Parents and early childhood education centres and home-based agencies are advised to take more care around money paid as donations following new information from Inland Revenue.
The IRD asserts that when parents receive services in return for payment, the payment should not qualify as a donation because the money is not given unconditionally and without benefit.
IRD has begun investigating arrangements and says it will take steps to recover excess tax credits if it feels they have been applied incorrectly. It may also seek to recover any GST that should have been paid. Penalties could also be imposed, although these may be reduced if people volunteer information.
This has possible implications for parents who pay and services that ask for donations or top-up payments for children on the 20 Hour ECE subsidy.