Hamilton man Ian Boddington's ACC payments penalised with secondary tax

When he flew down a hill and landed in a crumpled heap of broken bones Ian Boddington wasn't thinking about money.

But Boddington, 61, has had to after he was told he would be put on a different tax code which meant being paid $167 less in ACC.

The Hamilton man is outraged he is being penalised for getting ACC payments - a policy that affects about 7500 New Zealanders.

Boddington received 80 per cent of his usual salary via ACC since the October bike riding accident. His workplace, Waikato District Council, topped up his payments the remaining 20 per cent to his full income using his accrued 30 days of sick leave.

But on March 17 Boddington had a call from ACC saying that it had to change his tax code to ST, which is taxed at 33 per cent, because he couldn't have two M tax codes. On March 20 he said he was paid $167 less than usual from ACC.

Workers are given a secondary tax code if they have more than one source of income. Tax is automatically deducted before the money is paid. A tax rate of 33 per cent is applied to those whose total earnings are more than $70,000.

"I could understand the secondary tax if I had a job on the side over and above my salary. But the way it is now I'm going to be seriously financially disadvantaged as part of my salary," Boddington said.

"I don't believe I should be paying secondary tax for only getting what I'm entitled to.

"The legislation is there so it's obviously affecting a hell of a lot of other people."

About 7500 people receive ACC income and are on a secondary tax code.

Boddington was severely injured after he crashed on the Te Awa cycle trail along the Waikato River. He was riding by himself as he had done many times before. But this time, as he zoomed down a hill, his bike hit black slime and slid out from underneath him.

"It took me out. It broke my leg, fractured my leg up to my hip, punctured a lung, broke a rib, fractured my clavicle," he said.

"I have a broken femur and a spinal fracture up to my hip.

"I was in a fair bit of pain."

After a cyclist found Boddington 15 minutes later he was rushed to hospital where he spent the next 17 days. It took two months for him to get out of a wheelchair.

Now, six months later, Boddington is still on one crutch. He does up to three hours of rehabilitation a day.

Revenue Minister Judith Collins said sometimes a secondary tax code can over-deduct tax. If this is the case the taxpayer should contact Inland Revenue as a special tax code may benefit them.

"Secondary tax is not always well understood and some taxpayers feel they have to pay more tax as a result of being on a secondary tax code, even when this is not the case."

ACC spokeswoman Stephanie Melville said the tax code was changed after the IRD's instruction. She said ACC called Boddington as part of "good customer service" so he wasn't surprised to get his weekly compensation at a lesser amount.

An IRD spokesman said they could not comment on Boddington's individual case because of taxpayer secrecy provisions.

But he could say that when an ACC payment is not a person's main source of income and the total expected earnings of the person are more than $70,000, then a secondary tax code of ST should be used.

"Using the ST code ensures that the person pays the same amount of tax as if they had earned all their income solely from one source."

"Most of these people will end up paying no more or less tax than those who earned all their income from one source."

Secondary tax

Secondary tax is meant for secondary sources of income after the main income.

A primary tax code is used for the main source of income (usually the highest), and a secondary tax code is used for the additional income (usually less than the primary source of income). Secondary income has a different, higher rate of tax deducted from it.

Tax codes
SB $14,000 or less 10.5%
S between $14,001 and $48,000 17.5%
SH between $48,001 and $70,000 30%
ST between $70,001 and $113,768 (+ACC) 33%