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Appendix C

Pattern of State Support and Tax for Spouses and De Facto Partners

A12 THIS APPENDIX provides a brief description of the way a person’s position under State support and tax law is affected by that person having a spouse or de facto partner, assuming the spouse or de facto partner has assets or income.

• Invalid, Sickness and Unemployment Benefits generally abate (sometimes to nothing) according to the joint income of spouses or de facto partners if they are living together (but, with the exception of supplementary benefits, are not tested according to spouses’ or partners’ joint assets). If a beneficiary deprives himself or herself of assets, the Director-General of the Department of Social Welfare may refuse to grant, or may terminate or reduce the rate of a benefit. There is no provision preventing the spouse of a beneficiary from depriving himself or herself of assets during lifetime by making gifts to persons other than the beneficiary.
• The Department of Social Welfare has power to reduce a Domestic Purposes Benefit if a custodial parent does not seek child support from a liable parent under the Child Support Act 1991. When spouses separate during lifetime, the Department of Social Welfare also has a similar express discretion to refuse to grant, terminate or reduce benefits if a beneficiary omits to bring a potential support claim against a spouse: Social Security Act 1964 s 74(e). The Family Proceedings Act 1980 s 62 also provides, when a beneficiary chooses to make a support claim against a former spouse, that the support payable by the former spouse must be assessed as if the beneficiary is receiving no social welfare benefits.
• Personal New Zealand Superannuation entitlements drop to a lower level when someone is married or in a relationship in the nature of marriage, but are unaffected by the size of that person’s income: Social Welfare (Transitional Provisions) Act (No 2) 1990 First Schedule, cls 1(a)–(c).
• A spouse’s New Zealand Superannuation Surtax is affected only by what he or she earns, not by what he or she could potentially claim from his or her spouse as a share of the property of the marriage relationship or by way of support (see Appendix D for the combined effect of our proposals and support for the elderly). The general pattern of taxation is that spouses and de facto partners are unable to amalgamate their incomes for tax purposes: they usually pay tax separately. But the levels of exempt income for the purposes of the New Zealand Superannuation Surtax are higher for unmarried persons than for married ones: Income Tax Act 1994 s JB4.¹⁹⁷
• User-charges are not required for all Health and Disability Services. When user-charges are required for health and disability services they are not set at a higher level for persons in a marriage relationship. Yet the Health Entitlement Cards Regulations SR 1993/169 cls 2 and 8 assess a person’s entitlement to a Community Service Card (allowing the cardholder reduced user-charges for health and disability services) on the basis of “family income”, which includes the income of that person’s spouse or de facto partner. The income threshold for disqualification from Health Entitlement Cards for persons not party to a marriage or de facto relationship is more than half of the “family income” threshold for those who are party to a marriage or de facto relationship.
• The Residential Care Subsidy for those who are 65 or older is means-tested under the Social Security Act 1964 s 69F. The means and assets of the will-maker and his or her spouse in care are assessed jointly. During lifetime a will-maker whose spouse is in care and receiving the subsidy is treated as contributing income he or she earns (in excess of $28 927 joint income per annum) and assets he or she holds (over and above threshold joint assets of $40 000 and the couple’s house and car) towards the cost of his or her spouse’s care (up to a maximum of $33 072 per year): Social Security Act 1964 s 69F and Twenty-Seventh Schedule, Parts I and II.
• The joint income and joint asset thresholds allow will-makers whose spouses are in care to retain significant levels of assets, and even more is exempted when a will-maker whose spouse is in care has dependent children. Yet when a will-maker makes inadequate provision on death for the proper maintenance and support of his or her spouse receiving subsidised care, and the spouse in care does not claim support, the amount of subsidy paid may be reduced or diminished: Social Security Act 1964 s 73. This may place considerable pressure on the spouse in care to make a support claim against the will-maker’s estate, particularly if the estate is large.
• At present the Department of Social Welfare cannot include in the means test of a spouse or de facto partner in care the right he or she has to a share of the property accumulated during a marriage-relationship with the will-maker.
• Provider charges for Home-based Disability Support Services supplied to persons who are not children nor entitled to a Health Entitlement Card are also to be assessed by reference to a means-test under provisions to be inserted in the Social Security Act 1964: a new s 69G and a new Twenty-Eighth Schedule. These provisions will be inserted by cls 32 and 49 of the Social Welfare Reform Bill 1994. For this means-test the income of the person receiving home-based disability services includes the income of his or her spouse, or de facto partner of the opposite sex: cl 32(4) read with Social Security Act 1964 s 63. The Bill was read for the second time on 12 September 1995, and as at 26 July 1996 had not been read by the House for a third time: Parliamentary Bulletin, 96.16, 29 July 1996, 38.

Conclusion

A13 The broad pattern of tax and welfare law shows that the State seldom expects a partner to exhaust support which might be forthcoming from the other partner’s separate assets before seeking State welfare, at least where the couple are not living together (see paras 120–129). However, no clear and invariable pattern emerges.