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Most will benefit from Working for Families

Friday, 27 January 2006

Three out of four families will benefit from Working for Families

Revenue Minister Peter Dunne said today it won't be long before most New Zealand families will see the benefit of the changes to the Working for Families package.

"Eighty-five thousand New Zealand families will be newly eligible for Family Assistance tax credits as part of the government's $1.6b Working for Families package," he said.

The changes will make a big difference for many working families.

Currently a family earning $45,000 per year with two young children receives Family Assistance of $46 per fortnight. From April 2006 that will increase to $277.

A family earning $60,000 per year with two young children is currently not eligible for Family Assistance but from April they will receive $161 per fortnight.

As part of Working for Families, Family Assistance income thresholds go up on 1 April 2006; the rate at which payments reduce goes down; and In-Work Payment is being introduced to replace and pay more than the Child Tax Credit as a new entitlement for working families.

The Family Tax Credit threshold also increases from $15,080 to $17,680.

"The combined impact of all of the Working for Families changes to Family Assistance will benefit three quarters of all families in New Zealand, including 85,000 families eligible for Family Assistance for the first time from 1 April 2006," Mr Dunne said.

Family assistance includes four types of tax credits and families can qualify for one or more depending on their circumstances. Payments can be made weekly or fortnightly based on a family's income estimate for the year ahead, or in a lump sum after the end of the tax year.

Families can register now with Inland Revenue so Family Assistance payments can start from April 2006.

Further information is available on www.workingforfamilies.govt.nz

Fact Sheet

Changes to Family Assistance from 1 April 2006

Family Assistance is currently made up of four types of tax credits, which are: Family Support, Child Tax Credit (being replaced by In-Work Payment for eligible families from 1 April 2006), Family Tax Credit, and Parental Tax Credit.

Families may qualify for one or more of the tax credits, depending on their circumstances.

Family Support is available to all families with dependent children and can be paid by Inland Revenue to working families or by Work and Income to families who also receive a benefit.

Child Tax Credit, Parental Tax Credit and Family Tax Credit are paid by Inland Revenue and are available only to families in which the principal carer or their spouse or partner meets specific work tests, and are not available to families receiving benefits.

Eligibility for Family Assistance is based on a family's income, the number of dependent children in the family and their ages, and any shared care arrangements.

The changes to Family Assistance that will come into effect on 1 April 2006 as part of Working for Families are:

· An increase in the income threshold at which Family Assistance payments begin to abate from $20,356 to $35,000, so families on higher incomes will qualify and families can earn more before their payments start to reduce.

· A reduction in the abatement rate from 30 per cent to 20 per cent so that payments reduce more slowly as earned income increases.

· The introduction of the new In-Work Payment to replace and pay more than the Child Tax Credit for eligible working parents.

· The In-Work Payment will pay up to $60 per week per family (of up to 3 children), with an extra $15 per child for the fourth and subsequent children.

Eligibility for In-Work Payment is based on hours of work. The hours of work requirements are:

· 20 hours or more per week in a single parent family

· 30 hours or more per week in a two-parent family The Child Tax Credit, which pays $15 per week per child, will be phased out over time, but will continue for current recipients who are not eligible for the In-Work Payment.

The Family Tax Credit threshold will increase to ensure that families have a minimum income of $17,680 (after tax) a year. The Family Tax Credit currently (up until 31 March 2006) tops up families income to $15,080 (after tax) a year.

The combined effect of all the Working for Families changes to Family Assistance is an estimated average gain of $64 per week in Family Assistance across a total of 348,000 families from 1 April 2006.

This is estimated to represent over three quarters of all families.


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