Payroll donations should be held in trust for employees

Submission

(19 – Volunteering New Zealand, 24 – New Zealand Law Society, 62 – Minter Ellison Rudd Watts)

The bill should provide that payroll donations are held in trust for employees until those donations have been transferred to the relevant recipient organisations.

Submissions raised concerns about the risk of employers becoming insolvent and the employees losing their entitlement to payroll donations that have not yet been transferred to the relevant recipient organisations.

Comment

The proposed scheme is silent on whether payroll donations held by the employer during the three-month timeframe are held in trust for employees or the donee organisations.

Officials consider that payroll donations that have not been transferred should be held in trust for the employees. As previously mentioned, in the event of an insolvency the payroll donation tax credit would be extinguished and the employer would become liable to the resulting shortfall in PAYE. Additionally, the employee would have the right to claim compensation or redress from the employer for the payroll donations that had not been transferred. If payroll donations were treated as being held in trust for the employee, the employee’s claim on the assets or income of the employer would be treated in the same way as trust monies. Officials agree with this submission.

Recommendation

That the submission be accepted.