pre-paid debit card incomeReceiving a portion of your salary as a voucher or pre-paid debit card may now be considered to be tax avoidance by the IRD.

Late last week the Inland Revenue Department issued a new press release warning taxpayers that salary packages which substitute part of the payment for non-taxable vouchers could be considered to be tax avoidance or even tax evasion.

According to the IRD, some taxpayers are willingly choosing to substitute a portion of their salary package for vouchers or prepaid debit cards which they can use for their regular payments and expenses.

The value of the voucher is not reflected on the taxpayers’ own PAYE obligations, and may allow the individuals to reduce their payments for student loans, Kiwisaver contributions or child support payments, or to claim excessive tax credits or welfare payments.

The purchase of the vouchers may, in some cases, also allow employers to claim GST on the cost of the voucher.

Currently the IRD is evaluating the voucher-based payments schemes on a case-by-cae basis to determine whether each example has breached current tax regulations.

The IRD is encouraging anyone who believes that their voucher payment scheme may breach tax legislation to come forward and discuss their position with the IRD.

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