NZ Business Experts - Business Formation, Taxation, Advisory - Cost of Living Payment 2022

Budget 2022 – Cost of Living Payment

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Budget 2022: The Government has announced a Cost of Living Payment, which will be paid from 1 August 2022. You do not need to apply for this payment. If you are eligible, Inland Revenue will pay it into your bank account. 

This is what Inland Revenue has explained in their latest post:

Cost of Living Payment

The Cost of Living Payment is a payment to help with the rising costs of inflation for eligible individuals. On this post Inland Revenue has explained who can get the payment, based on the criteria set by the Government.

You do not need to apply for the payment

Inland Revenue will pay you the Cost of Living Payment automatically if you’re eligible for it. You do not need to apply.

Make sure we have your correct bank account number for your Income tax account in case you are eligible. You can check this in myIR.

Payment dates and rate

The total Cost of Living Payment is $350, which will be split into 3 monthly payments starting 1 August.

For most people the 3 main payment dates are:

  • 1 August 2022
  • 1 September 2022
  • 3 October (the first business day of the month).

In some situations you may get some of the main payments and a lump sum, or just a lump sum. Find out more under ‘Your income tax assessment or return will confirm your income’ below.

Who will get the payment

Inland Revenue will check who is eligible for the Cost of Living Payment before each monthly payment is made. You’ll get the payment if on the day they check for eligibility they can confirm you:

  • earned $70,000 or less in the period 1 April 2021 to 31 March 2022
  • are not entitled to receive Winter Energy Payment by receiving the NZ Super or a qualifying benefit from Ministry of Social Development (MSD)
  • are aged 18 or older
  • are both a New Zealand tax resident and present here
  • are not in prison or deceased.

If you get a Student allowance, you’ll get the payment if you meet the other eligibility criteria.

Example – Aki was a student in the 2022 tax year

Aki is a student and received a Student allowance during the 2022 tax year. She meets all the other criteria to get the Cost of Living Payment and will get all 3 payments.

If Aki’s only income for 2022 was the living costs from her student loan (no Student allowance received), she would not be eligible for the Cost of Living Payment. This is because she has no net income for 2022 and no requirement to get an income tax assessment or file an Individual income tax return – IR3.

If you’re insolvent or bankrupt

You will get the Cost of Living Payment paid to you if you’re insolvent or bankrupt and qualify for it. It will not be sent to the Official Assignee.

Your income tax assessment or return will confirm your income

Inland Revenue will confirm your eligibility for the payment based on your income for the 2022 tax year. Depending on your situation, you will have:

  • received your automatically issued income tax assessment
  • provided more information or confirmed the details on your assessment, and this has been confirmed by us
  • filed your Individual income tax return – IR3 (and it’s been processed by us).

If your income assessment is completed or your IR3 is filed after any of the 3 main Cost of Living Payments have been paid and you are eligible for it, you’ll get either:

  • any payments that have not been made yet and a lump sum of any payments you were eligible for but missed
  • a lump sum based on the number of payments you are entitled to if all payment dates have passed.

Your return may be filed after the payments have been made because you have a tax agent with an extension of time to file your return.

Find out : What happens at the end of the tax year

The $70,000 threshold is net income before tax

The income threshold is based on individual income, not household income.

For salary and wage earners, the $70,000 net income threshold is based on your income before tax, minus any expenses you can claim.

For business owners, the threshold is based on your gross income after expenses, but before any losses from earlier years are taken into account.

Find out : Types of individual expenses

Example – net income is before tax

Manu earned $90,000 from wages in the 2022 tax year and has no expenses to claim. Although he pays tax of $20,620, his net income is $90,000 (as defined by BC4 of the Income Tax Act) and he is not eligible for the Cost of Living Payment.

Example – individual expenses claimed

Oliana earned $70,200 from wages in the 2022 tax year, and paid $250 in income protection insurance that year. Oliana’s net income for 2022 is $69,950 ($70,200 minus $250) and will be eligible for the Cost of Living Payment.

Example – business income and expenses

Pavel earned $120,000 gross from self-employed work in the 2022 tax year. They claim $30,000 in expenses and have a loss to bring forward of $22,000. Pavel’s net income for the Cost of Living Payment is $90,000 as the loss is not included. They would not be eligible for the payment.

If Pavel’s expenses were $52,000, their net income would be $68,000 and they would be eligible for the payment.

People who will not be eligible

If you do not receive a tax assessment for the 2022 year, you will not be eligible for the payment.

If your income is only from a Portfolio investment entity

If your only income is Portfolio investment entity (PIE) income you will not be eligible for the payment. For example, if interest from your KiwiSaver was your only income for the 2022 tax year.

Even though you may receive a tax assessment for this income, PIE income is not included in your net income for the Cost of Living Payment. In this case you would not meet the requirements to get the payment.

Individuals who file or request an unnecessary nil tax assessment

If you have no net income but request an unnecessary nil assessment (an assessment containing no income from any source), you will not be eligible for the payment.

This will not impact you if you’re required to file an assessment despite having no net income, such as if you’re:

  • a parent with no net income but are required to file a return or get an assessment for Working for Families purposes
  • self-employed and your allowable deductions reduce your net income to zero.

You may be eligible to get 1, 2 or all 3 payments

Inland Revenue will check to see if you’re eligible to get the Cost of Living Payment before each monthly payment is made. It is possible to be eligible for 1, 2 or all 3 payments.

Payments will not be paid for a part of the month. If you’re eligible when Inland Revenue checks, you’ll get the full payment for that month.

Example – Kahu turns 18 after the first payment

Kahu turns 18 on 25 August 2022. She meets all the other criteria for the payment. She will not qualify for the August payment but will qualify for the payments in September and October.

Example – Antonio starts getting Jobseeker Support after the second payment

Antonio is eligible to get the Cost of Living Payment. On 13 September he starts getting Jobseeker Support, which qualifies for the Winter Energy Payment. He gets the August and September Cost of Living payments, but not the October payment.

We’ll check eligibility until 31 March 2023

The final date to be eligible for the Cost of Living Payment is 31 March 2023.

If an IR3 is filed or income assessment generated on or:

  • before 31 March 2023, we’ll still check if you’re eligible for the payment (even if it is processed or completed after this date)
  • after 1 April 2023, we will not check if you’re eligible for the payment (even if your tax agent has applied for, and been granted a deferment to file later).

Inland Revenue will pay the amount to your bank account

Inland Revenue will pay the Cost of Living Payment into the bank account they hold for your Income tax account. Make sure they have the correct one in myIR, and update it if it’s not correct.

Inland Revenue can only make the payment to a New Zealand bank account.

Update my bank account details

The payment is not taxed

You will not pay tax on the Cost of Living Payment. It also does not count as income for:

  • child support
  • Working for Families
  • student loans
  • benefits and payments from Work and Income.

Inland Revenue will not use the payment to pay off any debt you may have with them.

You have until 31 March 2024 to provide your bank account

If you’re eligible to get the Cost of Living Payment but Inland Revenue has not been able to pay it to you because they do not have your bank account number, you’ll have until 31 March 2024 to update your details. After this date the amount will be returned to the Crown.

Payment made to people who are not eligible

It is possible that the information that Inland Revenue has been provided to determine eligibility could be incorrect. The correct information may show that a person is not eligible. For example, a person may be recorded as 27 when they are actually 17 years old.

However, Inland Revenue will only apply resources to identify such cases, and to recover payments, when there has been fraudulent or wilfully misleading information provided. Inland Revenue will be able to use their usual debt recovery options, such as deductions from a person’s salary and wages, or their bank account.

Source: https://www.ird.govt.nz/cost-of-living-payment

Disclaimer:

Information supplied above is to be referred to as general guide only. For any assistance specific to your situation, please free to contact us here at NZ Business Experts.

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