Tax law on defence force allowances to be clarified

Special allowances paid to members of the armed forces in overseas trouble spots will be automatically exempt from income tax under legislation proposed by the government.

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Special allowances paid to members of the armed forces in overseas trouble spots will be automatically exempt from income tax under legislation proposed by the government.

Announcing the move today, Revenue Minister Michael Cullen and Defence Minister Mark Burton said it would be included in the first taxation bill to be introduced into Parliament after the election and will apply from the date of enactment.

"The change will clarify the difference between the tax treatment of ordinary pay and allowances and the special allowances paid to service personnel in recognition of the increased military and environmental dangers associated with operational deployment overseas," the Ministers said.

To secure tax exemption under the current law and to protect entitlement to income tested benefits such as family assistance and the accommodation supplement, it has been necessary to pay the allowances under the Social Security Act administered by the Ministry of Social Development.

ENDS

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