Working for Families system 'not properly helping those most in need'

Friday, 1 July 2016

Working for Families could do more to help children, it has been claimed.

Too many parents are missing out on financial support to help them raise their kids, it has been claimed.

Working for Families, New Zealand's primary financial family assistance package, has now been in place for 10 years. But critics say it is inefficient and unfair.

Statistics New Zealand estimates there about 510,000 households in New Zealand with children under 18. But only 361,200 of those receive any Working for Families tax credits.

That number could be set to drop.

While other benefits, such as the Jobseeker allowance, are adjusted each year in line with inflation, and the pension is adjusted so the married rate is always 66 per cent of the average net wage, Working For Families' rates and thresholds have remained largely untouched since 2012.

In fact, it is becoming more stringent.

Working for Families is made up of a family tax credit, which starts at $92 for one child under 16, and an in-work tax credit of $72.50 for families of between one and three children and an extra $15 per child for larger families.

A parental tax credit is available after the birth of a baby and in rare cases a minimum family tax credit is available to bring the family's net annual income to $23,764, if required.

But Working for Families has an 'abatement rate', so that higher-income people get less. In 2011, 20c of credits were taken back for every $1 a household earned over $36,530. The abatement rate is now 22.5c.

It will eventually increase to 25c in the dollar and start to be applied on income over $35,000.

University of Auckland associate professor Susan St John said it was completely unjust that while other benefits increased, the Government was working in the 'opposite direction' in its support for families.

'Thresholds are being reduced over time and the targeting is becoming much more intense.'

She said Working for Families rates and thresholds would only be adjusted for inflation when cumulative inflation was more than 5 per cent. This has not happened in recent years.

'The in-work tax credit is not indexed at all. The recent $12.50 increase this year represents no more than an inflation adjustment. There is no obligation to adjust again in future.'

An Inland Revenue spokesman said the minimum family tax credit was adjusted annually.

Deborah Russell, of Massey University, said even two people earning the median wage of $46,000 with two children would earn to much to get anything from Working for Families. 'The idea of Working for Families is to support kids and people raising kids, so if half of all families are missing out, that's well, interesting.'

St John is part of a Child Poverty Action Group campaign to fix Working for Families. It wants the in-work tax credit named dropped and that amount to be rolled into the family tax credit so that people do not have to meet a set number of work hours to qualify for it.

St John said Working for Families had not helped the poverty rate of the country's poorest children. That was partly because those who would benefit the most from the $72.50 in-work tax credit were not entitled to it.

'If you are not meeting the required work hours or your hours of work fall, that's a loss of $72.50 a week, that's a lot to take out of somebody's income. If you have someone who's a teacher aide whose contract ends in December and doesn't start again until February, just at the point she needs more money because the children are on holiday, $72.50 is ripped out. It has nothing to do with the needs of the child.'

A parent on the Sole Parent Support benefit would be entitled to only the family tax credit of $92 a week.

Russell said her preference would be to see a return to the universal family benefit. 'That was to support children full stop. It went to every child, it didn't matter if it went to the children of high-income earners, it was just a payment for children. It signaled something, that we value children.'

She said some people who did not have children themselves could not understand why taxpayers' money should be spent on supporting them. 'Everyone is going to be old one day and they will still need doctors, lawyers, plumbers, road builders. These people are going to have to come from somewhere, it's protecting our future workforce.'

But St John said it would be too expensive to provide a universal family benefit that was large enough to make any impact on the lives of those who needed it most.

Revenue Minister Michael Woodhouse referred inquiries to Inland Revenue. A spokesman said there were no plans to extend the availability of the in-work tax credit. 'We aren't able to comment on what may be considered in future.'