Hiring a support worker
The National Disability Insurance SchemeExternal Link (NDIS) lets you choose to self-manage all or part of your budget. This includes being able to hire and pay for your own support workers directly, without using an agency or third party.
If you hire a support worker directly, you may need to withhold tax from payments you make to them. Your withholding obligation depends on whether the workers you hire are:
- employees – you have to work out the amount of tax to withhold from payments you make to them. You may also need to pay them superannuation.
- contractors – you generally don't need to withhold tax from payments you make to contractors, unless there is a voluntary agreement with the contractor to withhold tax.
To check whether your worker is an employee or contractor for tax and super purposes, see How to work it out: employee or contractor. If you need to withhold tax from the payments you make to your support workers, you can:
- use our tax withheld calculators to work out how much tax you need to withhold
- register for a PAYG withholding account so you can send the tax to us. This must be done before you pay your support worker for the first time.
You can check whether you need to pay your worker super by using our superannuation guarantee eligibility decision tool.
Income and deductions for support workers
If you're employed or contracted as a support worker, the payments you receive for providing services to the participant are treated as part of your income. This includes when the support services are provided in your home.
You can claim deductions for certain expenses you incur that relate to the services you provide to the participant under your agreement.
You can't claim deductions for anything paid for by the NDIS, even if the expense is used to produce your income.
An amount you are paid may be a reimbursement if you are paid the exact amount for expenses you incur (either before or after you incur them).
For more information, see Community workers and direct carers – income and work-related deductions
Income and deductions for participants
If you're a participant, the payments you receive (including funds you self-manage) are exempt income.
However, you can't claim deductions for expenses you incur or assets you buy under the scheme.
You can't claim a deduction for anything paid for by the NDIS, even if the expense is used to produce your income. You can't claim deductions for:
- decline in value of depreciating assets
- other capital expenditure.
If you buy assets with your payments and you use those assets to produce income:
- the income produced is not exempt income
- there may be capital gains tax (CGT) implications.
For example, if you own your own home and NDIS gives you funds to modify it and you rent out a room:
- you must declare and pay tax on the rental income
- the house modification will affect your house's CGT cost base.
Income and deductions for nominated representatives
If you are a nominated representative – such as a nominee, parent or guardian – and you manage a participant's plan and you receive NDIS funding:
- on behalf of the participant – it is treated as the participant's income
- for providing services to the participant – it is treated as part of your income.
If you use NDIS funding to purchase equipment or services on behalf of a participant, you can't claim:
- a tax deduction for the purchase price of the equipment or cost of the services
- a deduction for the decline in value of the equipment.
Example: NDIS funding received by a guardian on behalf of a participant
Sam is a participant under the NDIS. His plan identifies that he requires carer support. Sam's plan states that $10,000 is to be paid directly to his guardian, Anne. Anne uses the entire amount to pay for a care provider.
For tax purposes, Sam has received the $10,000 in NDIS funding. Therefore, it is his income and is tax-free.
Anne will not have to pay income tax on this payment as she received it on behalf of Sam in her role as a guardian.
End of exampleIncome and deductions for registered plan management providers
If you are a registered plan management provider (RPMP) and you manage a participant's plan and receive NDIS funding:
- on behalf of the participant – it is treated as the participant's income
- for yourself for providing services to the participant – it is treated as part of your income.
If your income is exempt from income tax under Division 50 of the Income Tax Assessment Act 1997, the fees you receive for providing services to the participant is exempt from income tax.
If you use NDIS funding to purchase equipment or services on behalf of a participant, you cannot claim a:
- tax deduction for the purchase price of the equipment or the cost of the services
- a deduction for the decline in value of the equipment.
However, if you use NDIS funding in the process of producing your assessable income, you may be entitled to tax deductions, including a deduction for decline in value. For example, you use your funding to pay your own expenses or acquire equipment for your own benefit.
The tax treatment of deductions does not affect the accounting treatment of these items. This means if an RPMP incurs expenses or purchases assets on its own account, it should be accounted for as it normally would.
Example: NDIS amount received by a RPMP on behalf of a participant
Claudio is a NDIS participant and he has arranged for Disability Now, a registered plan management provider (RPMP), to manage his funding on his behalf. Disability Now is a commercial provider that earns its assessable income by providing services to people with disability.
Under Claudio's plan, $5,000 is allocated for the purchase of a prosthetic limb and care services. The $5,000 is deposited into Disability Now's nominated trust account for Claudio.
Disability Now deducts $104.45 from the $5,000 in the trust account for the care services it provides to Claudio. It uses the balance ($4,895.55) to purchase Claudio's prosthetic limb.
The $5,000 deposited into Disability Now's trust account is Claudio's income, not Disability Now's income. Disability Now then used the $104.45 to pay the wages of its employees who provide services to Claudio.
Disability Now declare the $104.45 fee that they deducted from the trust account as part of their assessable income. As Disability Now is a commercial provider that is not exempt from income tax, they are entitled to a deduction for the wages they have paid using the $104.45.
The amount a plan manager can claim is subject to location (remote and very remote locations are subject to a higher amount) as per National Disability Insurance Scheme Pricing Arrangements and Price Limits.
End of example