Taking From The Vulnerable To Bolster Department Budgets

Following the expansion of eligibility to Loss of Potential Earnings (LOPE) compensation provided by ACC, there has been a “lolly scramble” over how much of these payments can be clawed back by the Ministry of Social Development (MSD) and Inland Revenue (IR). It is incredibly cruel, that having already faced the difficult process of proving eligibility to compensation as a result of horrific child-abuse, claimants face many months of financial and administrative hurdles by MSD and IR, who collectively receive the lion-share of compensation payments made to clients, previously reliant on welfare support.

It is incorrect to suggest that new legislation re-establishes fairness in the system between different types of ACC recipients. This method of calculation supplementary payment debt due to retrospective lump sum compensation payments was identified by the Social Security Appeal Authority (part of the Ministry for Justice) in Case 10/5 decided 5 September 2024, as well as the October 2025 High Court Decision as unfair and unequitable. Both set of decision makers felt it was fairer to have a different method of calculating debt from lump sum payments, that took into account that recipients of LOPE compensation had through no fault of their own, received less in a bank payment than what would have been received if the payment had been made at the time that they were entitled to it. This is largely due to the declining purchasing power of money over time, as well as the way lump sum payments are taxed and affect entitlement to benefits with cash asset limits.

Clause 107 and 108 of SSAA decision identifies that “…the passage of time creates inevitable inequities…achieving true equity may not be possible”. 

The 14 October 2025 High Court decision by Judge Grice J. between MSD and Community Law Centres in clause 37 states “..in my view a greater inequity will arise….if a recipient of ACC arrears, having had to wait for those payments (and likely having taken the matter through dispute resolution processes to obtain them), was then required to repay the supplementary assistance.”

Clause 35 adds that “Furthermore, the Ministry’s interpretation could result in the state retrospectively imposing potentially significant debts on persons of limited means, through no fault of their own. This would be contrary to both the purposes of the ACC Act and the SSA…”

The representative for the Community Law Centre is reported in clause 36 of the High Court case as saying that it would be “unconscionable” for the Ministry to seek repayments of supplementary payments, because the supplements had been received in good faith, the recipient reasonably relied on communication from MSD informing them they were entitled to this assistance, and this money was spent on essentials, in the absence of any expectation of repayment.

LOPE claimants receiving lump sum payments of 5 or more years can have substantial disadvantages compared to ACC recipients who receive payments at the time they are due. These include:

• Substantial loss of purchasing power for long delayed payments (money does not buy as much as it would have, if received at time of eligibility).
• Significant delays in accessing funding for support services;
• Receiving a large payment in one hit could result in clients losing eligibility to ongoing payments from MSD with cash asset or income limits e.g. Accommodation Supplement, Temporary Additional Support and Disability Allowance.
• Inland Revenue taxes LOPE compensation as income received over the past 4 years. This results in a larger tax take than it was calculated as income spread over the entire time period for which compensation is paid. Higher assessed income over the past 4 years may in turn lead to tax debt from the overpayment of Working for Families Tax Credits to parents.
• LOPE compensation payments are typically lower than other types of compensation payments, as recipients are largely paid 80% of minimum wage. Other types of ACC recipients generally receive 80% of their previous wage, which tends to be higher due to greater work experience and skill set.
• Weekly LOPE compensation payments may barely cover the rent of some recipients.

Recipients of LOPE compensation deserve special treatment. There is little point granting compensation if all or most of it is simply transferred to other government departments. Compensation should provide some financial benefit to clients, in recognition of the harm they experienced and the effort needed to prove their case. Recognition is also needed of just how much time and resources are needed to deal with administrative matters.

Former MSD beneficiaries and their advocates have been fighting against retrospective supplementary payment debt for the past 3 years. It is hugely unfair that they only had 3 days to comment on the proposed law change. The Stuff News Article of 19 February 2026 by Emma Ricketts points out that “Nearly 40,000 people would have had their debts wiped by the High Court’s decision - meaning MSD would have had to write off $63 million in debt.”

The persons losing this money are some of the most vulnerable members of society. Whilst they were supported by MSD until compensation cases were won, the benefit largely only provides subsistence living, with a daily struggle to cover essential costs. The money taken from these persons could have really enriched their lives, and perhaps help them pay for what are luxuries for beneficiaries, such as computers, dental work and a reliable car.

Note about the Author

Allison Tindale has worked as welfare advocate in the Wellington region for over five years. As part of this advocacy work she has assisted recipients of LOPE compensation with MSD matters and witnessed the distress that dealing with multiple government departments over lengthy periods of times has caused clients.

Copy of SSAA and High Court decision.

Weblinks to Stuff article

https://www.stuff.co.nz/politics/360940723/retrospective-law-change-will-mean-beneficiaries-lose-out-63m

© Scoop Media