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COVID19 Response Taxation and Social Assistance Urgent Measures Bill

Social assistance

REMOVAL OF HOURS TEST FROM THE IN-WORK TAX CREDIT

(Clauses 17, 19, 20, and 29(3))

Summary of proposed amendment

The In-Work Tax Credit is an income-tested cash payment to working families with children of $3,770 per year (plus an additional $780 per child for 4th and subsequent children). This amendment would remove the requirement for recipient families to normally be working at least 20 hours per week as a sole parent or a combined 30 hours per week as a couple.

Application date

The proposed amendment would apply from 1 July 2020.

Key features

The removal of the hours-test would allow families that work variable hours or less than the required 20 (sole) or 30 (coupled) hours per week to receive the In-Work Tax Credit. The remaining eligibility criteria for the In-Work Tax Credit would remain unchanged. Therefore, recipient families must still be deriving income and cannot be receiving an income-tested benefit or student allowance, as per the existing requirements.

Background

The effect of this proposed change would be to allow all Working for Families recipients that have income from employment and do not receive an income-tested benefit or student allowance to receive the In-Work Tax Credit, regardless of the number of hours they work. Currently, families that work a fluctuating number of hours from week to week or are unable to increase their hours of work do not receive the In-Work Tax Credit for weeks that they do not work 20 (sole) or 30 (coupled) hours.

WINTER ENERGY PAYMENT

(Clause 36)

Summary of proposed amendment

This amendment would reduce the rates of winter energy payment back to $450 for single people with no dependent children (down from $900) and $700 for couples or single people with dependent children (down from $1,400).

Application date

The proposed amendment would apply from 1 May 2021.

Key features

The proposed amendment would ensure that the doubling of the winter energy payment rates for 2020 as part of the COVID-19 Recovery Package are only temporary. It would reduce the rates back to $450 and $700 for the 2021 winter period.

Background

As part of Phase One of the Recovery Package in response to the economic impacts of COVID-19, the Government agreed that the annual rates of WEP payments for 2020 would be $900 for single people with no dependent children, and $1,400 for couples or single people with dependent children. The increase is double the normal rate and is only intended to be temporary. Single people would receive $40.91 each week, and couples would receive $63.64 each week for the 2020 winter period (1 May to 1 October), these rates would be reduced back to their previous levels for the 2021 winter period.

The temporary WEP increase provides further support to beneficiaries and superannuitants to help cover their heating costs this winter. It is estimated that around 850,000 WEP recipients would benefit from the proposal to temporarily double the WEP rates. If partners of recipients are included, over one million people are expected to benefit.

WORKING FOR FAMILIES TAX CREDITS ENTITLEMENT FOR EMERGENCY BENEFIT RECIPIENTS

(Clause 18)

Summary of proposed amendment

The proposal would allow people on a temporary visa who wouldn’t otherwise meet the Working for Families (WFF) residency criteria, to qualify for WFF, if the Ministry of Social Development (MSD) has granted them an emergency benefit. This would ensure that people on a temporary visa who are granted an emergency benefit would qualify for the same WFF components as other beneficiaries.

Application date

The proposed amendment would apply from 1 April 2020.

Key features

If MSD grant an emergency benefit, to a person on temporary visa, that person would be able to qualify for the same WFF payment as other beneficiaries. That is, they could qualify for family tax credit and Best Start. They would not qualify for the In-Work Tax Credit or minimum family tax credit because these payments are not available to a person who is in receipt of a main benefit.

Background

Currently, emergency benefit recipients with dependent children and who are on a temporary visa, do not qualify for WFF tax credits. This is because they do not meet the residency criteria for WFF. The result is a difference in the financial support that these families can access, compared with other main benefit recipients with children.

In general, to receive a main benefit (including an emergency benefit) a person must be a New Zealand citizen or permanent resident and have resided in New Zealand for at least two years since becoming a citizen or resident. However, MSD has discretion to grant an Emergency Benefit in other circumstances[1] when those residency criteria are not met.

The WFF legislation does not contain any comparable discretion. The WFF residency requirements can be met by the child or the parent.

The WFF residency requirements can be met by the child if:

  • the child is ordinarily resident in New Zealand; and
  • is present in New Zealand for the period of entitlement.

The WFF residency requirements can be met by the parent if:

  • the parent is ordinarily resident in New Zealand; and
  • has been in New Zealand for 12 months continuously at any time.

Those on a temporary visa are specifically excluded from the definition of New Zealand resident for WFF. This exclusion was intended to prevent short-term visitors from accessing WFF. It was not intended to prevent those in exceptional circumstances from accessing WFF.

The proposed amendment would ensure that families on a temporary visa who are granted an emergency benefit are able to access a comparable level of financial support to other recipients of main benefits.

GST ON COVID-19 RELATED SOCIAL ASSISTANCE PAYMENTS

(Clause 35)

Summary of proposed amendment

The proposed amendment ensures that COVID-19 Leave Payment and the COVID-19 Wage Subsidy (the payments) which were paid between 17 March 2020 and 23 March 2020 are not subject to GST.

The amendment is necessary because the Goods and Services Tax (Grants and Subsidies) Amendment Order 2020 (the 2020 Order) came into force on 24 March 2020. This Order added the payments to the schedule of non-taxable grants and subsidies in the Goods and Services Tax (Grants and Subsidies) Order 1992, however, it did not have retrospective effect. This means that the payments are only non-taxable from 24 March 2020, which is not the intent.

Proposed section 89 of the Goods and Services Tax Act 1985 ensures that payments made between 17 March 2020 and 24 March 2020 are non-taxable grants and subsidies for the purposes of the Goods and Services Tax Act 1985 for the period between the Government’s announcement of the payments and the commencement of the 2020 Order. This means that recipients of the payments would not need to return GST on them, irrespective of when they were received.

Application date

The proposed amendment would come into force on the day the Bill is enacted, and would apply retrospectively from 17 March 2020.

 

[1] These circumstances can include not being eligible for another benefit, that they are in hardship and unable to earn a sufficient livelihood.