The Student Allowance definition for parents' income is any income your parents receive for the tax year you started studying in. This includes any income that your parents may have directly or indirectly deprived themselves of. This definition is closely aligned with the definition of the Working for Families 'Family Scheme Income'. Refer to the income types below.
Salary or wages
This is the total amount of any salary or wages (taxable or non-taxable). This includes paid parental leave, weekly accident insurance payments and overseas salary and wages.
This also includes salary and wages that are exempt from income tax under specific international agreements with New Zealand.
It includes employees of international organisations such as the United Nations or the Organisation for Economic Co-operation and Development (OECD), or under the Diplomatic Privileges and Immunities Act 1968.
Work and Income Benefit or Student Allowance
This is the gross amount of any income from a main benefit or Student Allowance that you receive from the Ministry of Social Development.
Note: any supplementary assistance you receive (e.g. Accommodation Supplement, Disability Allowance, etc.) is not included as income.
This is the gross amount of any income that is received as a result of business activity. For income tax purposes, an individual may offset their business losses against their other taxable income. For Student Allowance parental income purposes, where a business loss occurs, it is ignored and therefore cannot be offset against other forms of income.
Business income can also include any profits you make as a sole trader.
This is any money that is withdrawn from a business, company or trust by the owners, shareholders or settlors/trustees that is intended to be used for purposes other than for the entity it was drawn from.
In some cases it would be more accurate to categorise these payments as a shareholder wage or salary, a beneficiary distribution/loan or a dividends payment.
It is the purpose or intended use of the money (i.e the substance of the transaction) that will determine whether it is included as parental income.
Dividends are part of a company's profits that it passes on to its shareholders.
Company profits are paid to shareholders according to the proportion of the company they own.
This is the net profit (gross profit minus expenses) made from all the rental properties that you own. For help to work out which expenses you can deduct from the gross profit, go to Inland Revenue's website.
If you make a loss for the rental property, that loss is ignored and cannot be offset against other forms of income.
Income from boarders
This is the gross amount of any income received from boarders that you are required to declare to Inland Revenue.
The Inland Revenue website outlines how to calculate the gross amount that you are required to declare to them (this amount depends on the boarding payments you receive and the costs you incur).
Go to Inland Revenue's website for more information.
Where the parent is not, or was not, a New Zealand tax resident
Where a parent is not, or was not, a tax resident in New Zealand, we only include any taxable income they receive.
Retirement savings income
This includes payments received from:
Income, pensions or annuities from a life insurance policy or private superannuation fund
This includes half of any regular, ongoing payments received in the form of a pension/annuity from a private superannuation fund or from a life insurance policy.
This also includes half of any payments received in the form of a pension/annuity from a superannuation scheme after retirement.
Distributions from superannuation schemes
This includes the employer contribution received by a parent from a superannuation scheme if:
- an employer of the parent has made contributions to the scheme in the income year in which the distribution was received, or the two years immediately prior and
the parent continues to work for the employer for one month or more after the date of the distribution.
Distributions from a retirement savings schemes
This includes the amount of any distribution received from a retirment savings scheme, as long as:
- retirement savings scheme contribution tax was not paid by the contributor when the contributions were made and
- at the time of the distribution, the parent is not eligible for the New Zealand Superannuation.
This includes the amount of any overseas pension received (taxable and non-taxable).
Attributable trustee income
For a settlor of a trust, this is any income in a trust (for that year) that hasn't been distributed as beneficiary income (this includes the net income from trading and investment activities of a trust and the net income of a company controlled by the trust).
This also includes any income that a parent receives from a trust, as a settlor of the trust, unless:
- the trustee of the parent's trust is registered as a charitable entity under the Charities Act 2005
- the parent's trust is solely for the benefit of a local authority
- the interest and dividends derived is for funeral costs
- the trust is a superannuation fund
- the parent is not permitted to benefit from the trust except under an order of a court.
We need to know who the settlors of the trust are to determine whether the parents are the settlors of the trust and how the attributable trustee income is distributed to each settlor.
Common terms for trust income:
Settlor - the person (or persons) who settles the trust, appoints the trustees and names the beneficiaries. It also includes anyone who transfers assets, income or money to the trust. For the full definition of "settlor" please refer to sections HC 27 and HC 28 of the Income Tax Act 2007.
Beneficiary - a beneficiary of the trust is a person for whom a trust was created, and who receives the benefits of that trust.
Trustee - an individual or organisation appointed to administer the assets and income of the trust for the benefit of the beneficiaries.
Property - something which is capable of being owned i.e such as land or shares.
Attributable fringe benefits
This is the taxable value of any fringe benefits received where the parent is a shareholding employee of a company and holds:
- voting interests of 50% or more and/or
- market value interest of 50% or more.
Some attributed benefits are:
- motor vehicles, other than pooled vehicles
- low-interest loans, other than those provided by life insurance companies
- where the parent hold a voting interest of 50% or more in public transport business (bus company) and received subsidised transport of $1,000 or more per year
- where the parent's employer contributes to an insurance scheme, namely any life insurance, pension insurance or personal accident or sickness insurance policy or insurance fund of a friendly society, if the annual taxable value of all contributions is $1,000
- where the parent's employer has contributed $1,000 or more to any superannuation scheme where the employer superannuation contribution tax (ESCT) does not apply
- where the employer contributions to a sick, accident or death fund, if the annual taxable value of all contributions is $1,000 or more
benefits of any other kind (for example, gifts, prizes, subsidised or discounted goods and services) if the annual taxable value of all these benefits is $2,000 or more.
For more information on Attributable Fringe Benefits please visit Inland Revenue's website.
Portfolio Investment Entity (PIE) Income
This is any income that is attributed (i.e. included in a tax return) by a Portfolio Investment Entity (PIE) to a parent.
If it's "locked in" a superannuation fund or a retirement savings scheme (e.g. Kiwisaver), then the income is included under the 'Retirement savings income' definition.
Main income equalisation scheme deposits
This includes any deposits made into a main income equalisation scheme (excluding 'adverse events' deposits).
Income of shareholders in a closely held company
A closely held company is a company where at any time there are five or fewer people whose voting interests in the company is more than 50% or, if market value circumstances exist for the company, there are five or fewer people whose market value interest in the company is more than 50%.
If a parent is a major shareholder in a closely held company, the income is the greater of either zero or the amount calculated using the following formula:
(parent’s interest + attributed interest) x (income – dividends)
For the purpose of this formula, the following definitions apply:
- Parent's interest is the percentage voting interests for the company held by the parent on the last day of the company's income year.
- Income is the net income of the company for the income year.
Dividends is the total dividends paid by the company for the income year.
Attributed interest is calculated using the following formula:
dependent child interest / relevant major shareholders
For the purposes of this formula, the following definitions apply:
- Dependent child interest is the total percentage voting interests for the company held by the person’s dependent children (or the dependent children of their partner), on the last day of the company's income year.
- Relevant major shareholders is the total number of parents (or their partner, or other principal caregivers of the dependent children) who are major shareholders of the company on the last day of the company's income year.
Payments for income-related purposes that exceed $5,000 a year
This is the value of any payments paid or provided to a parent (from any source) that are:
- used by the parent to replace lost or diminished income of the parent or the parent's family, or
- used to meet usual living expenses of the parent or the parent's family, and
- the total payments for that particular financial year are more than $5,000.
This can include shareholders' drawings. It is the origins of any funds introduced to the business by the shareholder, as well as the nature of the use of any drawings by the shareholder, that will determine whether it is included as parental income.