Changes to Family Assistance from 1 April 2006
A number of the changes making up the Working for Families package (announced in last year's Budget) are to due start on 1 April this year. These changes will make a big difference for many working families. Currently, for example, 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. Another example is that of a family earning $60,000 per year with two young children. Currently, such a family is not eligible for Family Assistance, but from April they will receive $161 per fortnight.
The Current Situation
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.
What the Family Assistance Changes Will Mean
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 percent to 20 percent 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 three children - with an extra $15 per child for the fourth and subsequent children; and
- the Family Tax Credit threshold will increase to ensure that families have a minimum income of $17,680 (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.
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 |
Contact for Enquiries
The Ministry of Agriculture and Forestry
Pastoral House
25 The Terrace
PO Box 2526, Wellington
Tel: +64 4 894 0100
Fax: +64 4 894 0720
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