The wording of regulation 9B would appear to be reasonably clear:

9B Deprivation of property and income

For the purposes of section 147A of the Act, instances of deprivation of property or income include, but are not limited to, the following:

(a)gifts that are gifted in the 12-month period prior to the commencement of the gifting period, or in any 12-month period preceding that period, to the extent that the total value of the gifts in each such period exceeds $27,000:

For those not used to “legal Speak” that means that a gift of say $21,000 does not constitute deprivation of property or income. If a gift of $21,000 was intended to be caught then the regulation would have said “exceeds $20,000” not $27,000. This meaning has been established by the courts in relation to the asset test.

The Ministry of Social Developments (MSD) application of rules is far less clear. In particular the circumstances in which they will determine you have “deprived yourself of income”. Their publications and website do not publish the rule that they are applying.

After almost 3 years going through the Court system I have ascertained that their view is that any gift, no matter how small, has the effect of depriving you of the income that the asset could have earned if you had not gifted it and if you put it in the bank at interest.

This was clarified somewhat in the High Court when the MSD Lawyer stated that the MSD would not seek to assess deprived income if “total gifts in a persons lifetime were less than $50,000”. The High Court revelation is the only place I have seen this self made rule stated.

The High Courts decision is that Gifts of less than $27,000 DO NOT constitute deprivation of income because of section 9B 

A key statement from the Judge in the ruling is: 

“ I have found that the interpretation advanced by the Ministry, while it may meet the Ministry’s policy objectives, does not accord with the statutory scheme, properly construed”

If you know of people affected by the Ministries interpretation please contact me at s@atxnz.com