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New In-Work Payment makes work pay

Hon David Benson-Pope
Minister for Social Development and Employment
Member of Parliament for Dunedin South

30 March 2006 Media Statement
New In-Work Payment makes work pay

The Government’s new In-Work Payment will put more money into the hands of more families, Social Development and Employment Minister David Benson-Pope said today.

Part of the Working for Families package, the new in-Work Payment replaces and pays more than the Child Tax Credit from 1 April 2006. The new payment is worth up to $60 per week for families with up to 3 children, plus an additional $15 for each subsequent child.

It is estimated that more than 200,000 families in the 2006/07 tax year will be eligible for the In-Work Payment at a cost of around $530 million per annum, compared with the 117,000 families who received Child Tax Credit in the 2004 tax year.

“Paid work offers families the greatest opportunity to improve their financial circumstances and the In-Work Payment ensures that work really does pay,” said Mr Benson-Pope. "The In-Work Payment recognises the extra costs associated with work and that people on benefit already receive significant financial assistance and services from the State."

The In-Work Payment is available to working parents (including self-employed) who do not receive a benefit, student allowance or Parents Allowance and who work a minimum of 20 hours or more per week in a single parent family; and 30 hours or more per week in a two-parent family.

The In-Work Payment is available to some groups that previously couldn’t get the Child Tax Credit, including:

- Workers who are on ACC, if they would have qualified for it at the time of their accident (Child Tax Credit entitlement ceased after three months on ACC) and the accident was on or after 1 January 2006
- Families getting NZ Superannuation or a Veteran’s Pension, who work the required hours
- In some cases, both parents at the full rate, in cases where they share the care of a child
- Recipients of Foster Care Allowance, Orphan’s Benefit or Unsupported Child’s Benefit

Approximately 15,000 people who receive Child Tax Credit, but do not qualify for the In-Work Payment will continue to receive the Child Tax Credit for as long as they continue to meet the eligibility requirements. The Child Tax Credit will be closed to new applicants from 1 April 2006. Once a family moves onto In-Work Payment, they cannot go back to receiving Child Tax Credit.
On average beneficiary families have an increase in assistance of around $32 in the first year of Working for Families. These families also gain by an additional $10 per child per week with the Family Support increases that come into effect in April 2007.

The In-Work Payment is seen positively by the OECD and others as a way of encouraging employment and opening up the margins between benefits and low wages.

Working for Families builds to $1.6 billion per annum and is a significant investment in the well-being of New Zealand families which will also address child poverty.

Ministry of Social Development policy analysts predict that the full implementation of Working for Families by 2007 will see:

- A 30% reduction in child poverty using a 60% of median household income threshold
- A 70% reduction in child poverty using a lower threshold of 50% of median income

Almost all families with children with incomes below $70,000 benefit from the package, and nearly all sole-parent families receive extra money from the Working For Families package as a whole.

“Working for Families is a fantastic investment in New Zealand families,” said Mr Benson-Pope.

A comparison of how much a family would get from the In-work Payment versus the Child Tax Credit:

Number of Children
One Two Three Four Five Six
Child Tax Credit $15 $30 $45 $60 $75 $90
In-Work Payment (Up to) $60 $60 $60 $75 $90 $105
Difference $45 $30 $15 $15 $15 $15


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