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Notional Remuneration assessment guide

Notional Remuneration is the fair and equitable valuation of the services rendered to the business by a self-employed person or deemed employee.

A self-employed person is an individual who carries on business otherwise than as an employee and benefits from the income or profits of that business other than by way of, or in addition to, being paid actual remuneration. Section 6 of the Payroll Tax Act 1995 defines a deemed employee as:

  1. a partner in a partnership carrying on business, who renders services to the partnership and otherwise than as an employee participates directly or indirectly in income or profits of the partnership;
  2. a shareholder of a company carrying on business, who renders services to the company and otherwise than as an employee participates directly or indirectly in income or profits of the company;
  3. a member of the governing body of an association carrying on business, who renders services to the association and otherwise than as an employee participates directly or indirectly in income or profits of the association;
  4. members of the Senate and members of the House of Assembly in the Government;
  5. a person holding an office in the Government as:
    • Premier
    • Ministers of Cabinet
    • Opposition Leader
    • President of the Senate
    • Speaker of the House of Assembly
    • Vice-President of the Senate
    • Deputy Speaker of the House of Assembly
    • Parliamentary Secretaries
    • Government Whip
    • Opposition Whip

Further, a self-employed person or a deemed employee is deemed to employ themselves and pay themself a deemed remuneration and their deemed remuneration is their actual remuneration or the notional remuneration whichever is greater.

When assessing the Notional Remuneration of your deemed employees or yourself, if you are self-employed, you are required to take the following factors into account:-

  1. The nature and extent of the services of the self-employed person or deemed employee to the business, including any such services which directly or indirectly affect or influence the financial viability of the business;
  2. The self-employed person or deemed employee's experience and any special skill;
  3. The nature of the business;
  4. The emoluments of
    • persons engaged in other businesses who render to those businesses services similar to those rendered by the self-employed person or deemed employee to the employer’s business;
    • persons engaged in the business who render to the business services similar to those rendered by the self-employed person or deemed employee;
    • persons engaged in the business other than those mentioned in (b) above;
  5. The financial records of the business which show
  6. the services of the self-employed person or deemed employee which generate revenue for the business;
  7. and the allocation to him of benefits from the business.

The answers to the following questions may guide you in making your assessments of Notional Remuneration:

  1. What is the value of the work that the self-employed person or deemed employee did in the business during this tax period?
  2. What would another person have been paid to do the work that the self-employed person or deemed employee did in the business during this tax period?
  3. What is the current market rate being paid for the job being done by the self-employed person or deemed employee?
  4. What is the gross remuneration paid to the highest paid salaried employee in the business this tax period?

Notional Remuneration of self-employed persons or deemed employees must be reevaluated on 1 April of every year. Adjustments are based at a minimum Consumer Price Index (CPI) as of 31 December of the preceding year. You may contact the Office of the Tax Commissioner for the current CPI or for any assistance required in assessing your notional remuneration.

The Tax Commissioner reserves the right to make enquiries and/or obtain documentation as is fit for the purpose of ascertaining whether an assessment of Notional Remuneration is adequate; and the Tax Commissioner may increase the assessment if it is concluded that it is not adequate. Each taxpayer should be able to demonstrate and substantiate how they calculated the fair and equitable value of their services to the business.

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