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Income Tax Act 2007

Tax credits paid in cash - Abating WFF tax credits

MD 9: Fifth requirement: earner

You could also call this:

“You or your partner must usually earn income from work or a business”

You need to meet the fifth requirement to get an in-work tax credit. This requirement is about being an earner. Here’s what you need to know:

  • Either you or your partner needs to usually be an earner.
  • An earner is someone who gets income from working or from a business.
  • There are different types of income that count, like wages, salary, or business income.
  • Some types of income don’t count, like accident compensation payments or certain government benefits.
  • If you own a big part of a company, you can also meet this requirement if your company makes money.

You might still meet this requirement if:

  • You got injured and are getting weekly compensation.
  • You’ve just had a baby and are not working your usual hours.
  • You met the requirement in the last 14 days but don’t right now.

Remember, there are specific rules about what counts as being an earner, so it’s important to check if your situation fits.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1518532.

Topics:
Money and consumer rights > Taxes
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“You must not receive certain benefits to qualify for the in-work tax credit”

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MD 10: Calculation of in-work tax credit, or

“How to work out your in-work tax credit amount”

Part M Tax credits paid in cash
Abating WFF tax credits

MD 9Fifth requirement: earner

  1. The fifth requirement for an entitlement to an in-work tax credit is that either or both the person referred to in section MD 4 and their spouse, civil union partner, or de facto partner, is normally an earner (the earner). Also, the earner must—

  2. derive income as set out in subsections (2) and (3) as an earner, or derive an amount of compensation described in subsection (4), or not derive income but meet the alternative requirements in subsection (6); or
    1. if they are an earner in relation to a close company, be a major shareholder in the close company, and the company must derive gross income in the income year.

      1. The income referred to in subsection (1)(a) is—

      2. a PAYE income payment that is—
        1. not excluded under subsection (3), although it does not matter if the person also derives income of the type described in subsection (3); and
          1. not a benefit or allowance described in section MD 8; or
          2. income, other than from a PAYE income payment, to which section RD 3B or RD 3C (which relate to income other than PAYE) applies; or
            1. income from a business carried on for profit; or
              1. an amount paid or benefit provided—
                1. by a person (the claimant), who receives a personal service rehabilitation payment from which an amount of tax has been withheld at a rate specified in section RD 10B (Amounts of tax for schedular payments); and
                  1. to another person for providing to the claimant a key aspect of social rehabilitation referred to in paragraph (c) of the definition of personal service rehabilitation payment in section YA 1 (Definitions).

                  2. The following PAYE income payments are excluded from income under subsection (2):

                  3. a payment referred to in paragraphs (a) to (c) of the definition of accident compensation earnings-related payment:
                    1. a PAYE income payment referred to in section RD 5(6)(a) (Salary or wages), other than a parental leave payment or preterm baby payment referred to in section CF 1 (Benefits, pensions, compensation, and government grants):
                      1. a PAYE income payment referred to in section RD 5(6)(bb), (bc), or (bd):
                        1. a schedular payment that is a contract payment for a contract activity or service of a non-resident contractor:
                          1. an amount paid as a result of incapacity, suffered before 1 January 2006, due to personal injury by accident within the meaning of section 26 of the Accident Compensation Act 2001.

                            1. A person meets the fifth requirement if—

                            2. they received a child tax credit for an entitlement period ending on 31 March 2006; and
                              1. between 1 January 2006 and 31 March 2006 (both dates inclusive), they or their spouse, civil union partner, or de facto partner suffered an incapacity due to personal injury by accident within the meaning of section 26 of the Accident Compensation Act 2001; and
                                1. weekly compensation within the meaning of section 6 of the Accident Compensation Act 2001 is being or will be paid for the incapacity; and
                                  1. at the time of the incapacity, the person or their spouse, civil union partner, or de facto partner—
                                    1. was deriving, as a full-time earner, income as set out in subsections (2) and (3), as those subsections were immediately before the amendment made by section 360(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009; and
                                      1. would have been eligible for the tax credit calculated using the formula in section MD 10, as that section was immediately before the amendments made by section 127(1) and (3) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012, had this Act come into force before the date of the incapacity.

                                      2. Despite subsection (1), a person also meets the fifth requirement if they normally derive income as set out in subsections (2) and (3) as a full-time earner but, in a 1-week period, they do not work, or work less than, the number of hours required to be a full-time earner because of the birth of a child. However, this subsection applies only if the person is entitled to receive the parental tax credit for the child.

                                      3. A person meets the fifth requirement if they do not derive income or otherwise do not meet the fifth requirement, but have met the fifth requirement within the last 14 days.

                                      Compare
                                      Notes
                                      • Section MD 9 heading: amended, on , by section 19(1) of the COVID-19 Response (Taxation and Social Assistance Urgent Measures) Act 2020 (2020 No 8).
                                      • Section MD 9(1) heading: replaced (with effect on 1 April 2011), on , by section 126(2) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).
                                      • Section MD 9(1) heading: amended, on , by section 19(2) of the COVID-19 Response (Taxation and Social Assistance Urgent Measures) Act 2020 (2020 No 8).
                                      • Section MD 9(1): replaced (with effect on 1 April 2011), on , by section 126(2) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).
                                      • Section MD 9(1): amended, on , by section 19(3) of the COVID-19 Response (Taxation and Social Assistance Urgent Measures) Act 2020 (2020 No 8).
                                      • Section MD 9(1): amended (with effect on 1 April 2008), on , by section 126(1) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).
                                      • Section MD 9(1)(a): amended (with effect on 1 April 2021), on , by section 134(1) of the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 (2022 No 10).
                                      • Section MD 9(1)(a): amended, on , by section 3 of the COVID-19 Response (Further Management Measures) Legislation Act (No 2) 2020 (2020 No 58).
                                      • Section MD 9(1)(b): amended, on , by section 19(5) of the COVID-19 Response (Taxation and Social Assistance Urgent Measures) Act 2020 (2020 No 8).
                                      • Section MD 9(2): substituted (with effect on 1 April 2008), on , by section 360(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                                      • Section MD 9(2)(b): replaced, on (with effect on 30 March 2017), by section 163 of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
                                      • Section MD 9(2)(c): amended (with effect on 1 July 2008), on , by section 360(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                                      • Section MD 9(2)(d): added (with effect on 1 July 2008), on , by section 360(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                                      • Section MD 9(2)(d)(i): replaced, on , by section 84 of the Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017 (2017 No 3).
                                      • Section MD 9(3): substituted (with effect on 1 April 2008), on , by section 360(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                                      • Section MD 9(3)(b): amended, on , by section 83 of the Parental Leave and Employment Protection Amendment Act 2016 (2016 No 8).
                                      • Section MD 9(3)(c): amended (with effect on 5 January 2010), on , by section 109 of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
                                      • Section MD 9(3)(e): amended, on , by section 189 of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
                                      • Section MD 9(4) heading: replaced (with effect on 1 July 2020), on , by section 134(2) of the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 (2022 No 10).
                                      • Section MD 9(4): replaced (with effect on 1 July 2020), on , by section 134(2) of the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 (2022 No 10).
                                      • Section MD 9(5): amended (with effect on 1 July 2020), on , by section 134(3) of the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 (2022 No 10).
                                      • Section MD 9(6) heading: inserted, on , by section 3 of the COVID-19 Response (Further Management Measures) Legislation Act (No 2) 2020 (2020 No 58).
                                      • Section MD 9(6): inserted, on , by section 3 of the COVID-19 Response (Further Management Measures) Legislation Act (No 2) 2020 (2020 No 58).
                                      • Section MD 9 list of defined terms close company: inserted (with effect on 1 April 2011), on , by section 126(3) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).
                                      • Section MD 9 list of defined terms earner: inserted, on , by section 19(6)(b) of the COVID-19 Response (Taxation and Social Assistance Urgent Measures) Act 2020 (2020 No 8).
                                      • Section MD 9 list of defined terms full-time earner: inserted (with effect on 1 July 2020), on , by section 134(4) of the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 (2022 No 10).
                                      • Section MD 9 list of defined terms income year: inserted (with effect on 1 April 2011), on , by section 126(3) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).
                                      • Section MD 9 list of defined terms in-work payment: repealed, on , by section 474(2)(b) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
                                      • Section MD 9 list of defined terms in-work tax credit: inserted, on , by section 474(2)(a) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
                                      • Section MD 9 list of defined terms major shareholder: inserted (with effect on 1 April 2011), on , by section 126(3) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).