News

Gift tax ends for the rich and starts for the poor

While gift duty is abolished for the rich, regular transfers which total over $5,000 to struggling low income families are penalised.  Transfers totalling $5,001 means $1,000 loss of Working for Families tax credits.

Read the full Media Release below.

Child Poverty Action Group says the definition of ‘family scheme income’, which came into force on 1st April goes too far.

Spokesperson Susan St John says it is fair that income from trusts and ‘portfolio investment entities’ (PIEs) is now counted when calculating Working for Families, Student Allowances and the Community Services Card entitlements. “But the new definition includes regular gifts of money from other family members, for example, if an outside family member pays for something like the electricity bill.”

While gift duty is abolished for the rich, regular transfers which total over $5,000 to struggling low income families are penalised.  Transfers totalling $5,001 means $1,000 loss of Working for Families tax credits.

These low income ‘working families’ are not the ones hiding money in PIEs and trusts. The government ought to be encouraging grandparents who can afford it to help their children. In the recession, without such help many more working families will resort to loan sharks and foodbanks.    

CPAG also queries how such as scheme could possibly be administered fairly. “And there are other anomalies,” says St John. “For example, payments for daycare made by a working grandparent is captured by ‘family scheme income’. But if the grandparent looks after the grandchild themselves it is not counted. The overall value of the help is the same but the impact on the way IRD treat it is very different”

St John says “Under the changes one-off cash gifts are exempt, raising the prospect that families will be planning their transfers much more carefully in the future” 

 

 

Supporting Information:

 

IRD consultation document on family scheme income at: http://taxpolicy.ird.govt.nz/publications/2010-ip-social-assistance-integrity/overview