Do Educators Pay Tax?

Because Home Based Educators are not employees of A Kidz World and so have no employment relationship, Educators are responsible for any income tax liability on the income they receive. 

Under present tax law, Educators are liable for tax on their income less their costs incurred in providing care. This may be either the actual costs, for which full records must be kept, or the “Standard Cost of Care” as set out in IRD’s Determination DET001 dated 10th May 2004. 

We have direct contact with IRD to help in filling out any tax forms at the end of each financial year - please contact us for assistance.

Educators are also responsible for any ACC levies on their income.

ACC and Tax

Being Self Employed
All A Kidz World Educators are deemed self- employed and you will sign your enrolment form stating you accept this and you also accept responsibility for your own tax.  
All Educators set their own rate of pay.
A Kidz World will provide you with a Payment Record form to enable all payments to be recorded and to be able to facilitate the completion of tax returns to the Inland Revenue Department.  The Payment Record form is to be filled in each time you receive a payment from a parent/caregiver.  It is important to obtain a parent signature each week when the parent pays their fee.  Your Co-Ordinator will talk you through this process in more detail.

Your Tax… Explained Here
Ok you are keen on becoming a self-employed A Kidz World Educator but the tax and money side of things is freaking you out!!  Slow Down and take a deep breath – dealing with tax and money can be stressful but this is easy as pie and we are here to assist you every step of the way.

First thing, you have a child to enrol with you.  What is the hourly rate?  Because you are self- employed you won’t get sickness or holiday pay, so you need to consider this when setting your rate. 
The majority of Educators throughout A Kidz World charge between $5.00 and $8.00 per hour.  Remember you can have up to four children in your care (including your own).
A Kidz World allows Educators to set their own fees based on the unique learning environment they provide and market rates for care in the region where it is being provided.
 
Your Co-Ordinator will help you work out exactly the amounts of WINZ/20 ECE and parent payments you are to receive.  This information is also given to the parents by way of a contract that you as an Educator signs, A Kidz World as the agent and the parent so we all know exactly what parents are to pay you.

You will get a break down similar to this:
Hours the child is in care x your hourly rate
= total fee
Total fee minus WINZ or 20 ECE payments (reimbursed to you through A Kidz World)
= Parent top-up
The parent top-up is paid directly to you.

So let’s use a scenario
One child enrolled with you for 20 hours, and you charge $6.00 per hour.
20 hrs x $6 = $120.00 (total fee)
The parent is eligible to claim for WINZ at the top rate which is $3.98 per hour.
20 hrs x $3.98 WINZ = $79.60
The difference between the full fee of $120 and the WINZ subsidy of $79.60 = $40.40
and this becomes the parents weekly payment.

NOTE:   WINZ childcare subsidy rates are dependent on parental income and how many dependants are in the family.  You can find the current rates at www.workandincome.govt.nz  

If you have a child receiving 20 Hours ECE – this is paid at $4.70 per hour.  All 3 and 4 year olds are entitled to ECE hours, regardless of parental income.

You will have an A Kidz World Payment Record form and each week you will need to fill in the dates for the week, the parents payments and then obtain a parent signature.  Your Co-Ordinator will help you to fill this in for the first few weeks.  When it comes time to do your tax, this information is vital so it is extremely important to keep your Payment Record form up to date.
 
So what do you need to complete your tax responsibilities and obligations?
At the end of each tax year, the IRD give out the new Determination DET 09/02 for Standard Cost Household Service for Childcare providers.  Simply put, this is the non-taxable part of your income because you are working from home.  It is called Variable standard-cost and as at April 2014 it stands at $3.42 per hour per child.  This covers expenditure on items such as electricity/fuel, food, wear and tear, outings and associated transport costs, laundry, educational resources, modification costs, equipment and first aid.  You can get more information at www.ird.govt.nz

So basically – you don’t pay tax on the first $3.42 per child per hour.

Let’s go back to our scenario…
One child at 20 hrs, $6 per hour = $120 per week full fee.
$3.42 (non-taxable component) x the 20 hrs of care = $68.40
Taxable income is the difference- $51.60
So you receive the $120 each week for providing the care, but you only pay tax on $51.60 of the $120.00

There are five pieces of information you need to complete your tax.
  1. The total payments you have received from parents for the year (Payment Record form)
  2. The total payments received from A Kidz World, these will include A Kidz World subsidy, WINZ and 20ECE hours (Supplied to you by A Kidz World)
  3. The total hours you have worked for the year (Supplied to you by A Kidz World)
  4. The purchase price or the total rent you have paid for your home for the year.
  5. Any accommodation supplement you have received for the year. (WINZ)
At the end of each financial year you will receive an earnings certificate from A Kidz World with all the information you will need to complete your tax obligations, and we will be there to assist you every step of the way.  We also have direct access to IRD for any assistance.

 

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