Veteran income replacement payments
2015 amendments ensure Veterans' payments are treated the same as ACC earnings-related 'weekly compensation' payments for tax, social policy and KiwiSaver purposes.
Sections CF 1(1), CW 28(1)(a), MA 7(3), and RD 5(6) of the Income Tax Act 2007 and sections 4 and 14 of the KiwiSaver Act 2006
The new Act introduces amendments to the Income Tax Act 2007 and the KiwiSaver Act 2006 that correct the tax, social policy and KiwiSaver treatment of income replacement payments paid under the Veterans' Support Act 2014. The corrections ensure the payments are treated the same as ACC earnings-related "weekly compensation" payments for tax, social policy and KiwiSaver purposes.
Background
The Veterans' Support Act 2014 introduced two new support schemes for veterans who have suffered as a result of their service.
Two types of payment were included under Scheme One and Scheme Two:
- impairment compensation payments (for example, the disablement pension); and
- income replacement payments (for example, a veteran's weekly income compensation).
The policy intention was for veteran income replacement payments to be treated the same as ACC weekly compensation payments for tax, social policy and KiwiSaver purposes. ACC weekly compensation payments are treated as taxable, subject to PAYE and are included in social policy calculations. In addition, KiwiSaver deductions can be made from the payments, but they are not subject to the KiwiSaver auto-enrolment and compulsory employer contributions rules.
However, the Veterans' Support Act 2014 did not apply the correct tax, social policy and KiwiSaver treatments to the veteran income replacement payments. The Taxation (KiwiSaver HomeStart and Remedial Matters) Act 2015 introduced amendments to ensure the correct policy outcome is achieved.