CONTINUEThis site uses cookies. By continuing to browse this site you are agreeing to our use of cookies. Find out more.
  1. Front Page
  2. News By Topic
  3. New Zealand Government Amends Tax Treatment Of Redundancy Payments

New Zealand Government Amends Tax Treatment Of Redundancy Payments

by Mary Swire, Tax-News.com, Hong Kong

11 December 2007


New Zealand's government has this week introduced legislation to make the taxation of redundancy payments fairer to people who are pushed into a higher tax bracket when they receive the lump sum payments.

"Under current tax law, lower and middle-income people can be over-taxed when their redundancy pay pushes them into a higher tax bracket," Finance Minister Michael Cullen and Revenue Minister Peter Dunne explained on Tuesday.

"Redundancy payments are employment income, and it is fair that they are taxed. However, taxing these payments at a higher rate of tax without taking into consideration the recipient's personal tax rates before and after redundancy has led to many cases of over-taxation. When that happens it can come at what is already a very difficult time for most people," they continued, adding:

"To resolve the problem, and to keep complexity and compliance costs to a minimum, the government is introducing a simple tax rebate that will apply to redundancy payments made on or after 1 December 2006. "

The Ministers explained that: "Calculation of the rebate will be based on the flat rate of six cents per dollar, up to $60,000 per redundancy. That means, for example, that someone who receives a redundancy payment of $20,000 will be able to claim a $1,200 rebate. Someone who receives a $60,000 payout can claim a rebate of $3,600."

"Because the maximum redundancy payout that qualifies for a rebate is $60,000, the rebate itself is capped at $3,600, so someone who receives a payout larger than $60,000 will be eligible for a $3,600 rebate."

"The process for obtaining a rebate will be straightforward. Once the system is in place, from 1 April next year, recipients will be able to claim a rebate immediately after receiving their redundancy payout by completing an Inland Revenue form. Over time an automated system will be developed to reduce compliance costs further."

"The government is pleased to have found a solution to a complex tax problem that has been of concern to workers and unions for some time. The changes announced today will make help to make the taxation of redundancy pay fairer to all concerned," the Ministers concluded.

The changes are being added to the taxation bill currently before Parliament by means of supplementary order paper No. 167, which was released on Tuesday.


To see today's news, click here.

 















Tax-News Reviews

Cyprus Review

A review and forecast of Cyprus's international business, legal and investment climate.

Visit Cyprus Review »

Malta Review

A review and forecast of Malta's international business, legal and investment climate.

Visit Malta Review »

Jersey Review

A review and forecast of Jersey's international business, legal and investment climate.

Visit Jersey Review »

Budget Review

A review of the latest budget news and government financial statements from around the world.

Visit Budget Review »



Stay Updated

Please enter your email address to join the Tax-News.com mailing list. View previous newsletters.

By subscribing to our newsletter service, you agree to our Terms and Conditions and Privacy Policy.


To manage your mailing list preferences, please click here »