What are Working for Families Tax Credits?

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  Published on Tuesday, 03 April 2018

What are Working for Families Tax Credits?

Library Home  >  Cost of Child Care
  Published on Tuesday, 03 April 2018
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What are Working for Families Tax Credits?

The government supports working parents and eases the day-to-day cost of child-raising with its Working for Families Tax Credits. These payments come in a range of different forms and, depending on your family size and income, you may qualify for one or more of them.

What types of payments are there?

There are four different Working for Families payments available to eligible families: 

  1. The in-work tax credit for those in paid work;
  2. The family tax credit for those with dependent children;
  3. The minimum family tax credit for those on a low income; and
  4. The Best Start payment for families with a child under the age of three (Note: Best Start replaced the Parental Tax Credit from 1 July 2018). 

These payments come from either Inland Revenue or Work and Income and are deposited directly into a family’s bank account. 

The tax credits are usually income-tested and Inland Revenue says they’re available for: 

  • Almost all families with children that are earning less than $65,000 per year;
  • Many families with kids that are bringing in up to $80,000 a year; and
  • Some larger families on higher incomes.

These payments come from either Inland Revenue or Work and Income and are deposited directly into a family’s bank account. 

The tax credits are usually income-tested and Inland Revenue says they’re available for: 

  • Almost all families with children that are earning less than $65,000 per year;
  • Many families with kids that are bringing in up to $80,000 a year; and
  • Some larger families on higher incomes.

That said, the Best Start payment is not means-tested for the first year a family receives it. Income is only considered for the second and third year of this payment.

All in all, the Working for Families Tax Credits provide financial assistance to many NZ families. To see if you’re eligible for one or more of these payments, let’s look at them in more detail.

What is the in-work tax credit and how do you qualify for it?

As its name suggests, the in-work tax credit is a payment for families who are in paid work. 

There is no need to work a minimum number of hours to get this payment, and your family can get the tax credit if you’re receiving salary/wages, self-employed income, paid parental leave and some other incomes, like accident compensation or the Unsupported Child Benefit. 

Your family can't get the in-work tax credit if you’re receiving a student allowance, parent’s allowance/children’s pension from Veterans’ Affairs New Zealand or some kinds of income-tested benefits, including Jobseeker support and sole parent support.

The amount a family receives is calculated according to their annual income before tax and number of children. You can check the current rates here, which are on a sliding scale.

As a guide, the in-work tax credit can amount to as much as $145 per fortnight for families with up to three children, and up to an extra $30 a fortnight for additional kids.  

This tax credit is paid by Inland Revenue. 

What is the family tax credit and how do you qualify for it?

The family tax credit is a payment for each dependent child. It is calculated according to:

  • Your family’s annual income; and
  • How many dependent children you have.

The family tax credit is paid by Inland Revenue if you’re not getting a Work and Income benefit payment. And if you are receiving a Work and Income benefit, they can pay the family tax credit with your other payments. 

As with the in-work tax credit, you will not be eligible for the family tax credit if you’re receiving a parent’s allowance/children’s pension from Veterans’ Affairs New Zealand. 

Currently, the maximum weekly family tax credit rates are:

Age/number of children Weekly rate
First or only child, aged 0 to 15 years $113.04
First or only child, aged 16 years or older $113.04
Second or subsequent child, aged 0 to 12 years $91.25
Second or subsequent child, aged 13 years to 15 years $91.25
Second or subsequent child, aged 16 years or older $91.25

For more detail, see this 2020/2021 table showing the sliding scale of payment rates, dependent on income and family size. 

What is the minimum family tax credit and how do you qualify for it?

The minimum family tax credit is a payment that boosts the income of working parents to ensure they’re earning a basic income. 

If your annual family income is $27,768 or less after tax, then you may qualify for this payment and have your family earnings topped up to at least $534 a week after tax. 

To qualify for the minimum family tax credit, parents need to be working for salary or wages and putting in a certain number of hours per week:

  • In a two-parent family, one or both parents must be working at least 30 hours per week between them; and 
  • A single parent must be working at least 20 hours a week 

As with the in-work tax credit, families receiving an income-tested benefit or parent’s allowance/children’s pension from Veterans’ Affairs New Zealand won’t be eligible for the minimum family tax credit. 

This payment comes from Inland Revenue.  

What is the Best Start payment and how do you qualify for it?

The Best Start payment is a payment that helps parents cover the costs of raising a child in their first three years. It is available to families in the first year of a baby’s life, regardless of their income, and is then means-tested.

To qualify for Best Start, you must be a NZ resident and the principal care-giver of a child under one-year-old. 

In dollar terms, Best Start amounts to $60 a week, per child, in their first year and it is paid into the principal care-giver’s bank account. 

Once your child turns one, Inland Revenue will check if you’re still eligible for payments in your child’s second and third years, depending on your family income and situation. 

The $60 weekly payment is reduced on a sliding scale once your family’s income goes over $79,000. If your family earns less than $93,858 per year in your child’s second and third year, then you can still get Best Start payments, but your entitlement will go down by 21 cents for every dollar you earn over $79,000.  

Best Start entitlements in a child’s second and third years

 

Annual Family Income Weekly payment Fortnightly payment

Lump sum payment

(paid after tax year ends on 31 March)

$79,000 $60 $120 $3,120
$80,000 $55 $110 $2,910
$85,000 $35 $70 $1,860
$90,000 $15 $30 $810
$93,858 + $0 $0 $0

To get Best Start you need to register your baby and apply for the payment

Keep in mind that you can’t get Best Start if you’re on paid parental leave (PPL).  If you register for Working for Families while on PPL, then your Best Start payments will begin automatically after the PPL ends. Otherwise, Best Start payments begin from the day of your child’s birth (and end the day before your child turns three). 

If you’re receiving a Work and Income benefit, you need to let them know that your child has been born. They will pay Best Start with your benefit and advise of any changes to your payment. 

What other eligibility criteria are attached to the Working for Families payments?

To get Working for Families, you must meet the requirements of the specific payment type and also:

  • Have a dependent child in your care under the age of 18 (or between 18 and 19 if they’re still at school or a tertiary institution)
  • Be their principal care-giver
  • Be over the age of 16 yourself
  • Meet certain residency requirements

How much will your family receive?

Each family has a different income and number of children, so the easiest way to estimate your Working for Families payment is to jump online and use the Inland Revenue ‘Estimate Your Working for Families Tax Credits’ calculator

This Working for Families Tax Credits Worksheet 2021 will also help you estimate the Working for Families Tax Credits you might receive, based on your pre-tax family income and number of children. 

How do you apply for Working for Families Tax Credits?

Before you receive any money from the government, you must register for Working for Families and qualify for the payment/s.

To register you will need to: 

  • Collate certain documents. You need to provide IRD numbers for you, your partner and your child (keeping in mind that you can get Working for Families payments for 8 weeks if you need to apply for your little one’s IRD number).  You’ll also need to dig out your estimated family income for the tax year, your bank account number and any child support payments you’ve paid or received by private agreement.
  • Log in to myIR. This secure online service lets you manage your Working for Families payments and details, along with other tax-related matters. If you need to register for myIR, click here
  • Register for Working for Families. Once you’re logged in to myIR, go to ‘I Want To…’ and select ‘More’ in the top right corner. Then select ‘Register for Working for Families’ in the left-hand menu. If you like, you can give your partner access as well.
  • Fill out and submit your details, then wait to hear from Inland Revenue. After you’ve completed the registration process, they’ll send you a notice of entitlement, confirming how much you’ll get and when payments will begin.

Provided you’re eligible, you can choose to have Working for Families payments made into your bank account weekly, fortnightly or as a lump sum after the tax year ends on 31 March.  

If you’ve been a Working for Families customer in the past, then you don’t need to register again. You can reactivate your Working for Families account in myIR and restart any payments you qualify for. 

What should you do if your family’s circumstances change?

You’re responsible for checking/updating your Working for Families information, and it’s important that you let the government know if there’s a change to your work or home situation which may affect your payments. 

To avoid being underpaid or having to pay money back, you should tell Inland Revenue if:

  • Your family income changes (e.g. you’re starting paid parental leave)
  • You or your partner’s hours of work change 
  • The number of children in your care changes
  • There’s a change to your relationship status
  • You want payments to go into a different bank account
  • Your name or contact details change
  • You or a family member move to another country
  • Your shared care arrangements change
  • Any private child support payments you pay/receive change
  • Your child stops/starts getting a benefit
  • Your child works 30 or more hours a week
  • Your child is still at school after turning 18

You’re responsible for checking/updating your Working for Families information, and it’s important that you let the government know if there’s a change to your work or home situation which may affect your payments. 

Inland Revenue says, ‘If you receive weekly or fortnightly payments, any changes you tell us about before 6pm on Mondays will affect your payment for that week.’

What is income adjustment?

There are some types of income that aren’t included in your income tax assessment, but are counted when Inland Revenue works out your Working for Families entitlements. 

The upshot of this is that you need to tell Inland Revenue about certain types of income you receive, including, but not limited to:

•    Salary exchanged for private use of a work vehicle
•    Tax-exempt salary and wages
•    Your non-resident spouse or partner’s income; and
•    A dependent child’s passive income. 

In practice, this means you need to complete an Adjust Your Income Form in myIR, any time during the tax year or after it ends. 

Once your income adjustment has been processed, Inland Revenue will send you a notice of assessment confirming whether you’ve received the correct Working for Families entitlement. You might receive a refund or have money to pay, and if you adjust income during the year, this can have an effect on your weekly or fortnightly payment amounts. 

The best thing is to keep your information up-to-date and contact Inland Revenue or Work and Income with any queries. 


References
Inland Revenue
Work and Income

This child care article was last reviewed or updated on Friday, 10 July 2020

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