Getting a loan while receiving government benefits
Receiving Work and Income NZ (WINZ) benefit payments can help to significantly improve some aspects of life when it comes to finance. Whether you’re studying, disabled or looking after someone who is. You could be looking for work, unable to work due to illness or injury. Or you might be pregnant or a new parent, retired, or just going through a rough financial patch. Whatever it is, Government benefits can help keep you afloat.
Sometimes you need extra money on top of what you are already earning. Or sometimes you need income replacement until you’re able to get back to work. Either way, it’s a relief to know that there is always some assistance on offer.
Though, sometimes, receiving government benefits, while incredibly helpful, doesn’t always cover all the costs in life. Most Work and Income NZ payments are a source of regular income. Therefore, people treat them as any other type of wage in that they are accounted for in the budget. However, it’s difficult to predict every little expense that’s set to come our way. Therefore, sometimes we can be unprepared for certain costs that our income doesn’t quite cover.
If this is ever the case, applying for a personal loan can be one quick solution to your money problems. Short-term personal loans can be very helpful for covering unexpected expenses that get thrown our way. Because the application and approval processes are generally very fast, it doesn’t take long before you can get back to focusing on the important things.
Though, there is a common misconception when it comes to receiving a loan while on a government benefit payment scheme. People are concerned that receiving the loan into their account will affect their Work and Income NZ payments. There is a worry that receiving a personal loan could be classified as a form of income meaning that it would have to be reported to WINZ.
In order to straighten out the confusion and misconceptions that come with applying for a loan while receiving government benefits, we have put together some helpful information about the type of payments that need to be reported to Work and Income NZ.
Reporting to Work and Income NZ
If you are receiving a Work and Income NZ benefit on top of another form of income then it is likely that you will need to report this to WINZ. You will need to continuously report the income you’ve received and then notify them if your situation changes in any way. Here is a list of the main benefit schemes that require you to report your income and earnings.
- Jobseeker Support
- Sole Parent Support
- Supported living Payment – You must report your income and your partner’s
- NZ Super with non-qualified partner included – including your partner’s income
- Emergency Benefit – including your partner’s income
- Orphan’s Benefit/ Unsupported Child Benefit – You only have to report your income if you are receiving another benefit as well as this one, or if the child has an income.
- Youth Payment or Young Parent Payment – You must contact your Youth Service provider directly to tell them about any income you get.
For a full list of all the benefits and extra help payments that require you to report your income, visit the Work and Income NZ website.
What’s classed as ‘income’ by Work and Income NZ
Income is defined as money received before tax. It comes either in the form of a wage/salary or returns from an investment. This is quite a broad definition, however there are only certain types of work income that need to be declared when receiving government benefits. These include:
- Wages – Regular or casual
- Self-employed or business income – Earnings from a business or if you are self-employed
- ACC Payments – These are from the Accident Compensation Corporation and includes both regular and one-off payments
- Pension or Superannuation Scheme Payments – Includes overseas pensions, lump sum payouts and other
- Trust income – Regular and one-off payments from trusts
- Insurance payments – Includes income replacement, mortgage protection, health and disability, debt insurance, loan protection insurance, life insurance, and fire and general protection policies
- Other regular income – This includes child support, bank interest, investments and rental income
- Lump sums or one-off payments – Not all lump sum or one-off payments need to be declared as they aren’t always treated as income. For some payments, the only reason you would need to report them is if you were to invest the money and earn interest, dividends or rent. The other one-off payments that you need to report are:
If you get Accommodation Supplement, Temporary Additional Support or Special Benefit, you need to report:
- Compassionate grants
- Employer help if you have a sickness, injury or disability
- Ex gratia and compensation payments
- One-off gifts (these include cash gifts, rental property and personal property)
- Home equity conversion scheme lump sum
- Lottery prize money or gambling winnings
- Lump sum payment from a deceased estate sale or will
- Sale of assets
- Payments to victims of crime
For all other payment schemes, you must report:
- Settlement payments over sleepover shifts
Why personal loans don’t count as income
While you must report some lump sums, Work and Income NZ don’t tend to include personal loans in this expectation. Regarding the standard definition of income, personal loans do not fall under this category. Loan providers don’t give you the loan as a wage or salary, or as an investment. It is simply a money advance that is due to be paid back.
The type of one-off payments that are generally exempt from Work and Income’s reporting list include ones that are unlikely to happen again, hard to predict, not for a service and not for profit. Personal loans fall quite accurately under these exemptions as they are not common occurrences for the reasonable individual. The need for a loan is also generally unpredictable. Furthermore, loan providers do no give out loans in return for a service. Loans also do not provide profit to the recipient as it is money that needs to be paid back.
The only time Work and Income NZ would class a personal loan as income and require you to reported it is if you were to invest the money and make a profit off the initial loan amount. Otherwise, WINZ shouldn’t count a personal loan as a part of your income and you may not need to be report it. This means that applying for a personal loan while receiving Work and Income NZ benefits would not affect your regular payments at all as it’s not something you are required to declare.
If you are concerned about your personal loan affecting your benefit payments then you should get in contact with Work and Income NZ to confirm the circumstances.