Government is proposing changes to how IRD manages Working for Families (WFF), Child Support and Student Loans. The aim is to increase certainty about entitlements and obligations under these schemes. The changes are intended to ensure that payments made or received during the year better reflect what the obligation or entitlement for the year is, to avoid the need for large end-of-year repayments.

Currently, to receive WFF payments throughout the year, it is necessary to estimate your income for the year. This estimated income determines the regular payments received during the year. A year-end wash-up calculation is undertaken based on actual income for the year to determine whether payments received during the year exceed or are less than the year’s entitlement. Where WFF has been overpaid for the year, the recipient is required to repay the overpayment. The Government is proposing that payments during the year be based on recent income, for example the latest PAYE return from the employer, and adjusted based on this income throughout the year. The self-employed would be able to supply current earning information to IRD to get their entitlement adjusted. Where an overpayment occurs, rather than requiring a lump sum repayment, the overpayment would be recovered by making small deductions from future payments.

The proposals for Child Support are along a similar line, with payment obligations to be based on the most recent income information and adjusted throughout the year, rather than assessed once a year based on prior year income. The calculation will be extended to include all income, including that of associated companies and trusts, as is currently the case with WFF.

For Student Loans, the proposal is to broaden the payments from which student loan repayments must be deducted to include payments to contractors, rather than just those receiving salary and wages. Student loan borrowers who have income that is not subject to repayment deducts will be required to make repayments throughout the year.

At this stage, these changes are just proposals and need to go through the consultation and legislative process. However, they provide an indication of the likely changes to these schemes and are consistent with the Government’s overall push to simplify and streamline the tax system.