Carer Support payments can be used to pay a support carer so that full-time carers can take a break from their role.
Whether a support carer is taxed depends on if they provide care in their own home, or in the home of the person who needs care.
Providing care in their own home
The Carer Support payment is a reimbursement. It covers a support carer’s costs to look after the person in need of care. The payment they get is not taxable, and the support carer cannot claim expenses for tax purposes.
Providing care outside their own home
If the carer provides care outside their own home, their payment is taxable.
Support carers who work for 30 hours a week or less are generally classed as private domestic workers and must pay their own tax and register as IR56 taxpayers. This means they are acting as their own employer.
Each month they earn income they should send us employer details, showing how much they have earned, and how much tax they have deducted. Income can be reported in myIR or using an Employment Information – IR348 form.
At the end of the year, if they do not have any untaxed income, we will send an income tax assessment that includes the support carer payments.
A full-time carer can choose to pay a support carer as their employee. The full-time carer would have to register with us as an employer.
Self-employed support carers
If a support carer is in the business of providing care, the support payments are taxable. They should show these payments as self-employed income in an end of year tax return. The support carer may also need to register for GST.
Entitlements and repayments
We use yearly taxable income to work out Working for Families entitlements or student loan repayments. Self-employed and IR56 payers will need to tell us how much they expect to earn.
Silvia is a full-time carer for her son Max. Silvia organises for a support carer, Joe to come to her home to provide care for Max.
As Joe is providing care in Silvia’s home Joe will need to keep records of the payments and register as an IR56 taxpayer.
Joe will account for his own tax on these payments as an IR56 taxpayer. Silvia does not need to register as an employer but can choose to.
If Joe works for more than 30 hours per week for her on a regular basis Silvia will have to register as an employer. In this case Joe will be an employee and no longer need to be registered as an IR56 taxpayer.