Retiring Allowance Taxation Inquiry

Press, Volume CII, Issue 30233, 11 September 1963, Page 16

Retiring Allowance Taxation Inquiry

(From Our Parliamentary Reporter) WELLINGTON, September 10. An inter-departmental committee was now considering the course to be followed as a result of the Supreme Court decision on the taxing of a retired public servant’s retiring allowance, the Minister of Finance (Mr Lake) said in Parliament today.

Mr M. A. Connelly (Opp., Riccarton) asked Mr Lake during the discussion of the Inland Revenue Department’s estimates what the attitude of the department would be as a result of the case, Irvine v. the Commissioner of Inland Revenue. On retirement from the Public Service, a person could accept six months’ retiring pay taxed at normal rates, or he could take ’’iree months’ allowance, 5 per cent of which was taxed, said Mr Connelly.

Irvine, a former public servant, elected to take the six months’ retiring allowance. had challenged the department, won his case for taxation at 5 per cent and claimed a refund of tax.

Other people had claimed refunds as a result of the decision and other people

had retired since, said Mr Connelly.

Public servants retiring after 40 years’ work, have the choice of six months’ leave on pay before receiving superannuation, or three months' retiring allowance in a lump sum. taxed at 5 per cent, and receiving superannuation immediately.

Before the Irvine case the six months’ salary was collected in one sum and taxed at normal rates as if it had been received in instalment over the full period. It is now paid fortnightly. The Supreme Court held this was a gratuity payment and should be taxed at the same 5 per cent rate as the three months' lump sum. The secretary of the Public Service Association (Mr D. P. Long) said the association was arguing that persons who formerly accepted the six-months* payment as a lump sum were entitled to have their tax reassessed for that year.