If you get Working for Families, you’ll qualify for an in-work tax credit as long as you’re earning income from paid work.
Can you get Working for Families?
Meaning of income from paid work
Here are some examples of paid work.
Salary and wages
You’ll qualify for an in-work tax credit if you’re an employee earning a salary or wage.
Self-employed income
You’ll qualify for an in-work tax credit if you’re self-employed and earning income ─ even if you make a loss after deducting your expenses.
Income as a shareholder/employee
You’ll qualify for an in-work tax credit if you’re a shareholder employee and your company is earning income ─ even if there’s a loss after deducting expenses.
And you’ll still qualify whether the company pays you a salary or not.
Passive income
If you earn passive income only, you do not qualify for an in-work tax credit. Passive income is money that comes in even if you’re not working. Examples include:
- interest
- dividends
- rent
- royalties.
But you could get an in-work tax credit if you earn income from paid work along with your passive income.
Government payments
If you receive payments from the government, your Working for Families entitlement may be affected.
Government payments that affect your Working for Families
How much money can you expect?
Check out our calculator and chart for a quick estimate of your entitlement.
How the in-work tax credit works
We work out the in-work tax credit based on your income, the weeks you work and the number of children you have.
If your family situation changes during the year, we’ll adjust your entitlement.
Changes to your family situation, income and working hours
If your family income is $42,700 or less
You’ll get the full in-work tax credit if you meet the requirements for all of the tax year.
If you have 1, 2, or 3 children, your in-work tax credit will be $5,070.
If you have 4 or more children, you’ll get $5,070 for your first 3 children plus $780 for every child after that.
These figures are full-year entitlements.
If your family income is over $42,700
Your full in-work tax credit will reduce by an amount called the abatement.
If you’re entitled to a family tax credit
Your full in-work tax credit will reduce by any abatement left over from your family tax credit.
If you’re not entitled to a family tax credit
You may qualify for an in-work tax credit but not a family tax credit if you get:
- a foster care allowance (board payments from Oranga Tamariki)
- an orphan's benefit
- an unsupported child’s benefit.
In this case, we’ll work out the abatement by starting with your family income, subtracting $42,700, then multiplying the difference by 27% (the abatement rate).
Your entitlement for the year will be the full in-work tax credit less the abatement.
Note
If the abatement is equal to or larger than your full in-work tax credit, you will not qualify for an entitlement.
Unpaid break of 2 weeks or less
You can get an in-work tax credit as long as you’re earning income from paid work.
But you can keep getting your in-work tax credit if you take an unpaid break from work for 2 weeks or less.
For example, you may be on leave without pay or moving to a new job.
Let us know the date your unpaid break from work starts. That way, you can avoid an overpayment (which you’ll have to pay back). The best way to contact us is to send a message in myIR.
Different rules before 1 July 2020
To get in-work tax credit payments before 1 July 2020 you had to work a minimum number of hours.
- A single parent had to work at least 20 hours a week.
- In a 2-parent family, 1 or both parents between them had to work at least 30 hours a week.
Weekly or fortnightly payments
If you choose to get your Working for Families throughout the year, we’ll pay your entitlement by instalments. Your instalments will be equal to your full-year entitlement divided by:
- 26 for fortnightly payments
- 52 for weekly payments.
We round your instalments down to the nearest dollar.
Examples
The following examples show how we work out the in-work tax credit.
Jaimee has 5 children: Casey (13), Michaela (10), Kat (8), Blade (4), and Sam (1). Her family income for the year is $41,600, and she gets her Working for Families payments weekly.
Because Jaimee’s family income is below $42,700, she gets the full in-work tax credit. In her case, it totals $5,330. Here’s how we worked it out.
| Dependent children | Full family tax credit (for the year) |
|---|---|
| Casey, Michaela, Kat (first 3 children) | $5,070 |
| Blade | $ 780 |
| Sam | $ 780 |
| Total | $6,630 |
Weekly in-work tax credit
Jaimee gets paid $127 every week.
Here’s how we worked it out:
Claire and Laura are parents of Daniel (9) and Stephanie (6). Both parents work and the family income for the year is $100,000.
Because they have 2 children, their full in-work tax credit is $5,070.
Abatement
In the family tax credit calculation we did for Claire and Laura, we found they have a remaining abatement of $1,817.
See how we worked it out in the example on the family tax credit page.
Full-year in-work tax credit
When we reduce the full in-work tax credit by the remaining abatement, we get an entitlement for the year of $3,253.
Weekly in-work tax credit
Claire and Laura get their Working for Families payments weekly, so every week they get paid $62.
Here’s how we worked it out:
Last year, Brooklyn started caring for Jack (3) full time, when he moved into the family home.
Brooklyn’s family income is $47,000 from wages. Brooklyn receives an unsupported child’s benefit for Jack. She gets her Working for Families entitlements paid weekly.
Because she has 1 dependent child, the full in-work tax credit is $5,070.
Abatement
An abatement applies to the in-work tax credit because her family income is more than $42,700.
She cannot get a family tax credit because she receives an unsupported child’s benefit.
We work out the abatement by subtracting $42,700 from her family income, then multiplying the difference by 27%:
Full-year in-work tax credit
When we reduce the full in-work tax credit by the abatement, we get an entitlement for the year of $3,909.
Weekly in-work tax credit
Every week, Brooklyn gets paid $75.
Here’s how we worked it out:
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