Geekzone: technology news, blogs, forums
Guest
Welcome Guest.
You haven't logged in yet. If you don't have an account you can register now.


1222 posts

Uber Geek
+1 received by user: 58


Topic # 25762 1-Sep-2008 00:22
Send private message

I don't know anything about how donations work, but have read the same stuff over and over - but not really sure if my understanding = how it really works.

This is a hypothetical situation, based on fact and made up details to TRY to get my point across without needing to go to a lawyer or someone of the like.

If someone is on unemployment, they can earn $80/week gross before the benefit starts to drop. Every additional $1 earned drops it by 70c. But if one calculates or factors for 20c tax on the earned money, plus say another 10c net for student loans, then from that $80 onwards to the point of being full time there is little incentive. Anyway....

Now say if that unemployed person was self employed in a part time job, and the "employer" pays the full amount each week which hasn't had the taxes/expenses taken out at all. Say on a given week they did too many hours and earned $160 that week gross, so $80 over, what happens if they give that extra $80 as a donation?

Does this then mean they can say they earned $80 that week as $80 was donated to charity and the $80 that is left is their gross TAXABLE income (which is what WINZ care about)?

If the above statement is correct, then if one later claims a rebate on the donations, is that counted as income or taxable or anything negative?

Create new topic
90 posts

Master Geek


  Reply # 161135 1-Sep-2008 07:24
Send private message

You're unlikely to get away with that.

IRD have extensive powers to declare arrangements like this to be shams intended to avoid or evade tax.  The end result would be that income tax would be payable on the "donations", probably along with penalties and interest (which could amount to much more than the original tax due).

Good try though.

453 posts

Ultimate Geek
+1 received by user: 27


  Reply # 161161 1-Sep-2008 09:16
Send private message

From my understanding on it you pay tax on the full amount as it is money you have earned as part of doing your job.

When you file a tax return at the end of the year you can claim against that, which I believe just reduces your taxable income i.e. so in your example being on a benefit you'd receive 19.5 cents back for every dollar you donated.

Note that the charity would also need to be a registered charity so you can't just "donate" money to someone to avoid tax.



1222 posts

Uber Geek
+1 received by user: 58


  Reply # 161164 1-Sep-2008 09:18
Send private message

Firstly I am asking this not to evade tax or rip WINZ off or anything bad at all, if you knew me you would know thats against all my rules. The thing that troubles me is I know 100s (yes HUNDREDS) of people in New Zealand who are working and their jobs are not being taxed. I don't mean people working and getting benefits and not declaring it, I mean not taxed at all. I would say 99% of those people will not pay tax themselves, and maybe the honest 1% like me do. However there is no way of being caught from what I see.

I think what I am getting at, is if one earns to much money in any given week, can it be given away so that it won't affect benefit? That really is quite simply the question.

So why do businesses make donations? I mean businesses are there to make money so why give it away to charity? Explain that one for me.

4288 posts

Uber Geek
+1 received by user: 82

Moderator
Trusted
Lifetime subscriber

  Reply # 161167 1-Sep-2008 09:21
Send private message

Ofcourse business can give away money. But they will have to explain that to their accountant, as to why there are cash discrepencies. And if they were to be audited by the IRD they would probably get caught, or if the employee was investigated, then the business may also get caught.
AFAIK they can ask that you back pay five years worth of an individuals earnings in tax, if they can prove it.

3394 posts

Uber Geek
+1 received by user: 925


  Reply # 161169 1-Sep-2008 09:26
Send private message

Comradehunt:
Now say if that unemployed person was self employed in a part time job, and the "employer" pays the full amount each week which hasn't had the taxes/expenses taken out at all. Say on a given week they did too many hours and earned $160 that week gross, so $80 over, what happens if they give that extra $80 as a donation?

To Whom is the donation given? you cannot give a donation from income you do not have, it has to come to you before you give it away.
Being self employed means just that, you receive income from someone else, you cannot split yourself into an "employer" and "employee" as two entitees. You need a legal company to do that,

Comradehunt:
Does this then mean they can say they earned $80 that week as $80 was donated to charity and the $80 that is left is their gross TAXABLE income (which is what WINZ care about)?

If the above statement is correct, then if one later claims a rebate on the donations, is that counted as income or taxable or anything negative?


Nope, my understanding is that WINZ are concerned about gross income. not net of any expenses,

If you only want to be paid $80 a week to avoid any abatement, then talk to you employer about arranging you employment relationship to reflect such a desire.

3394 posts

Uber Geek
+1 received by user: 925


  Reply # 161171 1-Sep-2008 09:32
Send private message

Comradehunt:
So why do businesses make donations? I mean businesses are there to make money so why give it away to charity? Explain that one for me.


Businesses make donations for many reasons, any these are best answered by the owners and controllers of companies, but off the top of my head, donations cane be given to improve the public standing of a company bu supporting a cause the public approve of,

i.e. The National Bank give donations to the cancer society ( in staff time and probably cash), this allows them to use the cancer society daffodil day promotion in their corporate activities,

Local businesses ( butcher/supermarket) may make a donation to a local sports team with the aim of promoting themselves to the people that support that team,

Corporates exist in a wider public community and rely on that community as its customers, promoting causes that your customers approve of is usually seen as not bad for business.



1222 posts

Uber Geek
+1 received by user: 58


  Reply # 161176 1-Sep-2008 09:37
Send private message

I just composed a big reply but it said error closing tags wrong or something so the whole lot was lost...

anyway summary is this:

If I earn $320 in 1 week, and $240 is petrol expenses, how much did I earn? I would have thought that my Gross income is $320, but my gross taxable income is $80. Therefore it would not affect benefit as I only earned $80 taxable. IF this is not right and the full $320 is looked at, then in that case that would exceed the income limit and cancel unemployment benefit, meaning I have to live on the $80 which still hasn't had ACC/tax/etc deducted from it!

And as for the other post I briefly saw, I don't really know if I'm "self employed" - the scenario is I work for a company who pays me weekly and tax/acc/etc is not deducted at all, I am meant to do it myself.

3394 posts

Uber Geek
+1 received by user: 925


  Reply # 161198 1-Sep-2008 10:05
Send private message

Comradehunt: I just composed a big reply but it said error closing tags wrong or something so the whole lot was lost...

anyway summary is this:

If I earn $320 in 1 week, and $240 is petrol expenses, how much did I earn? I would have thought that my Gross income is $320, but my gross taxable income is $80. Therefore it would not affect benefit as I only earned $80 taxable. IF this is not right and the full $320 is looked at, then in that case that would exceed the income limit and cancel unemployment benefit, meaning I have to live on the $80 which still hasn't had ACC/tax/etc deducted from it!

And as for the other post I briefly saw, I don't really know if I'm "self employed" - the scenario is I work for a company who pays me weekly and tax/acc/etc is not deducted at all, I am meant to do it myself.


I think what you have here is a difference in what is termed "income"
 
As a self employed contractor you can deduct certain expenses before you end up deciding on your taxable income, (IRD rules)

The question you need to find out is what rules Work and Income use for defining "income"



1222 posts

Uber Geek
+1 received by user: 58


  Reply # 161207 1-Sep-2008 10:55
Send private message

Their definition is gross taxable income after expenses have been taken out.

Saying that answers my previous post I know, I now assume making a donation is not an expense as it is not required to make the said income, therefore i guess if one earns too much money there is no way to legally give it away.

Create new topic

Twitter »

Follow us to receive Twitter updates when new discussions are posted in our forums:



Follow us to receive Twitter updates when news items and blogs are posted in our frontpage:



Follow us to receive Twitter updates when tech item prices are listed in our price comparison site:



Geekzone Live »

Try automatic live updates from Geekzone directly in your browser, without refreshing the page, with Geekzone Live now.



Are you subscribed to our RSS feed? You can download the latest headlines and summaries from our stories directly to your computer or smartphone by using a feed reader.

Alternatively, you can receive a daily email with Geekzone updates.