New Zealand superannuation commences on day application received
New Zealand superannuation surcharge—timing of application for superannuation—superannuation payable from day application received—Income Tax Act 1994, s OB 1, Social Welfare (Transitional Provisions) Act 1990, ss 3 and 5
On 2 April 1997 the complainant retired and received his final pay cheque. On 21 March 1997 he had made application to Income Support to commence payments of New Zealand superannuation. Before doing so, he had spoken with someone from the Inland Revenue Department (IRD) about the imposition of the superannuation surcharge and had understood that only income earned after he retired would be assessed for surcharge purposes.
The first instalment of New Zealand superannuation was paid on 1 April 1997. The complainant then realised, after a further conversation with an IRD staff member, that the final payment he received from his employer on 2 April 1997 would count as income for surtax purposes for the 1998 tax year. He therefore asked Income Support if he could repay the first instalment of superannuation and defer the commencement of such payments until 29 April 1997. This request was agreed to by Income Support. Unfortunately, Income Support omitted to re-programme its computer and as a result the complainant received superannuation payments on 15 and 29 April 1997. He said he was not aware of the 15 April payment until he received his end of year tax statement and discovered a surcharge of the order of $6,600.00 had been assessed.
The complainant approached the IRD, requesting that Income Support’s incorrect actions be taken into account and that the payments of New Zealand superannuation be shown to have commenced on 29 April 1997, as agreed. He also offered to repay the 15 April payment. However, he was unsuccessful in persuading the IRD to waive the surcharge and he complained that it was unreasonable and unjust that he should be penalised as a result of a mistake by Income Support.
An examination of the facts, and of the legal arguments advanced by the IRD in respect of its decision, disclosed that the complainant’s liability for the surcharge was not caused by the fact that Income Support failed to correctly programme its computers, but by the fact that his first application in respect of superannuation was received by Income Support prior to his retirement.
This view was based on two issues:
‘New Zealand superannuation’ is defined in the Income Tax Act 1994, section OB 1, as meaning New Zealand superannuation ‘paid or payable’ under the Social Welfare (Transitional Provisions) Act 1990. Similarly, a ‘superannuitant’ is defined as ‘a person who receives New Zealand superannuation in the income year’.
The question of when a ‘superannuitant’ becomes entitled to receive superannuation in terms of the Social Welfare (Transitional Provisions) Act 1990, section 3, and when superannuation becomes legally ‘paid or payable’ in terms of section 5 of that Act.
The complainant was entitled to receive New Zealand superannuation in December 1996. However, he did not apply for it at that time and, in terms of section 5 of the Act, payment of the superannuation commenced on ‘the date on which the application for it was received by the Department’, that being 21 March 1997. While the legislation enables a superannuitant who is eligible to receive New Zealand superannuation to defer making an application for it, once an application is made, payment ‘shall commence’ on the day the application is received. As a consequence, the complainant’s liability for the surcharge was caused by the timing of his application and not by the failure of Income Support to programme its computers correctly. In the circumstances, the complaint could not be sustained.
This case note is published under the authority of the Ombudsmen Rules 1989. It sets out an Ombudsman’s view on the facts of a particular case. It should not be taken as establishing any legal precedent that would bind an Ombudsman in future.