Chapter 3.8: Tax
There are a number of tax issues that apply to schools. The Inland Revenue Department (IRD) has a range of useful information available from its website, especially the IR253 ‘Education centres: A tax guide for organisations that provide education’.
3.8.1 Income Tax
State and state-integrated schools are exempt from income tax under the Education Act (Schedule 6, clause 2).
3.8.2 Payroll taxes and employer deductions
Payroll service centres manage payroll taxes and deductions on behalf of schools for all employees on the education service payroll. Refer to the Funding, Staffing and Allowances Handbook for information.
If a school manages the payroll for any employees then that school is responsible for all payroll taxes and deductions for those employees. Please refer to the IRD webpage on employer responsibilities, and obtain and read all relevant IRD guides.
If a school provides housing for employees at below market rent then they should refer to the Ministry of Education website.
3.8.3 Goods and Services Tax (GST)
Please obtain and read a copy of the IR375 ‘GST Guide’.
Schools must be GST registered and must complete GST returns regularly. The Ministry of Education recommends two-monthly GST returns or monthly for large schools.
Systems need to be established to ensure GST is fully accounted for and is readily reconciled with GST returns. GST statements received from the IRD need to be checked with the return submitted and any adjustments required incorporated into the accounting system.
All Ministry grants are GST inclusive except for Furniture and Equipment Grants, Capital Contribution Grants and School Support Capital Grants.
Most expenses have GST included except for wages and salaries, interest and back charges and loan repayments.
Make sure that you only claim GST on expenses where the supplier has provided a correct GST invoice (refer to the IR375 GST Guide about what should be included in a GST invoice).
Check that all your invoices are correct GST invoices.
A common mistake that schools make is to pay invoices that are addressed to other organisations or people. For example, a school could contract a painter for the exterior repaint of school buildings. The painter then purchases paint on behalf of the school and gives the invoice from the paint company to the school for payment. If that invoice is addressed to the painter rather than the school and the school pays the invoice and subsequently tries to claim a GST credit, the school has committed an offence and could be fined. Instead, the painter should pay for the paint then include the cost of the paint on their invoice to the school or the school should pay the paint company directly.
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3.8.4 Fringe Benefit Tax (FBT)
Please obtain and read a copy of the IR409 ‘Fringe benefit tax guide’.
Schools are employers and may have to pay FBT on benefits provided to employees. Schools should take care that any such benefits do not contravene the terms of collective agreements.
FBT may be payable on the laptops provided to teachers (and any other employees) if they have significant private use and no recovery is made for that by the school. It is recommended that schools stress to teachers that the laptops are to be used predominantly for work-related purposes.
FBT will be payable if a school vehicle is provided to a Principal for their private use. Providing a vehicle for private use would also form part of the Principal’s remuneration and requires concurrence from the Ministry of Education. If the board allows a Principal to take a school vehicle home (such as the school van), it should be clearly documented that the vehicle is not to be used for private use.
Don’t forget that any of the IRD tax guides recommended can be found at the IRD's website.