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 and you may also need to pay superannuation for them.
- 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 Employee or independent 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 super for your worker by using our superannuation guarantee eligibility decision tool.
Example: NDIS self-managed funding
Sam is a NDIS participant and has a self-managed budget of $30,000. He directly engages support providers for the services he receives, then lodges a claim for payment of those services. The NDIA pay Sam who then pays the support providers.
The $30,000 is for Sam to pay for those services and is not taxable. He will need to keep records of his NDIS expenditure to demonstrate appropriate use of the funds if requested by the NDIA.
As Sam hired the support workers directly, he may need to withhold tax from payments made to them. The withholding obligations depends on whether the workers Sam hired are employees or contractors.
End of exampleIncome 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 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 the participant's non-assessable income
- for providing services to the participant – it is 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.
Income 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 the participant's non-assessable income
- for yourself for providing services to the participant – it is 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 are exempt from income tax.
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 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 doesn't 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, a NDIS participant, has a plan managed budget of $70,000. He has arranged for Disability Now to pay providers on his behalf. Disability Now is a commercial provider that earns its assessable income by providing services to people with disability.
The NDIA pays Disability Now $1,200 for plan management services, this is not paid for from Claudio's $70,000 plan management budget. Disability Now provides $10,000 worth of NDIS therapy supports and pays the additional $60,000 to Claudio's other NDIS support providers.
The $70,000 is spent on Claudio's behalf and is not taxable to Claudio.
The payments received by Disability Now for plan management services ($1,200) and therapy supports ($10,000) are business income and are subject to normal tax obligations. Disability Now will need to keep records of all the transactions related to Claudio's NDIS plan.
The $60,000 paid by the plan manager to Claudio's other NDIS providers is income for those providers but not the plan manager.
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