Dunne: Redundancy tax credit extended

Revenue Minister Peter Dunne today announced an extension to the redundancy tax credit.

The tax credit was repealed in Budget 2010 with effect from 1 October 2010, but will now be extended to 31 March 2011.

He said that the decision to extend the credit was in response to the Christchurch earthquake. 

Mr Dunne said it had been suggested that the credit be extended where jobs were lost because of the earthquake.

"Without the tax credit, in some situations, people could be taxed too highly if they had worked part of the year," he said.

The redundancy tax credit was originally introduced to provide some tax relief to people who have had a redundancy payment. In such situations, the payment often moved the person into a higher tax bracket.

He said that was perceived to be an unfair outcome and the tax credit rectified that situation.

"However with the lowering of the tax rates in Budget 2010, the redundancy tax credit was considered to no longer be necessary," he said.

The extension will apply to all redundancies received before 1 April 2011 and, once the legislation has been amended, will be paid at the rate of 6 cents in the dollar.