Campaigner calls for ACC payment inquiry

Denise Bryant, Aminah Ahmad (9 mths) , Ayoub Ahmad (5) and Rini Ahmad.
Denise Bryant, Aminah Ahmad (9 mths) , Ayoub Ahmad (5) and Rini Ahmad.
Dunedin ACC campaigner Denise Powell is calling for a ministerial inquiry to resolve problems with apparent double payments for tax in some ACC reimbursement cases.

Mrs Powell is president of Acclaim Otago, a support group for ACC clients, and is also a member of ACC's Consumer Outlook Group, a national forum which brings together community representatives and ACC management to discuss ACC issues.

The payment issue, recently highlighted by a concerned Dunedin ACC client, ultimately involved hundreds of cases, amounting to millions of dollars, throughout the country, Mrs Powell said.

Two of the three Government agencies involved, ACC and the Ministry for Social Development's Work and Income service, could do little themselves to resolve the underlying funding problem, she said.

A Government inquiry involving Finance Minister Michael Cullen would be the best solution to the issue, which mainly involved the third agency, IRD, she said.

The ACC client says she has faced "appalling" difficulties in trying to resolve the payment issue.

The client, who asked not to be named, said she was nevertheless optimistic that she would ultimately succeed.

She had gained some key documents involving her case which could help decide the matter in favour not only of herself, but also of many hundreds of other affected ACC clients.

If successful, she would become the first claimant in recent years to gain reimbursement of money lost through the double payment, she said.

The payment issue arises where ACC weekly compensation cover for an injury has been reinstated retrospectively, often through court action, after having been initially denied by ACC, or having been provided and later halted.

ACC initially denied cover for the Dunedin client after she was injured in 1987 and she initially received a Winz benefit.

Successful court action resulted in cover being backdated for about 20 years, she said.

Gross compensation payable by ACC was assessed about $320,000, with the subsequent gross reimbursement from ACC to Winz amounting to about $200,000.

The latter sum comprised the previously paid Winz benefit money (about $168,000) and another sum matching the $33,000 in PAYE tax on the benefit, which Winz had previously paid to IRD.

ACC had since paid the $33,000 to IRD, to reimburse the tax to Winz, officials said.

Mrs Powell says the second $33,000 payment effectively amounted to a double payment, significantly cutting the amount of backdated compensation payable to the client.

After the overall Winz reimbursement was deducted, the gross amount payable to the client was about $120,000, on which $49,000 in tax had to be paid to IRD, leaving the client with about $72,000.

Discussing the case on a hypothetical basis only, IRD and ACC officials said there was definitely no double taxation under these circumstances.

The second $33,000 payment, by ACC, effectively further restored to Winz the funds which it should not have been required to pay out, given the client's changed ACC status, officials said.

An IRD spokesman said the claimant had received a net $240,000 in the relevant period, comprising $168,000 (Winz) and $72,000 (ACC).

The claimant had paid $82,000 in tax (comprising $33,000 from Winz, and $49,000 from IRD), resulting in an overall tax level of about 25% on the about $320,000 total payment.

This showed there had been no double taxation, the spokesman said.

But Mrs Powell remains concerned.

She noted that, from the Dunedin claimant's perspective, if both $33,000 payments were included she had effectively lost a total of $115,000 in tax-related payments - equivalent to a tax rate of about 36%.

"It defies logic that you could actually have that amount taken off twice and it's not an overpayment," she said.

Wellington lawyer Jonathon Miller, who represents the Dunedin client, said that better communication from the agencies was needed to clarify confusion and allay concerns by clients.

"From a layman's perspective, it looks as if ACC clients are being asked to pay the Winz tax twice, without a satisfactory explanation to allay their fears," he said.

What had happened could ultimately prove to be "perfectly all right" but had not been properly explained.

There were unfair aspects in the Dunedin case, he said.

"A client is sometimes confused by this process," ACC lead media adviser Stephanie Julian said.

This was at least partly because the ACC client did not see the final transaction as IRD repaid Winz for the PAYE tax which Winz had earlier paid, Ms Julian said.

 

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