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Tax credit increase for low-income working family

12 September 2005

Family tax credit increase for low-income working families

Low-income working families will be eligible for an increase in their family tax credit from 1 April next year, Revenue Minister Michael Cullen and Social Development and Employment Minister Steve Maharey announced today.

“The family tax credit tops up the after-tax income of working families making them better off financially than if they received a benefit,” Dr Cullen said.

“At present, the guaranteed net income level is $15,080. That will rise to $17,680 from 1 April 2006, as part of the phased-in implementation of Working for Families changes announced in Budget 2004. The threshold will be reviewed and increased annually from 2006.

“The change means more money in the hand for low-income working families. For example, a family whose after-tax income is $12,000 and who currently receives $3,080 a year in top-up income from the family tax credit will receive an extra $2,600 a year, or an additional $50 a week, from April next year."

“About 80 per cent of families who have their income topped up by the family tax credit are headed by solo parents who work at least 20 hours a week," Steve Maharey said. "The remainder are two-parent families who work at least 30 hours a week between them. The number of families receiving the top-up is expected to increase from nearly 2,000 to over 4,000 as a result of this change.

“The family tax credit actively supports families moving off a benefit and into paid work and ensures that people who do paid work are better off as a result of their effort."

Steve Maharey said that Labour would continue to focus on the needs of all families, regardless of their employment situation.

"National has already announced that they would scrap the $10 per child, per week boost to Family Assistance scheduled for 2007. On its own, this would lead to an 18 per cent increase in child poverty – and that's without factoring in the impact of National's plan to raise rents for state houses."

The change to the Family Tax Credit was approved by Order in Council today.


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