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New Zealand law explained for everyone

Income Tax Act 2007

Tax credits paid in cash - Payment of credits

MF 6: Overpayment or underpayment of tax credit

You could also call this:

“Rules for handling extra or missing tax credit payments”

This law is about what happens when you get too much or too little money for your tax credit. It applies when you’re entitled to a tax credit for Working for Families or the Minimum Family Tax Credit.

If you ask for the tax credit to be paid in instalments or if the government department pays it to you, sometimes the amount you get might be different from what you should actually receive. This can happen if you’re paid too much (an overpayment) or too little (an underpayment).

If you’re overpaid, you’ll need to pay back the extra money. It will be added to your tax bill for the year, and the government can get it back from you as if it were regular tax you owe.

If you’re underpaid, the amount you should have received will first be used to pay any income tax you owe. If there’s any left over after that, it will be treated like extra tax you’ve paid and can be used for other things.

Sometimes, if the government department pays your tax credit, the Commissioner of Inland Revenue might decide to treat the amount you were paid as the correct amount, even if it’s different from what you were actually entitled to.

Remember, if you see words like section LA 3 in the text, it means there’s another part of the law that’s related to this one.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1518595.

Topics:
Money and consumer rights > Taxes
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MF 5: Recovery of overpaid tax credit, or

“Getting back extra tax credit money you shouldn't have received”

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MF 7: Orders in Council, or

“Governor-General can adjust tax credits through official orders”

Part M Tax credits paid in cash
Payment of credits

MF 6Overpayment or underpayment of tax credit

  1. This section applies for the purposes of sections LA 3 and LA 4 (which relate to the treatment of a person's total tax credits) when—

  2. a person has an entitlement to a tax credit under section MD 1 (Abating WFF tax credit) or ME 1 (Minimum family tax credit); and
    1. the person—
      1. applies under section MF 1 to have the tax credit paid by instalment; or
        1. is paid a tax credit under section 80KN of the Tax Administration Act 1994 by the chief executive of the administering department; and
        2. the instalments of the estimated tax credit, or the total of those instalments, differs from the tax credit, or total tax credit, to which the person is entitled under the family scheme because the instalment has, or the total instalments have, either been overpaid resulting in an excess or underpaid resulting in a shortfall; and
          1. the Commissioner—
            1. gives the person a notice of entitlement for the tax year because an instalment of the estimated tax credit has been paid to the person during the tax year; or
              1. finds out, otherwise than by way of a notice of entitlement, that an instalment of the estimated tax credit has been paid to the person for the tax year.

              2. For an overpayment of the person's entitlement, an amount equal to the excess is—

              3. added to the tax payable by the person for the tax year; and
                1. recoverable by the Commissioner under section 80KLB of the Tax Administration Act 1994 as if it were tax payable by the person for the tax year.

                  1. For an underpayment of the entitlement, an amount equal to the shortfall is used to satisfy the person's income tax liability, and any balance remaining is treated as tax paid in excess and available for use under section LA 7(2) (Remaining refundable credits: tax credits for social policy and other initiatives).

                  2. The Commissioner may, in relation to a person referred to in subsection (1)(b)(ii), choose to treat the amount of the tax credit paid to the person for the tax year as equal to the person’s entitlement for the tax year.

                  Notes
                  • Section MF 6: substituted (with effect on 1 April 2008), on , by section 365(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                  • Section MF 6(1)(a): amended, on , by section 488 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
                  • Section MF 6(1)(b): replaced (with effect on 1 April 2008), on , by section 166(1) (and see section 166(3) for application) of the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 (2020 No 5).
                  • Section MF 6(3): amended, on , by section 212 of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
                  • Section MF 6(4) heading: inserted (with effect on 1 April 2019), on , by section 166(2) of the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 (2020 No 5).
                  • Section MF 6(4): inserted (with effect on 1 April 2019), on , by section 166(2) of the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 (2020 No 5).
                  • Section MF 6 list of defined terms apply: inserted, on , by section 74 of the Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 (2016 No 27).