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Working for Families Tax xhanges 1st April 2012

 

The allowance currently reduces when you earn $36,827 or over.  This amount will reduce to $35,000. For every dollar earned over the threshold, you will lose 25c.

 

Working for Families Tax Credit Changes from 1 April 2011

See upcoming changes announced in Budget 19th May 2011
 
As announced in the budget last year the definition of family income has now been expanded to include many other types of income e.g. investment/rental losses must be added back, Trustee\Company income.
 
These changes will affect quite a few of you and we believe some clients will no longer qualify.
 
Most of our clients get this credit as a lump sum at the end of the financial year, BUT if you are receiving weekly\fortnightly payments we ask that you contact Sharyn Walsh so that she can look into your circumstances and advise if you will still continue to qualify, alternatively get your payments changed to lump sum as from 1 April 2011.
 

The following types of income now need to be added back to calculate the Total Family Income for Working for families tax credits purposes:

 

Investment/Rental Losses

All losses to be added back, including rental property investment losses.
 

Attributable trustee income

Attributable trustee income is all income for the year of a trust that hasn't been distributed as beneficiary income. It includes income from trading and investment activities and the net income of any company controlled by the trust. Trustee income will be attributed only to settlors of a trust. The settlors are individuals who establish or contribute funds to the trust.

 

Attributable fringe benefits

The value of any attributable fringe benefits is required to be declared by all shareholder employees if they, or their associates, hold voting interests of 50% or more in a company. The value of the fringe benefit is the tax-inclusive value of the benefit, PIE income.This includes an amount of income attributed by a portfolio investment entity (PIE) to the principal caregiver or their spouse or partner, except if the PIE is a superannuation fund or a retirement savings scheme (eg KiwiSaver).

 

Passive income of children

If your child(ren) receive(s) any of the following types of income totalling over $500 a year (per child), you’ll need to include the amount over $500 (per child) as part of your family income: 

  • resident passive income. This includes interest, dividends, a taxable Māori Authority distribution
  • royalties
  • rent
  • beneficiary income. However, beneficiary income that is excluded under the minor beneficiary rule is not included in family income (eg, income from a testamentary trust).
  • distributions from a listed PIE
  • attributed income from a PIE that is not a superannuation fund or
  • retirement savings scheme.

Income of non-resident spouse

If your spouse or partner, who is not a tax resident, is earning an income overseas, from 1 April 2011 you will need to include their worldwide income as part of your family income for Working for Families Tax Credits. We may require you to provide evidence of their income.
 

Tax exempt salary or wages

This includes salary and wages that are exempt from income tax under specific international agreements in New Zealand. It includes employees of international organisations such as the United Nations or the Organisation for Economic Co-operation and Development (OECD), or under the Diplomatic Privileges.
 

Pensions and Annuities

This includes 50% of the amount of pension or annuity payments from life insurance policies or a superannuation fund, (excluding NZ Super
 

Other payments

These are payments from any other person or entities that are used for the family’s day-to-day living expenses. If the total amount is more than $5,000 for the tax year, then the total amount must be included as family income. However if the total amount for the year is less than or equal to $5,000 you do not need to tell us about it. A payment is considered to be used to meet day-to-day living expenses if it is:
  • replacing lost or reduced income (eg; payments from an insurance policy that covers loss of earnings/employment)
  • used to pay regular liabilities (for example, car payments, hire purchases, mortgage, loans)
  • used to meet the family’s usual living expenses (eg; monthly phone bill or power bill)
  • paid directly by another person on behalf of the principal caregiver, or their family members, for regular expenses (eg; paying the power, phone, gas bills directly).
  • Payments can include soft loans. A soft loan is a loan made available to a person on favourable terms, such as no or little interest payable and no set repayment date.

Income equalisation scheme deposits (excludes "adverse events" deposits)

This includes any deposits made by:

  • you
  • a company controlled by you or your trust, or
  • your trust
  • to an agricultural, fishing or forestry business income equalisation scheme account at Inland Revenue.
  • subsequent refunds from these accounts (excluding interest) shouldn't be included as income for WFTC

 

Accounting services/ Tax facts/ Working for Families Tax Credit

 

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