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 newborn or 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, weekly, fortnightly or as a lump sum at the end of the tax year (31 March), depending on what you choose.

The tax credits are usually income-tested, though 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.

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, NZ supperannuation, a Foster Care Alliance or an Unsupported Child Benefit (as long as you're working). 

Your family can't get the in-work tax credit if you’re receiving an income-tested benefit or a student allowance. Income-tested benefits include Jobseeker support, sole parent support, a young parent payment and a few others. You can't get this benefit if you're receiving a parent's allownce or children's pension from Veterans' Affairs New Zealand.

As of 1 April 2021, you can keep receiving the in-work tax credit for up to two weeks when taking an unpaid break from work (e.g. if you're transitioning between jobs, leave your employment, or aren't getting paid for a period of time).

If you do take an unpaid break from work, you need to let Inland Revenue know, so they can make sure your in-work tax credit payments continue. Logging in to myIR is th easiest way to do this.

You can check your eligibility for the in-work tax credit here, and the amount your family receives is calculated according to your annual family income before tax and number of children you have.

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 $144 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
  • How many dependent children you have, and
  • Any shared care arrangements

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 or children’s pension from Veterans’ Affairs New Zealand. 

Currently, the maximum weekly family tax credit ares 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 $30,576 or less after tax, then you may qualify for this payment and have your family earnings topped up to at least $588 a week after tax. 

To qualify for the minimum family tax credit, you need to be working for salary or wages and not be self-employed. You must also be 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, parent’s allowance or 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.

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.  

The 2021/2022 rates for children aged one to three are here

To get Best Start you need to register your baby and apply for the payment through Inland Revenue (if you're not getting a benefit from Work and Income). The process is explained here.

 

If you are getting a Work and Income benefit, you need to let them know that your child has been born, so they can set up Best Start payments and advise of any changes to your benefit.

 

It's important to know that you can’t get Best Start while you're receiving paid parental leave (PPL) payments.  Best Start begins when PPL ends.

 

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 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 (follow the link at the bottom of this page) and allow about five minutes to do the estimate. 

This 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.

You can register by:

  • Logging in to myIR
  • Completing Inland Revenue's online form, or
  • Calling Inland Revenue on 0800 227 773

You will need to collate the following information before registering: 

  • IRD numbers for you, your partner and you child (keeping in mind that you can get Working for Families payments for eight weeks if you need to apply for your little one's IRD number)
  • Your estimated family income for the tax year (myIR can pre-populate some details)
  • Your bank account number, and
  • Any child support payments you've paid or recieved by private agreement.

After registering, you'll receive a notice of entitlement from Inland Revenue, confirming how much you'll get and when payments will begin.

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. 

It's also possible to apply for Working for Famillies for past years when you had children in your care. To learn more about back payments, click here

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 work extra hours or do some overtime, get a pay rise, change jobs or recieve a bonus)
  • 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 don't need to tell Inland Revenue if you're stopping or starting a benefit. Work and Income will send the details to them.

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 Monday, 19 April 2021

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