Tax Benefits
As an Educator with Kids at Home you are classified as self employed but its not as scary as it sounds. In fact, it has many benefits. You are responsible for declaring your income to IRD, and for paying your own income tax but you also receive generous tax benefits.
IRD has a worksheet (IR 413) especially for home-based Educators to calculate their taxable income. Kids at Home send you a summary of your hours and gross income at the end of each financial year. Where possible, we also hold a tax evening each year to help you understand and complete your tax return.
The real cool thing about working from your own home is that the IRD give you a concession towards the cost of running your business. This concession varies each year but for 2020 it is $3.70 per child per hour. In simple terms this means you do not get taxed on the first $3.70 per child per hour you earn. This goes straight into your pocket!
So for example:
If one child is enrolled with you for 40 hours and your reimbursement rate is $6 per hour
40hrs x $6 = $240 (Total fee)
40hrs x $3.70 (Your concession from IRD) = $148
$240 (Total fee) – $148 = $92 (Taxable income)
So for one week providing education for one child, you will have recieved $240 but only will only have to pay tax on $92. The $148 goes straight into your pocket. Ching Ching!
If you had 4 tamariki enrolled for 40 hrs your total income is $960 but you will only have to pay tax on $368!
There are other benefits too which will also further reduce your tax obligations but we can go over this in more detail later.
| Hours Worked | Reimbursement | Income |
|---|---|---|
| 40 | $6 per hour | $240 per child |
| straight into your pocket | only pay tax on |
|---|---|
| $148 per child | $92 per child |
x4 tamariki
Total Income
$960
Only pay tax on
$368
There are even more tax write offs for Home Based Educators including an Admin rebate and an Accommodation deduction.
Visit https://www.ird.govt.nz/income-tax/income-tax-for-individuals/types-of-individual-income/home-based-childcare to find out more
Tax FAQ’s
How much should I set aside to ensure I meet my tax liabilities?
As a rule of thumb we suggest you put up to 10% of your gross income from homebased childcare aside to meet your tax liability when it comes due.
When will I need to pay my tax?
Remember that the end of the financial year is 31 March. The payment of tax due, is to be paid by 7th February the following year.
Does Kids at Home provide a summary of your annual earnings?
At the end of the financial year Edubase will provide you with a summary of your earnings and the hours worked and you will be able to accurately work out your deductions and if you wish, the tax you will need to pay.
Do I need to keep my receipts?
You do not need to keep receipts as all general costs are taken into account with the deductions under variable standard costs on the IR413. (However you are able to use the receipt if you wish to make an actual costs return.)
What you could earn
With setting your own rates and hours, what you could earn is up to you. we provide a dedicated, friendly administration team to support you, with easy online record-keeping using our custom-built online attendance and payment system.
The following table is a few examples of what that could look like
| Hours Worked | tamariki | Reimbursement | Weeks Worked | Per Annum Earnings |
|---|---|---|---|---|
| 40 | 4 | $6 per hour | 48 weeks | $46,080 |
| 30 | 4 | $6 per hour | 48 weeks | $34,560 |
| 40 | 3 | $6 per hour | 48 weeks | $34,560 |
| 30 | 3 | $6 per hour | 48 weeks | $25,920 |
As mentioned above there are many tax benefits to being a Home Based Educator with Kids at Home, so in the above example with $46,080 earnings for the year only $18,432 would be taxable.
Please note, these are examples only and every situation will be different. You set your own hours and rates, and this will vary based on your own variables and region you work in.