Social Sector – NZ is being shown up by Australia’s family tax credit system, says CPAG

CPAG researchers Caitlin Neuwelt-Kearns and Susan St John say in contrast to Australia, the New Zealand system is both less generous and discriminatory so that the children of parents receiving a benefit do not get the full tax credits available to other low income families.

“The Australian system of family tax benefits for children is significantly better both in design and level. Families across all our modelling scenarios show that families get a much lower level of support in New Zealand,” St John says.

“As CPAG has repeatedly raised, child poverty rates are significantly higher for children raised in ‘workless households’, meaning that the design of the NZ system is leaving children in the poorest families even further behind.”

These families miss out on the In-Work Tax Credit (IWTC) when they have any core benefit, regardless of whether they have any paid work. The IWTC is an important part of the payment to the caregiver for the needs of the children and is worth at least $72.50 a week.

“CPG is disappointed that the changes brought in today (1st July) for the IWTC do not go nearly far enough and create a raft of other problems. While the minimum work hours for the IWTC were removed, parents must still be in paid work and cannot be on income support in order to be eligible,” St John says.

The latest change only helps 19,000 families, and does not match Labour’s lofty goals of significantly reducing child poverty.

“Doubtless, some families will be helped, but the requirement that there must be some hours of paid work to qualify for the IWTC may rule out others who can’t fulfil the paid work requirement and will make it complicated to administer,” St John says.

“The changes brought in today add to the confusing muddle of measures implemented since lockdown. Parents not in paid work on the wage subsidy have been counted as ‘working’ and they can receive the IWTC. On the other hand, the new COVD-19 Income Relief Payment (CIRP) has a requirement for there to be no paid work at all, so the children of these recipients cannot have the IWTC (unless their partner has work).”

CPAG believes it is imperative our welfare support system does not pick and choose who is most deserving of help.

“The creation of a deserving and an undeserving class of children in the name of a failed work incentive whose purpose is also to prevent child poverty has been a bizarre feature that other countries like Australia do not have,” St John says.