to note that mileage allowances paid to members of boards, councils, and committees are still regarded as taxable income. However, in most cases, this income would be offset by a deduction for motor vehicle expenses. As a result, any tax deducted from the allowances in the past will generally be refunded or credited against other tax liabilities when the board, council, or committee members file their tax returns.
| Disclaimer: This is intended as comment only and should not be relied upon or used as a substitute for professional advice. No liability is accepted for loss or damage incurred by persons who rely on this commentary. |
Page last updated: 18 November 2010
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