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Working for Families Tax Credit (WFTC)

Tax Changes 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.

See budget news 2011

 
If you have dependent children aged 18 or younger you may be entitled to WFTC. There are four different types of tax credits (you can be entitled to more than one). 
 
The types of payments you can get depend on:
  • Your total family income and where it comes from
  • The age and how many financially dependant children you have aged 18 or younger
  • Any children you share care of (122 days or 5 days a fortnight)
The four different payment types are:
 

Family Tax Credit

Paid to families with children 18 years or younger, this tax credit is the one most families qualify for.

You can't get family tax credit:
  • for any child(ren) you receive a foster care allowance, orphan's benefit or unsupported child's benefit, or
  • if you receive a parent's allowance.

In-work Tax Credit

Paid to families with dependent children 18 or younger who work the required hours each week.To get this payment, couples must work at least 30 hours a week between them, and single parents must work at least 20 hours a week.  If your hours change from week to week and some weeks you are eligible the calculation can be done on the weeks you were eligible.
 
You can't get an in-work tax credit if you receive: 
  • an income-tested benefit 
  • a student allowance, or 
  • a parent's allowance

Minimum Family Tax Credit

Paid to ensure that the annual income (after tax) of a family with dependent children 18 or younger does not fall below $22,204.
 
To get this payment, couples must work at least 30 hours a week between them, and single parents must work at least 20 hours a week. You must receive Family Tax Credit. 
 
You can't get the minimum family tax credit for the weeks when your family income includes:
  • an income-tested benefit
  • a parent's allowance, or
  • a veteran's pension.

Parental Tax Credit 

Paid to families with a newborn baby for the first 56 days (eight weeks) after the baby is born & the maximum payment is $1,200 depending on family income.For this option you must register within 3 months of child’s birth date.

 
You can't get this payment if you're on paid parental leave or receiving an income-tested benefit. You can either get parental tax credit or paid parental leave. You can't get both payments at the same time. You can't get a parental tax credit if your family income for the full eight weeks includes:
  • paid parental leave
  • an income-tested benefit, even if it is suspended
  • NZ Super
  • a veteran's pension
  • a student allowance, or
  • accident compensation from ACC, unless you get this for less than three months.

What’s changing 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

 

 

 

 

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