Schoolchildren Tax Credits

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Prior to 1 April 2012 you may have employed school students and:

  • you didn’t deduct tax at all or include on your employer monthly schedule, because their wages were less than $2,340 a year and they qualified for the tax credit for children.
  • they were entitled to a tax credit for children of $245.70 each year if their income was over $2,340.

The tax credit for children has been repealed effective from 1 April 2012. It has been replaced with a tax exemption for children meaning that children will not need to pay tax on income of less than $2,340 which is not taxed at source (such as money for mowing the neighbours’ lawns). The exemption does not apply to income on which tax has already been paid, such as salary/wages, schedular payments or interest. Due to these changes, there are some transitional rules you need to understand.

As at 1 April 2013 you will be required by law to start deducting PAYE from the school child’s salary/wages or schedular payments.

 

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