Are Surcharges A Double-Dip? - Ask Susan

Saturday, 19 April 2025, 6:34 pm
Article: RNZ

Susan Edmunds, Money Correspondent

Send your questions to susan.edmunds@rnz.co.nz

Businesses sometimes say they are charging surcharges to pass on what they have to pay. Is the cost of what they have to pay allowable as a business expense in the business tax return? If so then the businesses are potentially double dipping?

Businesses can claim expenses to offset their income and reduce the amount they have to pay tax on.

But in the scenario that you refer to, the cost and the surcharge should in theory offset themselves.

Robyn Walker, a tax partner at Deloitte, explains: "Ultimately these things will likely equalise out, so if a business is trying to charge $1 extra because they have $1 of extra costs, that $1 is treated as income and the $1 expense is a deduction."

Say, for example, you're a business selling something for $5. Your costs are $4, your profit is $1 and you're paying 28c tax on that. If you face a processing charge of 50c, you could absorb that and reduce your profit to 50c and your tax to 14c. Or you could charge a customer an extra 50c, keep your profit at $1 and your tax at 28c.

As a pensioner, I'm hearing more and more about how unaffordable the pension is for the country. The figures used vary from gross amount (the amount often used by politicians), net amount which is gross amount minus tax, but hardly any one talks about the actual amount, which would be the gross amount minus all tax paid by pensioners.

I currently work three days a week, pension rates per person for a married couple are currently $799.18 per fortnight. In a fortnight I pay $770 in PAYE tax and many pensioners are the same. I have heard the net amount mentioned as $19 billion, but have also heard the real net amount taking all tax into account is actually about $4.5 billion.

The other factor not mentioned is how many pensioners are volunteers in the community, and the dollar value that adds to the economy. Is there any way to work out the actual real cost to the country of the pension taking into account all tax dollars paid by pensioners, and assigning an average wage to all pensioner volunteers and average hours given per year?

I wasn't totally convinced that the actual cost of the pension would take into account tax from pensioners still working - we don't reduce the stated cost of Working for Families, for example, by the tax that those households pay from their jobs.

So I took your question to Shamubeel Eaqub, who is chief economist at KiwiSaver provider Simplicity.

He said, as a starting point, all welfare payments, of which NZ Super is one, are income and so are subject to tax.

"The gross payment for NZ Super in FY24 was $21.6b and $19.3b net of tax.

"But we should not mix up welfare and tax policies. Tax policy raises revenue, welfare policy then decides where that is spent - generally not commensurate to the tax paid, as that would be pointless."

He said your point about volunteering is valid but noted it is not just pensioners who volunteer.

"How do we account for those? Are they part of the policy process? I agree they are incredibly valuable, but is it volunteering if we assign a monetary value to them?"

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