24 March 2026
Ms Hosseini
[FYI request #34016 email]
Kia ora Ms Hosseini
Your Official Information Act request, reference: GOV-046666 Thank you for your request of 10 March 2026, asking for information relating to Loss of Potential
Earnings (LOPE) under the Official Information Act 1982 (the Act). Please find our responses to your
questions below.
1. It is my understanding that LOPE back payment is paid retroactively before tax and then taxed
as a lump sum. eg. if someone receives full back pay for the last 24 weeks, they will receive 24
payments of $752, the total of which will be taxed together. Is this correct?
LOPE backdated payments are paid and taxed as a lump sum. The client will elect the appropriate tax
rate and is encouraged to seek advice directly from Inland Revenue (IR) unless the duration of the
payment meets the alternative tax rate (ATR) criteria. For backdated lump sum payments which are a
continuous period of 366 days or more, IR will advise the right tax to be applied directly to ACC.
This meets the rules which were introduced through the Taxation (Annual Rates for 2023-24,
Multinational Tax, and Remedial Matters) Act and applied from 1 April 2024. These rules are specified
under section RD 20B of the Income Tax Act 2007.
Further information on this can be viewed on the IR website here:
www.ird.govt.nz/income-tax/income-
tax-for-individuals/types-of-individual-income/backdated-lump-sum-payments-from-acc-msd-
va/backdated-acc-lump-sum-payments.
2. In the case of debt to MSD, is the entire before tax amount of the benefit deducted from the
back payment, or the after tax amount that was actually received? eg. $412.51, Jobseeker
before PAYE is deducted, and $361.32, the cash in hand amount.
Where the Ministry of Social Development (MSD) advise ACC of a debt that needs to be recovered,
income tested benefits are requested and taxed as a gross amount i.e. the total before tax.
If the debt is not from an income tested benefit, MSD will request the nett amount i.e. the total after tax,
as tax does not apply.
3. When the final LOPE lump sum is taxed, is this before or after the benefit debt is deducted? eg.
$60,000 LOPE total taxed, then $20,000 MSD debt deducted from the taxed amount, or LOPE
minus MSD debt = $40,000 taxed.
The total gross backdated payment due less the MSD gross payment is what the elected tax code or
ATR applies to i.e. the payment is taxed as a gross amount.
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If you have any questions about this response, please get in touch You can email me at
[email address].
Ngā mihi
Christopher Johnston
Manager Official Information Act Services Government Engagement
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