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Income Tax Act 2007

General collection rules - Employment-related taxes - Adjustments for certain PAYE income payments

RD 20C: Payments of recalculated main benefit

You could also call this:

“How tax is calculated on back-payments of main benefits”

You might receive a payment called a recalculated main benefit payment. This happens when the government looks at the main benefit you got in past years and decides you should have received a different amount. They’ll pay you the difference in one lump sum.

When you get this payment, you’ll need to pay some tax on it. The amount of tax you pay is worked out using a special formula. This formula takes into account how much tax the government already took out of the payment before giving it to you.

The formula looks at two things:

  1. The tax deduction: This is the amount of tax the government department that handles social security (called MSD) has already paid to the tax department for your payment.
  2. The received amount: This is how much money you actually got from MSD after they took out the tax.

The government uses these two numbers to figure out the right tax rate for your recalculated main benefit payment. This way, you only pay the correct amount of tax on this extra money you’re getting.

This text is automatically generated. It might be out of date or be missing some parts. Find out more about how we do this.

View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=LMS960476.

Topics:
Money and consumer rights > Taxes
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Part R General collection rules
Employment-related taxes: Adjustments for certain PAYE income payments

RD 20CPayments of recalculated main benefit

  1. This section applies to a person for a payment (the recalculated main benefit payment) that is made in a lump sum in an income year and arises from a recalculation of the amount of main benefit payable to the person for 1 or more earlier income years.

  2. The rate of income tax given by subsection (3) applies to the recalculated main benefit payment for the income year in which the person derives the payment.

  3. The rate of income tax referred to in subsection (2) is the rate calculated using the formula—

    tax deduction ÷ (received amount + tax deduction).

    Where:

    • In the formula in subsection (3),—

    • tax deduction is the amount paid to the Commissioner by the department of State responsible for the administration of the Social Security Act 2018 (the MSD) as the amount for income tax payable on the recalculated main benefit payment:
      1. received amount is the amount paid to the person by the MSD as the amount of the recalculated main benefit payment after the withholding of income tax.

        Notes
        • Section RD 20C: inserted, on , by section 116(1) (and see section 116(2) for application) of the Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 (2024 No 11).