Criteria for earnings-related Working for Families tax credits

Section MA 7(3) of the Income Tax Act 2007

An amendment has been made to section MA 7 of the Income Tax Act 2007 to ensure the surviving spouse or partner of a deceased veteran can continue to claim the deceased veteran's full-time earner-related Working for Families tax credits.

Background

People need to meet certain criteria to qualify to receive Working for Families tax credits. Recipients of the in-work tax credit (IWTC) and the minimum family tax credit (MFTC) are required to be full-time earners (work at least 20 hours if single, or at least 30 hours as a couple).

However, if a person is receiving an ACC earnings-related payment due to an incapacity, the hours the person worked before being injured count towards their hours of work for Working for Families purposes. In the event of their death, their spouse/partner can continue to receive the deceased person's payments and full-time earner-related tax credits (the IWTC and MFTC).

The policy intention is for weekly income compensation and weekly compensation for veterans and weekly compensation to deceased veterans' spouses or partners to be treated the same as ACC earnings-related payments for Working for Families purposes.

An amendment to section MA 7(3) of the Income Tax Act 2007 contained in the Veterans' Support Act 2014 ensured that weekly compensation and weekly income compensation for veterans are treated as relating to an incapacity, and therefore the work hours test is modified for Working for Families purposes.

However, section MA 7(3) did not include weekly compensation payments to deceased veterans' spouses or partners. Therefore, these payments would not have been treated as relating to an incapacity for the purposes of section MA 7(2)(d). Hence, surviving spouses or partners would not have qualified to receive a deceased veteran's full-time earner-related Working for Families tax credits (IWTC or MFTC) without the amendment to section MA 7(3) in the Taxation (KiwiSaver HomeStart and Remedial Matters) Act 2015.

Key features

The amendment expands section MA 7(3) of the Income Tax Act 2007 to include weekly compensation payments to deceased veterans' spouses or partners.

Section MA 7(2)(d) of the Income Tax Act 2007 modifies the Working for Families full-time earner rule for earnings-related payments made by ACC or Veterans' Affairs New Zealand to surviving spouses or partners of people who had been incapacitated.

The spouse or partner is treated as being employed for the number of hours their deceased partner or spouse would have been employed if they had not been incapacitated. The deceased person's assumed hours are added to the number of hours the spouse or partner has worked.

"Incapacity" referred to in section MA 7(2)(d) is defined as being an injury for which an ACC or veteran support payment listed in section MA 7(3) has, is or will be paid.

Application date

The amendment came into force on the date of enactment, being 31 March 2015.