Tax On Bonus Payments Explained

Press, Volume CVI, Issue 31249, 22 December 1966, Page 5

Tax On Bonus Payments Explained

The effect of under-payment of P.A.Y.E. taxation on annual or Christmas bonuses was explained yesterday by Mr T. M. Hunt, regional controller for the South Island of the Inland Revenue Department, when he amplified a Press Association report from Wellington. Mr Hunt said that bonuses were taxed at a flat rate of 4s 3d in the £, but this might be insufficient in certain cases, leaving a balance due by the taxpayer at the end of the year. Where the total income did not exceed £l3OO, there was no undertaxation.

“Many taxpayers have additional exemptions to claim in their annual tax returns, such as life insurance premiums, charitable donations, union dues and private school fees,” said Mr Hunt. “These claims have the

effect of off-setting in whole or in part the under-payments on bonuses.

“For instance, in the case quoted below for £l5OO (S code), an under-payment of £5 10s is shown. This would be converted into a refund of £4 8s if the taxpayer had a claim for £4O for additional exemptions. “Larger bonuses are received by some employees after the close of their employers’ financial year. Underpayments in these cases can be more substantial." Mr Hunt said he would make another statement on this aspect of taxation before March 31. To show the under-taxation where a bonus of £5O is paid, and tax has been deducted at 4s 3d in the £, Mr Hunt quoted the following figures:

Income before bonus Code S M £ £ s d £ s d 1300 4 7 6 2 14 2 1500 5 10 0 ua 4 13 4 1700 6 12 « t 5 15 10 2000 8 8 7 9 7

M2 M4 £ s d £ s d 10 0 Nil 3 5 0 1 0 3 4 18 9 3 11 4 0 12 • S 13 1