Social Security

New Zealand’s social security system

Social security is largely non-contributory in New Zealand, and officially neither employees nor employers make contributions.

In practice, however, employees and the self-employed must contribute to the Accident Compensation Corporation (ACC, www.acc.co.nz ) scheme, which provides compensation in the event of an accident, either at work or elsewhere. ACC contributions are deducted from salaries usually via the pay-as-you-earn (PAYE) system at the rate of $1.20 per $100 of liable earnings up to an earnings limit of $85,795 (the figures and rates are usually reviewed annually).

It’s important to note, however, that receiving any sort of government benefits, which are collectively known as ‘government transfers’, isn’t conditional upon having contributed to the scheme. Unemployment and sickness benefits, for example, are available to all New Zealanders and permanent residents irrespective of their employment history, although there may be other eligibility criteria and means testing.

Eligibility

New Zealand nationals, permanent residents and foreign workers temporarily employed in New Zealand are covered by social security, without the need to make social security contributions. (They must, however, make contributions to the ACC scheme).

Benefits are normally paid only after a minimum period of residence, e.g. unemployment benefit is available only after you’ve lived in New Zealand for two years, and national superannuation (state pension) usually requires a ten-year residence period. However, New Zealand has reciprocal agreements with certain countries (including Australia, Canada, Denmark, Greece, Guernsey, Ireland, Jersey, the Netherlands and the UK), under which those migrating from these countries can apply for New Zealand social security benefits as soon as they arrive to take up permanent residence.

It’s important to note that a reciprocal agreement entitles you only to apply for benefits; whether or not a benefit is paid may depend on other criteria. Not all residents are eligible for all benefits, as various ‘tests’ (e.g. income and other means) may be used to determine whether you’re entitled to them.

For further information contact Work and Income National Office, Level 8, Bowen State Building, Bowen Street, PO Box 12-136, Wellington (freephone 0800-559 009 or 09-916 0300, www.workandincome.govt.nz ).

Benefits

Social security benefits are paid (where appropriate) at a flat rate, irrespective of your previous income. Benefits are taxable (assuming you earn enough to pay tax) and the Department of Social Welfare deducts the tax due (if applicable) before paying benefits. If you receive a benefit for the first time and aren’t registered for tax, you should contact your local IRD office, which will issue you with an IRD number. This is required by Work and Income in order to deduct tax before paying your benefits. Those who receive no income other than benefits receive an ‘M’ tax code.

This article is an extract from Living and Working in New Zealand. Click here to get a copy now.

Further reading

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