Working for Families: family scheme income - "other payment" category

Amends the 'other payment' category in Working for Families: family scheme income from Apr 2011 to support those affected by events like the Canterbury earthquake.

Section MB 13 of the Income Tax 2007 and section 91AAS of the Tax Administration Act 1994

The "other payments" category in the definition of "family scheme income" has been amended to ensure payments given to support people affected by events such as the Canterbury earthquakes in September 2010 and February 2011, and other similar events in the future, are excluded from the definition of family scheme income for up to 12 months.

Background

The Taxation (GST and Remedial Matters) Act 2010 introduced a more comprehensive definition of "family scheme income". This new definition of family scheme income applies for Working for Families (WFF) tax credits, and community services cards for those with dependent children, from 1 April 2011. The definition will also be used for student allowance parental income test purposes when the necessary regulations are made.

People adversely affected by the Canterbury earthquakes have received payments from relatives and employers to help them to recover from the earthquakes, replace damaged items and meet everyday living expenses. Under the new definition of family scheme income, these payments could be potentially included in family scheme income, affecting the recipient's entitlements to various benefits, including WFF tax credits.

Key features

The Taxation (Canterbury Earthquake Measures) Act 2011 allows for payments given to support people adversely affected by the Canterbury earthquakes, and similar events in the future, to be excluded from the definition of family scheme income.

Section MB 13(2) of the Income Tax Act 2007 has been amended so that payments made to relieve the adverse effects of emergency events declared by the Commissioner are excluded from the "other payment" category in the family scheme income definition for a specified period of up to 12 months.

New section 91AAS of the Tax Administration Act 1994 authorises the Commissioner to make a determination declaring an event, which meets the requirements of paragraphs (a) and (b) of the definition of "emergency" in section 4 of the Civil Defence Emergency Management Act 2002, an emergency event for family scheme income purposes. The requirements of these paragraphs generally relate to a state of emergency caused by natural disasters. The determination must also specify an application period of up to 12 months from the date of the event.

The Commissioner's determinations in relation to the Canterbury earthquakes are included in the Tax Information Bulletin, Vol 23, No 6 (July 2011).

Application date

The amendments come into force on 1 April 2011.