Posted 6 Nov 06

On the 1st April 2006, the child rebate was increased from $1,040 to $2,340 per annum.
This means school children who earn less than $45 per week or $2,340 per year, from all employers, do not have to complete a tax code declaration and do not require to have tax deducted from their earnings. (This does not apply to interest or dividends).
Farmers have always been permitted to pay wages to their children for assistance around the farm and this could now be as high as $2,340 per child per year without PAYE.
To claim a tax deduction the payment must be-: incurred in deriving your gross income or necessarily incurred in the course of your business.
In other words the payment must be a genuine payment for genuine work done.
Secondly, the payment must be made – it cannot be a book entry weekly, monthly or annually. The payment must be made to the child and recorded in a wages book or similar record.
Is it worth the hassle? If your taxable income is over $38,000 - each $2,340 you pay as wages saves you $772 in tax – 3 children helping and you have saved over $2,300 and probably paid your accountancy fee for the year!!
Prepared by Ian Stewart, Farm Accounting & Taxation, P Bag 47900, PONSONBY. email istewart@farm-accounting.co.nz Ph 09 3764894 Fax 3786682