Are you an NDIS provider struggling to manage your business taxes?

Navigating taxes as an NDIS provider can be challenging. The tax rules are complex, and it’s easy to get confused about what taxes you need to pay or documents to file. 

But you’re not alone—many providers find it tough to manage their tax obligations while focusing on delivering quality essential services. The team at Lawpath recognises your efforts toward improving the lives of individuals with disabilities, which is why we’ve created this detailed guide to help you stay compliant.

Let’s loo at the key tax information you need, offering clear and practical advice so you can handle your taxes confidently and avoid any costly mistakes that could lead to legal sanctions.

Do NDIS providers pay tax?

Generally, the funds  NDIS participants (beneficiaries) receive are treated as tax-exempt. However, the same rule does not apply to NDIS providers.

NDIS providers (individuals and businesses that provide NDIS-supported services to the scheme’s participants) are required to pay taxes. However, their tax obligations can vary depending on factors such as the nature of the services they provide and their business structure. As a provider, it is important that you are aware of your tax obligations early enough, as ignorance is usually not an acceptable reason for non-compliance.

Some of the taxes you might be obligated to pay include:

GST (Goods and Services Tax)

GST generally applies to most Australian businesses. However, services or supplies provided under the NDIS  might be GST-free, which means you might be exempt from GST payments as an NDIS provider even if your business is registered for GST. 

However, this tax exemption is dependent on certain conditions set by the Australian Taxation Office(ATO):

• The recipient participant must have an active  NDIS plan that has been approved by National Disability Insurance Agency 
• The service supplied must be listed as “reasonable  and necessary support “ in the participant’s NDIS plan
• The supply must be made under a written agreement between you (the provider) and the participant or anyone else acting on the participant’s behalf. 
• The supply or service rendered is listed under the NDIS minister’s 2021 Determination on the subject (A New Tax System (Goods and Services Tax) (GST-free Supply—National Disability Insurance Scheme Supports).

All four requirements must be met to qualify for the GST exemption. If you offer a mix of exempt and non-exempt services, you would need to separate them properly to ensure the correct tax treatment.

Income Tax

As an NDIS provider or support worker, your earnings for providing services to participants are treated as part of your income. As such, you must report your income and expenses to the Australian Taxation Office (ATO) and pay the appropriate income tax on your earnings. This applies whether you are a sole trader, partnership, or company.

PAYG Withholding

If you have employees as an NDIS provider, you may need to withhold tax on payments you make to your employees, contractors, and directors. The money you withhold must be paid to the ATO on each individual’s behalf. 

Payroll Tax

If you have employees and your wage bill (before taxes) exceeds a certain threshold, you may be liable for payroll tax, depending on the state or territory you operate in and where your employees are located.

Understandably, it might be difficult to understand your specific tax obligations. Don’t be afraid to seek professional advice if that’s what you need to ensure compliance.

Expenses NDIS providers can claim

Even though NDIS providers are generally required to pay taxes, they  can claim a variety of expenses that are related to the services they provide to participants as tax deductions. Claiming these expenses can reduce the amount of taxable income, which can lower the overall tax bill. 

Here are some common expenses that NDIS providers can typically claim:

• Car expenses (if you work in alternate workplaces for the same employer)
• Protective clothing expenses are needed to protect you or your employees during the course of the job, such as non-slip nursing shoes or distinctive uniforms
• The cost of a meal bought while working overtime ( if you receive an overtime meal allowance)
• Study expenses related to the skills needed for the job
• Work-related phone and internet costs
• Cost of personal protective equipment such as gloves and masks if the job requires close proximity with participants
• Union and professional association fees

It’s important to keep accurate records and receipts for all these expenses, as they will be required when claiming deductions on your tax return. Consulting with a tax professional is also recommended to ensure you’re claiming everything you’re entitled to and staying compliant with tax laws.

Expenses NDIS providers can’t claim

As a rule, you cannot claim deductions for any expense that NDIS pays for.

There are also certain expenses that cannot be claimed as an NDIS provider, either because they are not related to business activities or because they are considered private or non-deductible by the  ATO. These include the following:

• Costs for using a vehicle for personal trips or commuting between home and work unless the activity is directly related to a business activity.
• Personal medical expenses, even if they indirectly affect your ability to work, are not tax-deductible.
• Gym memberships or fitness costs
• Childcare costs incurred while you work
• Conventional clothing 
• Meal and snack costs consumed during normal work hours
• Any expense for which you’ve been reimbursed.

It’s crucial to differentiate between personal and business expenses to ensure compliance with tax regulations. Keeping detailed records and consulting with a tax professional can help avoid any issues with the ATO and ensure that only legitimate business expenses are claimed. 

Record keeping for work expenses

As an NDIS support worker, proper record keeping is critical to help you keep track of your deductible and non-deductible expenses and stay on top of your taxes.

Here are some effective record-keeping tips that could help you keep track of these expenses:

• Save and organise your digital and physical receipts
• Use expense-tracking apps to monitor your spending. These apps, such as Xero and Expensify, can automatically categorise expenses, generate reports, and even sync with your bank accounts, making it easier to keep a detailed record of your spending.
• Use mileage tracking apps like MileIQ or TripLog to automatically log your trips and calculate deductions based on your travel.
• If possible, use a separate bank account for all work-related expenses. This simplifies tracking, as all transactions in that account will be related to your NDIS work. It also makes it easier to reconcile your expenses when preparing your tax return.
• Set aside time each week or month to review and update your records. This regular practice ensures that nothing is missed and your records remain accurate and up-to-date. As tax time approaches, use these reviews to ensure all receipts are accounted for and that your records match your bank statements and invoices.

A tax expert can also help differentiate your expenses and make it easy to claim the highest tax deductions possible if you’re feeling overwhelmed and unable to handle things on your own.

FAQ

Can you claim NDIS worker screening fees on tax?

Yes, you can claim NDIS worker screening fees on your tax. Since these fees are directly related to your work as an NDIS provider, they are considered a deductible business expense.

Can you claim flights on NDIS?

Yes, you can claim flights on NDIS if they are directly related to providing services or supporting participants. Just ensure that the travel is necessary for your NDIS work to be considered a deductible expense.

Final thoughts 

Navigating your tax obligations as an NDIS provider requires you to understand which expenses are deductible and keep meticulous records. By following the details provided in this guide, you can ensure compliance with tax regulations and potentially reduce your taxable income.

The process might seem complex, but with the right knowledge and tools, it can be more manageable.

Lawpath offers easy access to accounting and legal resources and top-tier professional advice to help you handle your tax obligations effectively without jeopardising your business.

Proper tax management is important not just for regulatory compliance but also to optimise your business for long-term success. You can count on us to provide effective business tax compliance solutions that could help increase your productivity and make paying taxes less of a burden.