Government Benefits and Tax Credits

Work and Income Benefits and IRD Tax Credits

This information summarises the relationship between Te Rūnanga o Ngāi Tahu (‘Te Rūnanga’) contributions and Whai Rawa Portfolio Investment Entity (‘PIE’) income on a Whai Rawa member’s entitlement to receive Work and Income benefits and Inland Revenue Department (‘IRD’) tax credits.

  • Te Rūnanga matched savings and distributions paid under the Retirement Scheme Contribution Tax (‘RSCT’) regime should not affect any IRD tax credit entitlements or Work and Income NZ income-tested benefits, provided the correct RSCT rate is supplied by the member.
  • PIE income will not affect Working for Families entitlements, provided the correct Prescribed Investor Rate is supplied, and should not affect any Work and Income benefit entitlements.
  • One-off lump sum amounts withdrawn for a tertiary education or housing withdrawal will not be included as income in the assessment of an IRD income tested benefit and similarly should not be included in the assessment of a Work and Income income tested benefit. Retirement withdrawals may be considered income if they are of a regular nature.
  • Working for Families payments are tax credits and are not considered taxable income. Therefore member’s that receive Working for Families tax credits, should not include these as part of their “taxable income” when calculating their Prescribed Investor Rate (PIR) and RSCT rate.
  • Work and Income benefits are included as part of a person’s taxable income. Therefore member’s that receive these should include them as part of their “taxable income” when calculating their Prescribed Investor Rate (PIR) and RSCT rate.
  • Where PIE income is earned by members, or where Te Rūnanga contributions are made to members’ accounts and the correct RSCT rate has been supplied, this income is not required to be put in the member’s return and should not affect their entitlement to Working for Families.
Impact of distribution on benefits
IRD Benefits Work and Income Benefits
Te Rūnanga Contribution Not affected if correct rate is chosen Should not be affected
Whai Rawa PIE Income Not affected if correct rate is chosen Should not be affected
Lump-Sum Withdrawal Not affected Should not be affected

Te Rūnanga Contributions

RSCT is a final tax and the contribution does not need to be included in the member’s tax return as long as the correct RSCT rate is used by the member.

Te Rūnanga Contributions and Inland Revenue Benefits

Te Rūnanga contributions will be excluded income and will not affect a member’s entitlement to an IRD benefit under the RSCT regime as long as the correct RSCT rate has been supplied by the member. If an incorrect (and lower) tax rate has been supplied, the member will have to include the income in his/her tax return to quantify any additional tax liability (and IRD benefits may be affected as a result).

Te Rūnanga Contributions and Work and Income Benefits

Most benefits administered by Work and Income are also income-tested. In relation to these benefits, we understand income is determined by Work and Income to mean any money received or the value in money’s worth of any interest acquired, before income tax, by the person which is not capital. The contribution made by Te Rūnanga is not paid for an income-related purpose because it is unavailable to the member until retirement. A Te Rūnanga contribution should therefore not be expected to be included as income in the assessment of a Work and Income benefit regardless of the regime it is paid under.

Tertiary education and housing withdrawals – If a member withdraws all or part of a Te Rūnanga contribution for a tertiary education or housing withdrawal, this is a capital payment and would not be included as income in the assessment of a Work and Income benefit.

Retirement withdrawals – After a member turns 55, their Whai Rawa account can be converted into cash more easily and this may therefore be taken into account in assessing that member’s Work and Income benefit entitlement if Work and Income considers that the distributions they receive from Whai Rawa are regular enough to be income of that member. This will likely be dependent on each member’s circumstances and the regularity of any payments by Whai Rawa. Where payments are only annual or are less regular, they are unlikely to be considered income by Work and Income.

If a member is directly or indirectly depriving themselves of income, this may be taken into account by Work and Income in assessing the member’s entitlement to income tested benefits. However there would seem to be a relatively low risk that contributing to what is essentially a superannuation scheme is depriving that member of income. This again would appear to be based on the individual circumstances of the member.

Whai Rawa PIE Income

PIE income is “excluded income” for income tax purposes as long as the correct Prescribed Investor Rate (‘PIR’) has been supplied by the member. If the member has supplied a PIR which is lower than their PIR during the income year then the member will have to include the PIE income in his/her tax return to quantify any additional tax liability.

Whai Rawa PIE Income and Inland Revenue Benefits

PIE income will be “excluded income” and will not affect a member’s entitlement to an IRD benefit as long as the correct PIR has been supplied by the member (because it is not included in the member’s tax return). If an incorrect (and lower) PIR has been supplied (and applied by Whai Rawa in respect of attributed income), the member will have to include that PIE income in their tax return to quantify any additional tax liability (and will thus subsequently be included in calculating the member’s income tested benefit).

Whai Rawa PIE Income and Work and Income Benefits

Similarly with the Te Rūnanga distributions, we understand income is determined by Work and Income to mean periodic payments of money made from any source for an income-related purpose. The PIE income earned by Whai Rawa is not allocated to a member for an income-related purpose because PIE attributed income is notional, and no actual “distributions” are made from Whai Rawa to the member until retirement (or specified earlier events). We therefore expect that PIE income should not be included as income by Work and Income in the assessment of an income tested benefit.