New Zealand Working for Families Tax Credits

New Zealand has built a reputation for progressive social policy, and at the centre of its support for families sits Working for Families (WfF), the country’s main family income support package. Introduced in 2004 and operational since 1 April 2005, Working for Families provides a suite of tax credits designed to ensure that families with dependent children can meet the everyday costs of raising the next generation. From nappies and school uniforms to food on the table and heating in winter, the programme represents a sustained public commitment to sharing the financial burden of child-rearing between individual households and the state.

Working for Families is not a single payment but rather a package of four interrelated tax credits, each targeted at different family circumstances: the Family Tax Credit (FTC), the In-Work Tax Credit (IWTC), the Minimum Family Tax Credit (MFTC), and Best Start. Together, these credits provide a layered safety net. Some components are available to all families regardless of employment status, while others reward workforce participation or target the critical early years of a child’s life. The result is a flexible, income-tested system that channels the most support to those who need it most while still providing meaningful assistance to middle-income households.

The significance of Working for Families to New Zealand society cannot be overstated. Approximately three in four families with dependent children qualify for at least some level of WfF entitlement, and more than 300,000 families receive regular payments. The programme has been credited with dramatically reducing child poverty rates since its introduction and remains a cornerstone of the government’s broader welfare and tax policy framework. Whether you are a new parent adjusting to life with a baby, a sole parent returning to the workforce, or a two-income household managing the costs of multiple school-age children, Working for Families is designed to provide tangible, ongoing financial support.

Understanding the full scope of Working for Families — its components, eligibility rules, income thresholds, and application process — is essential for any family living in New Zealand. This guide provides a comprehensive overview of the programme, covering everything from its historical origins through to practical tips for maximising your entitlement.

Opportunity Snapshot

Historical Background and Context

Working for Families was announced as part of the 2004 Budget by the Fifth Labour Government, led by Prime Minister Helen Clark and Finance Minister Michael Cullen. The package was one of the most significant expansions of family assistance in New Zealand’s modern history, and it was designed to address several interconnected policy goals: reducing child poverty, making work pay for low- and middle-income families, and ensuring that the tax and transfer system provided adequate support for the costs of raising children.

Before WfF, New Zealand’s family assistance landscape was fragmented. Various tax credits and supplementary benefits existed, but they were widely regarded as insufficient and poorly targeted. The child poverty rate in New Zealand had risen sharply during the economic reforms of the late 1980s and early 1990s, when benefit cuts and labour market deregulation eroded the living standards of many families. By the early 2000s, advocacy groups, researchers, and opposition parties were calling for a comprehensive overhaul of family support.

The Working for Families package consolidated and expanded existing assistance into a coherent framework. It replaced the former Child Tax Credit and Family Support tax credits with the new Family Tax Credit, introduced the In-Work Tax Credit to encourage labour market participation, and established the Minimum Family Tax Credit as a wage floor for working families. The package was phased in over several years, with full implementation achieved by 1 April 2007. The initial cost to the government was estimated at approximately $1.1 billion per year, a substantial investment that reflected the scale of the challenge.

Since its introduction, Working for Families has undergone numerous adjustments. Payment rates have been increased periodically to keep pace with inflation and the rising cost of living. The income abatement threshold and abatement rate have been revised to ensure that the programme remains well-targeted. In 2018, the Sixth Labour Government led by Prime Minister Jacinda Ardern introduced the Best Start component as part of the Families Package, adding a new layer of support for families with babies and young children born on or after 1 July 2018. These reforms reflected a renewed focus on the first 1,000 days of a child’s life, a period that research consistently identifies as critical for long-term wellbeing and development.

The programme is jointly administered by Inland Revenue (IRD) and the Ministry of Social Development (MSD). IRD handles WfF payments for most families through the tax system, while MSD administers payments for families who are receiving a main welfare benefit such as Jobseeker Support, Sole Parent Support, or Supported Living Payment. This dual administration model reflects the programme’s hybrid nature: it is simultaneously a tax measure and a social welfare tool.

The Four Components of Working for Families

Working for Families comprises four distinct tax credits, each serving a different purpose within the overall package. Understanding how these components interact is key to determining your full entitlement.

1. Family Tax Credit (FTC)

The Family Tax Credit is the foundation of the Working for Families package. It is the main payment available to all families with dependent children aged 18 or under, regardless of whether the parents or caregivers are in paid employment. The FTC is income-tested, meaning the amount you receive depends on your total family income, but it is not contingent on working a minimum number of hours.

The FTC is paid at a higher rate for the eldest (or only) child in the family and at a slightly lower rate for each subsequent child. The rates also vary depending on the age of the child, with higher amounts payable as children grow older, reflecting the increased costs associated with older children. As of the 2024 tax year, the approximate weekly rates are:

• Eldest or only child: approximately $127 per week (this rate varies slightly by age bracket)
• Subsequent children: approximately $104 per week per child (also age-dependent)

These rates are reviewed and adjusted periodically. The FTC is available to families on a main benefit as well as working families, making it the most broadly accessible component of the WfF package. For beneficiary families, the FTC is typically administered by MSD and is included as part of their overall benefit entitlement. For working families not on a benefit, it is administered by IRD.

The FTC is designed to recognise the direct financial cost of supporting dependent children. It is not means-tested in the sense of being limited to the poorest families — many middle-income households receive at least a partial FTC entitlement — but the income abatement rules mean that entitlements decrease as family income rises above the threshold.

2. In-Work Tax Credit (IWTC)

The In-Work Tax Credit is an additional payment available to families who are in paid employment and who are not receiving a main welfare benefit. The IWTC was introduced as a deliberate policy lever to make work financially rewarding. By providing an extra payment that is conditional on employment and not available to beneficiary families, the IWTC creates a financial incentive to enter or remain in the workforce.

The IWTC is paid at a flat rate that does not vary by the age of the children but does increase for larger families:

• Families with 1 to 3 children: up to $72.50 per week
• Each additional child beyond the third: an extra $15.00 per week per child

For example, a working family with four children could receive up to $87.50 per week in IWTC ($72.50 + $15.00), while a family with five children could receive up to $102.50 per week. Like all WfF components, the IWTC is income-tested and subject to abatement once family income exceeds the threshold.

To qualify for the IWTC, at least one adult in the family must be engaged in paid employment or self-employment. There is no minimum hours requirement for the IWTC itself (the hours requirement applies only to the Minimum Family Tax Credit). However, the critical condition is that the family must not be receiving a main welfare benefit. If a family transitions from a benefit to work, the IWTC becomes available, providing an additional financial boost that helps offset the loss of benefit-related supplementary assistance.

The IWTC has attracted both praise and criticism over the years. Supporters argue that it provides a clear reward for workforce participation and helps reduce long-term welfare dependency. Critics contend that it creates inequities between beneficiary and non-beneficiary families, effectively penalising those who are unable to find work or who face barriers to employment such as disability or caregiving responsibilities. Despite this debate, the IWTC remains an integral part of the WfF package.

3. Minimum Family Tax Credit (MFTC)

The Minimum Family Tax Credit is a specialised top-up payment designed to ensure that working families receive at least a minimum after-tax income. It functions as an income floor, topping up a family’s earnings to a guaranteed weekly minimum of approximately $534 per week (after tax). The MFTC is available only to families who are in paid employment and who meet specific minimum hours requirements:

• Sole parents: must work at least 20 hours per week
• Couples: must work at least 30 hours per week combined

The MFTC effectively ensures that no working family falls below a basic income level, even if their hourly wage rate is low. It is particularly relevant for families earning the minimum wage or working part-time, where gross earnings alone may not be sufficient to cover essential living costs. The top-up is calculated as the difference between the family’s actual after-tax income (including other WfF credits) and the guaranteed minimum amount.

Because the MFTC is designed as a last-resort income guarantee, it interacts closely with other WfF components. A family’s FTC and IWTC entitlements are calculated first, and the MFTC then tops up the total to the minimum threshold if needed. In practice, the MFTC is claimed by a relatively small number of families — those with very low earned income who nonetheless meet the hours requirements. It is administered exclusively by IRD and is paid on a weekly basis to ensure that families have a reliable income stream.

The MFTC cannot be received as a lump sum at the end of the tax year. Because its purpose is to provide a weekly income floor, it must be claimed and paid throughout the year. Families who think they may be eligible for the MFTC should contact IRD to discuss their circumstances, as the calculation can be complex and depends on the family’s total income from all sources.

4. Best Start

Best Start is the newest component of the Working for Families package, introduced as part of the Families Package in 2018. It provides financial support to families with a new baby or young child, recognising the significant costs and reduced earning capacity that often accompany the early years of parenthood. Best Start is available for children born on or after 1 July 2018.

Best Start is paid at a rate of $69 per week per qualifying child. The payment structure has two tiers:

• From birth to age 1: Best Start is paid universally to all eligible families, regardless of income. Every family with a qualifying baby receives $69 per week during the child’s first year of life, with no income test applied.
• From age 1 to age 3: Best Start continues at $69 per week but becomes income-tested. Families with combined annual income below approximately $93,858 continue to receive the full amount. Above this threshold, the payment is gradually reduced through the standard WfF abatement mechanism.

Best Start replaced the former Parental Tax Credit, which had provided a lump-sum payment during the first weeks after a child’s birth. The shift to Best Start represented a move towards sustained, ongoing support throughout the critical early years, rather than a one-off payment. The policy rationale drew heavily on evidence from developmental psychology and early childhood research, which emphasises the importance of adequate material resources during the first 1,000 days of life.

Best Start is available to families regardless of their employment status and regardless of whether they are receiving a main welfare benefit. It can be paid alongside the FTC, IWTC, and MFTC, providing an additional layer of support for families with very young children. The payment is administered by IRD for most families, or by MSD for families on a main benefit.

Payment Rates and Income Thresholds

Working for Families entitlements are determined by a combination of fixed payment rates and income-based abatement rules. Understanding these mechanics is essential for estimating your likely entitlement.

Current Payment Rates (2024 Tax Year)

Income Abatement

WfF entitlements are subject to an income abatement regime. The key parameters are:

• Abatement threshold: $42,700 per year in combined family income
• Abatement rate: 27 cents for every dollar of family income above the threshold

This means that for every additional dollar a family earns above $42,700, their total WfF entitlement is reduced by 27 cents. The abatement applies across all WfF components collectively — FTC, IWTC, and Best Start (for children aged 1–3) are all reduced together once income exceeds the threshold.

For example, consider a family earning $60,000 per year. Their income exceeds the threshold by $17,300 ($60,000 − $42,700). The annual abatement would be $17,300 × 0.27 = $4,671. This amount would be subtracted from the family’s total WfF entitlement for the year. If their gross entitlement (FTC + IWTC + Best Start) exceeded $4,671, they would still receive a positive WfF payment.

The abatement regime is designed to ensure that WfF is well-targeted. Families with the lowest incomes receive the full entitlement, while higher-income families receive progressively less. However, the system is designed so that entitlements taper off gradually rather than disappearing abruptly, avoiding the sharp “benefit cliffs” that can discourage families from increasing their earnings.

Families should note that the income used for abatement purposes is the combined family income — that is, the total income of both partners in a couple, or the sole parent’s income in a single-parent family. This includes wages and salaries, self-employment income, investment income, and certain other types of taxable income. It does not include WfF payments themselves or most non-taxable income.

Eligibility Requirements

To qualify for Working for Families, a family must meet several criteria relating to residency, family composition, and income. The specific requirements vary slightly between the four components, but the core eligibility conditions are as follows:

Residency

• The applicant must be a New Zealand citizen, a permanent resident, or a holder of a qualifying visa that grants the right to reside and work in New Zealand.
• The applicant must be ordinarily resident in New Zealand. Short-term visitors and tourists do not qualify.
• Some visa categories (such as certain work visas and refugee visas) confer eligibility for WfF, while others do not. Families on temporary visas should check with IRD or MSD to confirm their eligibility.

Dependent Children

• The family must have one or more dependent children aged 18 or under.
• A dependent child is defined as a child who is financially dependent on the applicant and who is not in full-time employment (30 or more hours per week) or receiving a main welfare benefit in their own right.
• The child must live with the applicant as a member of their household for at least one-third of the time. Shared care arrangements are possible, and WfF entitlements can be split between caregivers in proportion to the time the child spends with each.
• The child does not need to be the applicant’s biological child. Foster children, grandchildren, and other dependants can qualify, provided the applicant is the child’s principal caregiver.

Employment (for IWTC and MFTC)

• The In-Work Tax Credit is available only to families who have income from employment or self-employment and who are not receiving a main welfare benefit (such as Jobseeker Support, Sole Parent Support, or Supported Living Payment).
• The Minimum Family Tax Credit requires that the applicant (or the applicant and their partner combined) work a minimum number of hours per week: 20 hours for sole parents and 30 hours for couples.

Income

• All WfF components except Best Start (for children under age 1) are income-tested. There is no hard income cut-off — instead, entitlements are gradually reduced through the abatement mechanism as family income rises above $42,700 per year.
• Very high-income families may find that their entire WfF entitlement is abated to zero, meaning they receive no payment. The exact point at which this occurs depends on the number and ages of children in the family.

Best Start Specific Requirements

• Best Start is available only for children born on or after 1 July 2018.
• For children under age 1, Best Start is universal — all eligible families receive it regardless of income.
• For children aged 1 to 3, Best Start is income-tested with a higher threshold of approximately $93,858 before abatement begins.

How to Apply and Receive Payments

Applying for Working for Families is straightforward, and the process differs slightly depending on whether the family is on a main welfare benefit or not.

For Families Not on a Main Benefit

Most working families apply for WfF through Inland Revenue (IRD). The application can be completed online through the IRD website using the myIR portal, by phone, or by completing a paper application form (IR211). The key steps are:

1. Register with IRD: If you do not already have an IRD number, you will need to obtain one. Most New Zealand residents will already have an IRD number from birth or from previous tax interactions.
2. Log in to myIR: Access the IRD online portal at myir.ird.govt.nz. Navigate to the Working for Families section.
3. Provide family details: You will need to supply information about your partner (if applicable), your dependent children (names, dates of birth, IRD numbers), and your estimated family income for the current tax year.
4. Choose your payment frequency: You can elect to receive WfF payments weekly, fortnightly, or as a lump sum at the end of the tax year when your income tax return is filed.
5. Submit your application: Once submitted, IRD will assess your entitlement and begin making payments. Processing typically takes a few working days for online applications.

For Families on a Main Benefit

Families who are receiving a main welfare benefit (such as Jobseeker Support, Sole Parent Support, or Supported Living Payment) will have their WfF entitlements assessed and paid by the Ministry of Social Development (MSD) through Work and Income. In most cases, the Family Tax Credit is automatically calculated and included in the family’s benefit payments. Families on a benefit do not need to apply separately for WfF — it is incorporated into their overall entitlement.

However, families who transition off a benefit and into work should contact IRD to ensure that their WfF payments continue without interruption. The switch from MSD-administered to IRD-administered payments is not always automatic, and there can be a gap in payments if the family does not proactively notify IRD of the change.

Payment Frequency Options

One of the distinctive features of Working for Families is the flexibility it offers in payment frequency:

• Weekly or fortnightly payments: These are based on your estimated annual income and are paid throughout the tax year. This option provides a regular income stream that helps with budgeting and cash flow management. However, because payments are based on estimated income, there is a risk of over- or under-payment, which is reconciled at the end of the tax year.
• Lump sum payment: You can choose to receive your entire WfF entitlement as a single payment after the end of the tax year, once your actual income is confirmed through your tax return. This option eliminates the risk of overpayment and the associated debt to IRD, but it means you do not receive any WfF assistance during the year itself.

Many families opt for regular payments (weekly or fortnightly) because they need the ongoing financial support. IRD recommends that families who choose regular payments keep their income estimates up to date throughout the year to minimise end-of-year adjustments.

End-of-Year Square-Up

At the end of each tax year (31 March), IRD conducts a square-up of WfF payments. This involves comparing the WfF payments made during the year (based on estimated income) with the family’s actual entitlement (based on confirmed income). If the family was overpaid, they will owe a debt to IRD, which is typically recovered through reduced future WfF payments or direct repayment. If the family was underpaid, they will receive a top-up payment.

The square-up process is automatic for most families and is completed as part of the annual income tax assessment. Families who receive a lump sum payment at the end of the year do not go through a square-up, as their payment is calculated based on actual income from the outset.

Interaction with Other Benefits

Working for Families does not operate in isolation. It interacts with a range of other government benefits and tax measures, and understanding these interactions can help families maximise their overall entitlement.

Main Welfare Benefits

Families receiving a main welfare benefit (Jobseeker Support, Sole Parent Support, Supported Living Payment) are eligible for the Family Tax Credit and Best Start, but they are not eligible for the In-Work Tax Credit or the Minimum Family Tax Credit. This distinction is a core design feature of WfF and is intended to create a financial incentive for workforce participation.

Accommodation Supplement

The Accommodation Supplement is a separate payment administered by MSD that helps with housing costs. It is available to both beneficiary and non-beneficiary families and is assessed independently of WfF. However, WfF payments are counted as income when calculating the Accommodation Supplement, which means that higher WfF entitlements can reduce the amount of Accommodation Supplement a family receives.

Childcare Assistance

New Zealand provides subsidised early childhood education (20 hours free ECE for children aged 3–5) and childcare subsidies through MSD. These are separate from WfF and can be received alongside WfF payments. Families with young children should investigate both WfF and childcare assistance to ensure they are receiving their full entitlement.

Child Support

Child Support payments (administered by IRD) are separate from WfF. A parent who is paying child support does not receive a reduction in their WfF entitlement, and a parent who is receiving child support does not have it counted as income for WfF abatement purposes in most cases. However, the interaction between child support and WfF can be complex in shared care arrangements, and affected families should seek advice from IRD.

Paid Parental Leave

Paid Parental Leave is a separate entitlement administered by IRD that provides income replacement for eligible parents taking leave from work after the birth or adoption of a child. Paid Parental Leave payments are counted as income for WfF abatement purposes, so families receiving both should factor this into their income estimates.

Winter Energy Payment

The Winter Energy Payment is paid to beneficiary families during the winter months (May to October) to help with heating costs. It is separate from WfF and does not affect WfF entitlements.

Tips for Families

Navigating the Working for Families system can be complex, particularly for families with variable incomes, shared care arrangements, or changing circumstances. The following tips can help you maximise your entitlement and avoid common pitfalls:

1. Apply as soon as you are eligible: WfF payments are not backdated indefinitely. While IRD can backdate payments in some circumstances, it is best to apply as soon as your family becomes eligible — for example, when a child is born or when you first arrive in New Zealand.

2. Keep your income estimate up to date: If you receive regular (weekly or fortnightly) WfF payments, your payments are based on your estimated income. If your actual income turns out to be significantly different from your estimate, you could face a large overpayment debt or miss out on entitlements. Update your estimate through myIR whenever your circumstances change — for example, if you start a new job, lose a job, receive a pay rise, or your partner’s income changes.

3. Notify IRD of changes in family circumstances: Changes such as the birth of a new child, a child turning 18 or leaving school, a relationship change (separation or new partner), or a change in shared care arrangements can all affect your WfF entitlement. Prompt notification helps ensure accurate payments.

4. Consider the lump sum option if your income is variable: If your income fluctuates significantly during the year — for example, if you are self-employed, work seasonally, or receive irregular bonuses — the lump sum option may be a safer choice. It avoids the risk of overpayment and the associated end-of-year debt.

5. Check whether you qualify for the MFTC: The Minimum Family Tax Credit is often overlooked because it applies only to families with very low earned income who meet the hours requirements. If you are working part-time on a low wage, the MFTC could substantially increase your weekly income. Contact IRD to check your eligibility.

6. Understand shared care rules: If your child spends time with more than one caregiver (for example, after a separation), WfF entitlements can be shared between the caregivers in proportion to the time the child spends with each. Both caregivers need to register with IRD and agree on the shared care arrangement.

7. Use the IRD online calculator: IRD provides an online calculator on its website that allows you to estimate your WfF entitlement based on your family size, children’s ages, and estimated income. This is a useful tool for financial planning and for checking whether you are receiving the correct amount.

8. Seek advice if your situation is complex: If you have a complicated tax situation — for example, if you are self-employed, have overseas income, or are in a blended family — consider seeking advice from a tax agent, budget advisor, or community law centre. Many community organisations offer free assistance with WfF applications and queries.

Impact on Child Poverty and Recent Reforms

Working for Families has had a transformative effect on child poverty in New Zealand. When the programme was first introduced in 2005, independent research estimated that it would lift tens of thousands of children out of poverty. Subsequent evaluations have confirmed that WfF, combined with related policy measures, has been credited with reducing child poverty by as much as 70 percent among the families it reaches. The programme’s impact has been particularly pronounced among working families with low to moderate incomes, who were previously caught in a gap between welfare benefits and adequate earned income.

Despite these achievements, child poverty remains a significant challenge in New Zealand. The Child Poverty Reduction Act 2018 established formal targets for reducing child poverty and required the government to report annually on progress. Working for Families is one of the primary policy tools available to the government for meeting these targets, alongside broader measures such as increases to main welfare benefits, social housing investment, and early childhood education funding.

Recent Reforms

The WfF package has been subject to several rounds of reform since its introduction:

• 2018 Families Package: The most significant overhaul since the programme’s inception. This package introduced Best Start, increased the Family Tax Credit rates, raised the abatement threshold from $36,350 to $42,700, and introduced a new abatement rate of 25 cents per dollar (later adjusted to 27 cents). The Families Package was estimated to benefit approximately 384,000 families and was projected to lift between 22,000 and 64,000 children out of poverty.

• Annual rate adjustments: WfF payment rates are reviewed regularly, and increases have been implemented to keep pace with inflation and the rising cost of living. These adjustments ensure that the real value of WfF payments is maintained over time.

• Changes to the abatement regime: The abatement rate and threshold have been adjusted multiple times since 2005. The current rate of 27 cents per dollar above $42,700 reflects a balance between targeting assistance to lower-income families and providing a reasonable level of support to middle-income households.

• Ongoing policy debate: In recent years, there has been ongoing debate about whether the In-Work Tax Credit should be extended to beneficiary families, which would remove the distinction between working and non-working families. Advocates for this change argue that it would reduce child poverty more effectively and eliminate inequities in the system. Opponents contend that the IWTC serves an important role in incentivising workforce participation. As of the current policy settings, the IWTC remains restricted to non-beneficiary families.

Working for Families continues to evolve as governments respond to changing economic conditions, new research on child wellbeing, and shifting public expectations about the role of the state in supporting families. For the hundreds of thousands of New Zealand families who rely on WfF payments, the programme remains an indispensable source of financial support and a concrete expression of the country’s commitment to ensuring that every child has the resources they need to thrive.

Additional Resources

• Inland Revenue – Working for Families: https://www.ird.govt.nz/working-for-families
• Ministry of Social Development – Family Support: https://www.workandincome.govt.nz
• myIR Online Portal: https://myir.ird.govt.nz
• Child Poverty Reduction Act 2018: https://www.legislation.govt.nz
• Citizens Advice Bureau – Working for Families: https://www.cab.org.nz