9 October 2019
Mr Anthony Jordan
[FYI request #11232 email]
Dear Mr Jordan
Thank you for your request made under the Official Information Act 1982 (OIA), received
on 15 September 2019. You requested the fol owing:
…information that confirms whether or not:
1/ Monies obtained from any ACC arrears payout, wil be taxed in the
year in which the Arrears were derived or not
2/ Inland Revenues Interpretation of the word 'Derived'
3/Given many payouts are significant sums, what tax coding is used
Monies obtained from any ACC arrears pay-out wil be taxed in the year the amount is
The general rule for which income year an amount of income is allocated to is the year in
which the amount is derived, unless there is a specific provision in the Income Tax Act
2007 (ITA) which provides for allocation on another basis.
Payments of ACC weekly compensation are classified as PAYE income payments. PAYE
income payments include salary and wages which are defined in section RD 5 of the ITA
to include an accident compensation earnings-related payment.
Section RA 5(2) of the ITA provides that an amount of tax withheld from a PAYE income
payment must be withheld at the time the payment is made. This means that
withholding wil take place in the year it is paid.
Section BD 3(3) of the ITA states that the interpretation of derived must give regard to
The interpretation statement “When is income from professional services derived”
provides a summary of the interpretation of “derived” and some relevant case law. The
interpretation statement is available here:
In line with relevant case law, current practice treats salary and wages (which includes
ACC weekly compensation payments) as being derived on a cash basis.
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