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10 Oct 2016

Commissioner's operational position on Veterans' Weekly Compensation/Weekly Income Compensation and tax codes

2016 operational position covering the tax codes available to a veteran receiving Weekly Compensation under the Veterans Support Act 2014.

This item clarifies the Commissioner of Inland Revenue's position concerning the tax codes available to a veteran receiving Weekly Compensation under Part 4, Subpart 5 or Weekly Income Compensation under Part 3, Subpart 4 of the Veterans' Support Act 2014.

Information about the independent earner tax credit and tax codes

An employee (this includes a veteran receiving Weekly Compensation or Weekly Income Compensation) must use the 'ME' tax code (or 'ME SL' for student loan borrowers) for their main source of income if they are eligible for the independent earner tax credit (IETC).

The IETC is a tax credit of up to $520 per year available to New Zealand tax residents who earn between $24,000 and $48,000. It is abated at a rate of 13 cents for every dollar earned over $44,000. A person cannot get the IETC if they receive certain types of government assistance, but receiving Weekly Compensation or Weekly Income Compensation does not exclude a person from IETC eligibility.

The 'ME' and 'ME SL' tax codes enable employees to receive the IETC throughout the year as part of their regular pay through a decrease in PAYE deducted.

Find out more about IETC eligibility

Error in the IR330 and corrections

From May 2015 until October 2015, the IR330 Tax Code Declaration provided that a person receiving Weekly Income Compensation must use the 'M' or 'M SL' tax codes for their primary source of income, and cannot use the 'ME' or 'ME SL' tax codes. From October 2015 until May 2016, the Tax Code Declaration contained similar statements regarding Weekly Compensation. The Commissioner has determined that these statements are incorrect and inconsistent with other Inland Revenue material.

Both the online and paper versions of the IR330 have now been updated to correct this error.

Information for those affected

If you have been using an incorrect tax code as a result of this error, please complete a new IR330 and provide this to Veterans' Affairs so they can update your tax code details.

Additionally, if you have been adversely affected by the use of an incorrect tax code, you can request a personal tax summary (or file a tax return if you are an IR3 taxpayer) and have any over-deductions refunded in the normal manner.