Tax treatment of reimbursements and honoraria paid to volunteers

2009 amendment provides an income tax exemption for reimbursement payments to volunteers and clarifies the tax treatment of honoraria.

Sections CO 1 and CW 62B of the Income Tax Act 2007

The Income Tax Act 2007 has been amended to provide an exemption from income tax for reimbursement payments to volunteers. The rules also clarify the tax treatment of honoraria paid to volunteers.


Before this amendment it was unclear how reimbursement payments made to volunteers should be taxed, particularly if they were made as combined payments with honoraria.

Key features

New section CO 1 of the Income Tax Act 2007 provides a general rule treating amounts derived in undertaking voluntary activities as income of the person receiving them.

Section CO 1 is overridden by new section CW 62B, which provides that:

  • Reimbursement payments that are based on actual expenses incurred by volunteers in undertaking voluntary activities will be treated as exempt income to the volunteer.
  • If a paying organisation puts in place a process for making a reasonable estimate of the amount of expenditure likely to be incurred by a volunteer for whom reimbursement is payable, payments based on that estimate will also be treated as exempt income. This will provide flexibility, such as when it is not practical for organisations to reimburse their volunteers on the basis of actual costs incurred.
  • Organisations will still be able to make combined payments as long as they:
    • clearly identify which portion of the payment is reimbursement;
    • correctly withhold tax from the honorarium portion; and
    • return the honorarium as a schedular payment in their employer monthly schedule.

The exempt income treatment includes reimbursements in non-cash form, such as petrol vouchers. It also includes reimbursement of transport costs incurred in getting to and from the place of volunteering, as well as those incurred in the course of volunteering.

Volunteers are defined as "people who freely undertake activity in New Zealand that has been chosen either by them or a group of which they are a member". The activity must provide a benefit to a community or another person. Although it is possible that the paying organisation could carry on a business for profit, there must be no purpose or intention of private pecuniary gain for the volunteer.

The term "honorarium" is defined for the purposes of both new section CW 62B and schedule 4, part B (Rates of tax for schedular payments).

The new tax treatment applies regardless of whether reimbursements are paid progressively through the year or in a lump sum.

Application date

The exemption for reimbursements and rules for the treatment of mixed payments of honoraria and reimbursements apply retrospectively to all reimbursement payments made on or after 1 April 2009.


Miriama is a voluntary regional coordinator for a national sports organisation, SportCo. Some travel to local centres, as well as attendance at tournaments is involved. Miriama uses her own car.

SportCo pays Miriama an honorarium of $50 per month for six months of the year.

SportCo estimates that Miriama travels an average of 250 kilometres per month in the course of her voluntary activities, including her travel to and from her home.

SportCo decides to reimburse Miriama’s travel expenses by paying her a travel allowance of 70 cents per kilometre.

The honorarium and travel allowance are paid together.

SportCo also gives Miriama meal vouchers to buy meals on the days that she has to attend tournaments.

Miriama receives a total payment of $225 in each of the six months of the year.

SportCo will deduct tax of $16.50 from the monthly payment of $225.

The $50 honorarium is subject to withholding tax at the 0.33 rate, and the $50 is included as a schedular payment in the employer monthly schedule.

SportCo will pay the $16.50 tax deduction to Inland Revenue.

The $175 travel allowance is treated as exempt income.

The meal vouchers fall within the scope of the exempt income treatment.