Income Tax (ACC Payments) Amendment Bill

Income Tax (ACC Payments) Amendment Bill EXPLANATORY NOTE GENERAL POLICY STATEMENT This Bill seeks to make changes to how ACC lump sum payments which are awarded after a court decision, a revised decision, or a review, are taxed. Almost all lump sum payments are taxed in the income year they are received, and in certain circumstances can lead to a person being taxed more than if they had received the correct payments in their relative year. Some people have taken this issue to court, who have pointed that while it would make sense for them to be taxed as though they had received the payment as intended, the legislation currently does not provide for it. This Bill will make the relevant changes to allow for the fair taxation of lump sum ACC payments. CLAUSE BY CLAUSE ANALYSIS Clause 1 is the Title clause. Clause 2 is the commencement clause. Clause 3 identifies the Income Tax Act 2007 as the Act being amended by the Bill. Clause 4 amends section BD 3 of the Income Tax Act 2007 to insert new subsections 7 and 8 . The effect of the amendments are that payments made under the Accident Compensation Act 2001 in respect of certain claims that were initially unsuccessful will be taxable at the rates that would have applied had the initial claims been approved. The Parliament of New Zealand enacts as follows: 1 Title This Act is the Income Tax (ACC Payments) Amendment Act 2024 . 2 Commencement This Act comes into force on the day after the date on which it receives the Royal assent. 3 Principal Act This Act amends the Income Tax Act 2007. 4 Section BD 3 amended (Allocation of income to particular income years) After section BD 3(6), insert: 7 ACC compensation is to be treated as having been derived in the year it would have been derived (as determined under this section) if the initial claim for the compensation had been approved at the time it was first declined. 8 In subsection (7) , ACC compensation means a payment, other than an award of costs,— a in respect of a claim, as defined in section 6 of the Accident Compensation Act 2001, for an entitlement under any or all of section 69 (1)(b), (c), (d), and (e) of the Accident Compensation Act 2001; and b made in one or more of the following circumstances: i in satisfaction of a judgment or an order of any court or an award of any tribunal: ii as a result of a revised decision under section 65 of the Accident Compensation Act 2001: iii as a result of a review or appeal under Part 5 of the Accident Compensation Act 2001: iv in settlement of a civil claim (whether or not a civil claim has been formally filed in a court or tribunal).