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Working for Families Tax Credits in New Zealand
Working for Families is a package of payments made by Inland Revenue (IRD) to help families with the cost of raising children. The main components are the Family Tax Credit (FTC), the In-Work Tax Credit (IWTC), and the Best Start Tax Credit. This calculator helps you estimate your annual entitlement based on your family income, the number and ages of your children, and your work situation.
How the Credits Are Calculated
The calculation involves three separate payments which are added together to form your total annual entitlement.
Family Tax Credit (FTC): This is a payment per child. For the 2026-27 tax year, the rate is $7,320 per year for your first child and $5,988 per year for each subsequent child. Your total maximum FTC is reduced (abated) if your family income exceeds a certain threshold. For every dollar of income above the threshold, your FTC reduces by a set percentage (the abatement rate). For 2026-27, the threshold is $52,000 and the abatement rate is 27%.
In-Work Tax Credit (IWTC): This is an extra payment for families who are not receiving a main benefit and meet minimum work hour requirements. For a single parent, you must work at least 20 hours per week. For a couple, at least one of you must work 30 hours per week combined. The annual rate for 2026-27 is $4,540.
Best Start Tax Credit: This is a weekly payment for each child under three years old. In the child's first year, the payment is $72 per week. For the second and third years, it is $63 per week. Payments stop when the child turns three.
A Worked Example
Consider a single parent with one newborn child. They earn $42,000 per year and work 25 hours a week. They do not receive a main benefit.
- Family Tax Credit: Maximum FTC for the first child is $7,320. Their income ($42,000) is below the abatement threshold ($52,000), so no reduction applies. FTC payable: $7,320.
- In-Work Tax Credit: They work more than 20 hours per week and are not on a benefit, so they qualify. IWTC payable: $4,540.
- Best Start: One child in their first year qualifies. Annual amount: $72 * 52 = $3,744.
- Total Annual Credits: $7,320 + $4,540 + $3,744 = $15,604.
This family would receive approximately $15,604 per year from Working for Families, usually paid weekly or fortnightly.
Common Scenarios
- Families on a benefit: You can still receive the Family Tax Credit and Best Start, but you are not eligible for the In-Work Tax Credit.
- Families with high income: Your Family Tax Credit will reduce to zero once your income is sufficiently above the threshold. You may still be eligible for Best Start if you have young children.
- Shared custody: Only one parent can claim the credits for a child in a given period. Parents need to agree on who will claim.
Next Steps: Formalising Parenting Arrangements
If you are separated and need to formalise care arrangements for your children, a Parenting Agreement (item_id 7777) outlines the responsibilities and rights of parents regarding their child's upbringing. It serves as a formal record to ensure clarity and cooperation between co-parents.