The man who beat New Zealand’s ‘unfairest tax’

Auckland Harry Stanley beat what has been dubbed New Zealand’s unfairest tax.

Every year ACC makes mistakes, wrongly declining cover for some people with injuries.

But when those people challenge those decisions and win large back-dated payments of the entitlements, they are taxed as if the whole back payment is income in the year they get it, sometimes resulting in them paying tax at the top rate.

The resulting overtaxing of people like Stanley has been ruled legal by the courts, but that’s not stopped Waikato woman Veronica Hoerberechts fighting to get MPs to change tax law to end it.

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Hoeberechts said 40 years of governments had failed to reform what she says is an obnoxious tax setting, affecting about 1000 people a year. It cost her around $35,000 when she won a backdated lump sum to cover the weekly compensation payments she was wrongly denied by ACC.

Stanley was hit by one of these massive tax bills when ACC was required to make a backdated payment to him.

He had suffered multiple treatment injuries in the early 2000s, including permanent damage to his brain, weakening of bones, and deterioration of joint cartilage, as a result of being given “herbal” treatment by a registered nurse, which contained high levels of the steroid betamethasone.

“I was given the wrong treatment for my gout by a registered nurse. It was a medication I was taking for about four years before realising all the different things it had done to my body [including] shrinking my brain, which is still shrunk,” he said.

His case led to a nationwide warning by Medsafe about the “herbal” remedy he had been given, which were also being used to treat people in rest homes.

History recently repeated itself, and in July, Medsafe once again warned steroid-laced “herbal” remedies were entering the county.

But his steroid poisoning also led to a lengthy series of legal tussles with ACC to get weekly compensation, which Stanley applied for in 2008, having initially been told by a medical practitioner that he was not eligible for ACC.

When he secured one large back payment, which he thinks was around 2012, he decided to ask ACC to pay the extra tax that resulted.

“I made a claim directly to ACC for the excess tax I paid as a result of its error in paying me late,” Stanley said.

“ACC paid me the difference in tax I had to pay Inland Revenue on that occasion, but not on the next back payment made to me, also resulting from ACC’s error,” he said.

ACC had discretion to make such payments, but wasn’t telling claimants they could apply for them, Stanley said.

Stanley remains disabled, and is receiving ACC weekly compensation.

Amanda Malu, deputy chief executive for service delivery at ACC, confirmed such payments could be made.

“We are aware of the impact backdated payments attracting higher tax rates can have on clients.

”The law on how tax is applied to income is set by Inland Revenue. We encourage clients who receive backdated payments to contact Inland Revenue to understand their options. However, where we have done something wrong that has contributed to the higher tax bill, we may be able to provide an additional payment to contribute to, or cover this.”

Where there had been an unreasonable delay in calculating and making payments, ACC could make an interest payment, which would help cover the tax liability, she said.

“In rare occurrences, where ACC has committed a serious service failing, such as where we have failed to do something that was a legislative requirement, we can consider a one-off payment which can cover the additional tax bill.”

Hoeberechts has written to multiple ministers in a bid to reform tax law to end the over-taxation of people getting backdated payments from ACC.

ACC minister Carmel Sepuloni has asked officials to report to her on the issue.

Before his injury, Stanley was a property developer.

He said the public needed to understand the hardship wrong ACC decisions could cause to injured people.

“What hasn’t been broached yet anywhere, is the multi-level hardship we were subjected to during the years of fighting to overturn the many highly questionable decisions by ACC that kept us all on MSD benefits,” he said.

“I had to sell my car and pawn off many of my personal assets that had some pawnable value at 20c to 25c on the dollar, and juggle bill payments, while having to front creditors to stop cutting off services or to have services reconnected,” he said.

He backed Hoerberechts’ campaign for law change, saying MPs should move urgently to stop the overtaxing immediately.