Give Us Our Daily Allowance (and Let Us Account for It)

We all look forward to our per diems when working away from home. But are you correctly accounting for this allowance? Chartered accountant **Phil Gore **gives techos some tips.

Per diems are the daily allowances paid to us while away for work. They are usually paid in cash with $60 being the magic number. When it comes to accounting for per diems, there are a number of considerations around income tax and GST issues.

The Inland Revenue issued a determination in September 2003 outlining the correct tax treatment. However, a general lack of understanding of how per diems are taxed still exists among New Zealand film industry contractors. Here are some key facts to remember about per diems.

Withholding tax

If you supply your services through a loan-out company, withholding tax is not required to be deducted from any per diems that are paid to that company (or contractually required to be paid to it), regardless of the amount of those per diems.

If you supply your services as an individual and you hold a valid certificate of exemption, withholding tax is not required to be deducted from your per diems.

If the per diems you receive as an individual are $60 or less per day, an exemption from withholding tax will generally apply. However, this exemption only applies if you are working away from home. Also, if you receive a catered meal from the production on a day that you receive a $60 per diem, the withholding tax exemption is reduced accordingly.

Example one:

The production pays you a $60 per diem but provides you with a catered meal worth $15. Withholding tax should be deducted on the $15.

Example two:

The production pays you a $60 per diem but meets all your costs for that day. The $60 exemption does not apply.

Per diems over the IRD approved amount that are paid to an individual should have withholding tax deducted on the excess. For example, you receive a per diem of $80, withholding tax should be deducted on $20.

Income tax

If you supply your services through a loan-out company, any per diems paid (or contractually required to be paid) to that company are taxable to the company.

You should include any per diems that are payable to you personally in your tax return.

Production companies are required to include the per diems paid to individuals in their monthly reporting to the IRD (even where no withholding tax has been deducted) in the same way that the individuals’ gross fees and equipment rentals are included. If you are supplying your services as an individual, your per diems should therefore be included in the gross income detailed on your annual Personal Tax Summary, as issued to you by IRD.

Income tax deductions

If you contract through a loan-out company, that company should claim tax deductions for the actual expenses it incurs, provided it has invoices or receipts for those expenses.

If you contract as an individual and you receive a per diem of no more than the IRD-approved amount, you can claim a notional tax deduction of an equivalent amount in your income tax return, without having to keep any tax invoices or receipts.

Alternatively, you can claim your actual expenses, if they are supported by tax invoices/receipts e.g. you receive a $60 per diem but want to claim $90 expenses for that day. You must keep all the tax invoices/receipts for that day that make up the total of $90.

GST

If you are registered for GST, you should invoice the production for your per diems, plus GST

e.g. 7 days @ $60 = $420 + 15% GST $63 = $483 payable.

You need to include the GST inclusive amount of the per diems you receive as sales or income in your GST returns.

You can’t claim a GST deduction based on the notional expense you claim for income tax purposes. You can only claim back the GST you pay on your actual expenses, and then only if they are supported by the required tax invoices/receipts.

Please note the above summary only applies to per diems paid to New Zealand cast and crew. Different rules apply to per diems paid to non-residents. Contact us or talk to your accountant for further advice.

_An earlier version of this article was published in _TAKE magazine.