Latest news with #forFamilies
Newsroom
05-06-2025
- Business
- Newsroom
The young need state support just as much as the old
In a recent column in the NZ Herald, Mathew Hooton said that if superannuation can't be cut, then wage subsidies should be. As 'welfare costs are exploding' and there is no political will to carve 20 percent off the universal pension, he continued, we must stop providing families with child-related tax credits and accommodation assistance, which he describes as 'wage subsidies'. While this view may resonate with some, all developed countries have variants on state policies like Working for Families to support children, and a version of New Zealand Superannuation to support the old. Typically and confusingly it is often argued that Working for Families is either 'corporate welfare' (letting businesses get away with not paying workers enough for their families to live on), or 'communism by stealth' that puts 'the whole population on welfare'. By similar logic it could be argued that NZ Super puts everyone on welfare at 65 or is a form of corporate welfare because wages should be high enough so people can save for a pension for themselves. Mid-last century, in a world long gone, wages were set by arbitration to ensure that one full-time male breadwinner earned enough to support a 'typical' family with a wife at home, and several children. Even so, tax breaks and a family benefit for children were also necessary. In the 21st century we have very different family structures including two-earner families. It is ludicrous to expect employers to meet the needs of both low-income adults and their children. For example, a very low-wage worker with four children currently receives an extra $610 per week from Working for Families. If cut completely, the net wage would have to rise by around $32,000 a year to make up for it, by Hooton's logic. The increase in the gross wage rate would cripple employers, be too much for workers without children, and not enough for larger families. There is the argument that by wiping Working for Families, the money saved be given back in tax relief to workers. That's pie-in-the-sky thinking. If families were to be compensated, it would require a complex package of abating tax credits. Oh, but isn't that that what Working for Families currently is? It all becomes so circular. One million superannuitants are collectively paid $20b after tax each year. Around one million children are given just $3.3b in Working for Families each year. You read that right. Each year around one million superannuitants are paid around six times more than one million children through Working for Families. But it is true that Working for Families is badly designed and does not meet the main goal of child poverty prevention. It doesn't reward paid work, as it is intended to. It is in desperate need of reform. It's often said that Working for Families is all Labour's fault, but it did not magically come into being fully formed under the Helen Clark Government in 2004. The universal weekly family benefit and tax breaks for families in the 1950s evolved by the 70s and 80s to become a complex mix of family benefit and different family tax credits. In 1991 the National Party folded the universal family benefit into the targeted tax credits to become one weekly targeted payment per child called Family Support. There were further changes under National in the mid-1990s, and rewarding paid work became elevated as a fundamental principle. All that the Clark government did in 2004 was to change the name to Working for Families, then build on and expand the existing complex structure, with even more emphasis on paid work as a criterion. Then, the Ardern government introduced an additional significant payment, called Best Start, for children under three years old, universal for the first year. As a policy, Working for Families is a mess. In contrast NZ Super is a simple, unconditional universal payment indexed to wages. It is easy to access and, until the housing crisis, has been enough to prevent poverty in old age. It is a basic income floor that does not disincentivise paid work. It has a very gentle income test though the tax system, so that the very highest income earners still get around three quarters of a pension paid when there is no additional income. The extra assistance for families to meet the basic income needs of their children is a very different story. Working for Families is tightly targeted and assists only children of low- and middle-income parents. Moreover, the full payment is conditional on parents having paid work and receiving no core benefit or part benefit. These conditions result in 200,000 children in the worst-off families being excluded from around $5000 per year, or more for larger families. With this division between deserving and undeserving children it's no wonder child poverty is so intractable. Working for Families payments are not annually indexed and are increased only when cumulative inflation exceeds 5 percent. There is no wage link as for NZ Super. Furthermore, payments are subject to a draconian clawback equivalent to an extra tax of 27 percent from a very low base of joint parental income. That threshold will be lifted marginally next year to $44,900, but to pay for it, the rate of abatement rises from 27 percent to 27.5 percent and Best Start becomes income-tested. This very 'tight targeting' ensures child poverty persists for many families in paid work. The overlap of tax, Working for Families clawbacks, student loan repayments and loss of accommodation assistance, and now Best Start clawbacks, confirms for too many, that extra work effort does not lift them out of poverty. Children are invisible: that is the problem. Fundamentally we need to understand that low-income wages, benefits, and paid parental leave are for the income needs of adults, but children also have income needs. I would argue that rather than take more from children we take more from the top end of NZ Super through the tax system and direct the revenue for fixing not just Working for Families but also the other failing welfare measures such as the accommodation supplement, benefits and disability support. We do want to grow the economy but should not be done at the expense of the wellbeing of both our current and future workforce.
1News
30-05-2025
- Business
- 1News
Couple owes $20k Working for Families debt 'through no fault of our own'
Just a quarter of 'squared up' Working for Families recipients are getting the right amount. Phoenix Ruka says he and his wife owe about $18,000 to $20,000 in Working for Families debt, despite always doing their best to ensure that they supplied the correct details about their income and circumstances. "We've always stayed up to date with my salary and what we received from them and updated my salary every time it went up and down," Ruka said. "What we're receiving was what they assured us we were entitled to. But then we got a massive bill saying they had overpaid us." He said his wife had been "relentless" in trying to work out what had happened. ADVERTISEMENT It was discovered that a couple of years they had been underpaid, by many thousands of dollars, which they were reimbursed, but one year they were paid too much, which left them with the debt. "I think the really frustrating part is that it's through no fault of our own. We owe a substantial amount of money. Now they're taking $350 a fortnight out of our bank account," Ruka said. "We've gone back and forth and shown them our expenses, that we actually can't afford the amount they're taking. We've shown them our bills, our mortgage — they told us that they can't keep taking money if we can't afford it, but we can't." He said there had been multiple times where the money that was being taken to repay the debt was all that was left in their bank account. Change proposed It's an issue the government is attempting to tackle with proposed changes to the way that income is assessed for Working for Families. As part of the Budget, it was announced that the threshold at which entitlements start to abate was to be increased slightly, and the government would look at options to help avoid the issue of Working for Families debt. ADVERTISEMENT Inland Revenue's discussion document said 85% of Working for Families households received their payments weekly or fortnightly during the 2022 tax year, based on an income estimate. Only 15% were receiving their credits annual based on the family's actual income once income tax had been assessed. Those who were being paid weekly or fortnightly were subject to an end of year "square up" process by Inland Revenue, the document noted, although they were expected to update IRD with any relevant changes during the year. In the 2022 year, only 24% of households receiving weekly or fortnightly payments and squared up by IRD had received the right amount of Working for Families credits. Those who were overpaid are left with a debt to repay. The document said debt was a particular problem for low- and middle-income families because it reduced their ability to meet their day-to-day costs in the future. "Debt undermines the intent of the Working for Families scheme to support low to middle income families to meet basic needs and incentivise work." ADVERTISEMENT Debt increases The amount owed by Working for Families recipients has been steadily increasing over the years. The document noted that in June 2024, 56,800 accounted for $273.5 million of Working for Families debt. There were 21,418 instalment arrangements in place to clear $50 million of debt. "Having to estimate annual income in advance is the most common reason why families do not receive the right amount during the year," the document said. "For many families, estimating yearly income is difficult to do with any accuracy. Under the current income estimation model, families can still be overpaid when their income increases unexpectedly. For example, something as simple as a promotion or starting a new job towards the end of the year could cancel out their Working for Families entitlement and leave them in debt." But the document said assessing people's income very regularly could mean a lot of changes in what people received. ADVERTISEMENT If someone was paid fortnightly, some months could have two paydays and some three. Someone who was paid every four weeks would occasionally be paid twice in one month. "Families would need to check in more often to report or confirm their income so that Inland Revenue can recalculate their payments. This would mean an increase in time spent interacting with Inland Revenue and its systems. This could also mean payments would vary every week or month, making it harder for families to budget and plan." The discussion document said the government's current thinking was that a quarterly assessment could strike the right balance between responsiveness, certainty and recipient effort. It was seeking feedback on the idea. The government also suggests a shift from calculating a recipient's Working for Families on the recipient's estimate of future income over the coming year to basing the calculation on past income they actually received. This would help to prevent people going into debt. It is also proposing to simplify the residence criteria for Working for Families and require both caregivers and children to be physically present in New Zealand to qualify. Review limited - advocate Susan St John, associate professor at the University of Auckland and Child Poverty Action Group spokesperson, said she thought the review was limited. ADVERTISEMENT "There are huge difficulties for self-employed in more regular assessment. For income that is not earned regularly it can cause volatility and add to the admin or compliance load. There are other ways — in Australia they hold a portion back until the end of the year." She said the review did not address the problems of Working for Families in a meaningful way. "They arise because the threshold is way too low and the rates of clawback way too high." She said the scheme was confusing with the different types of credits available, and the poorest 200,000 were excluded from the full package, missing out on about $5000 a year. Revenue Minister Simon Watts said the government knew that it could be distressing to have debt to Inland Revenue. "We are interested in what people think of the proposals." Another woman, Amy says she's still paying off the $12,000 in Working for Families debt she was landed with three years ago, amid a messy divorce. She and her husband were shareholders in a business and, she says, he incorrectly reported some of the business profit as income in her name. ADVERTISEMENT That prompted the government to think she had been overpaid credit, and she was landed with a bill. She now can only receive $172 a week in Working for Families credits for her three children because she is paying back the debt. She is a single parent also paying a mortgage.
Scoop
30-05-2025
- Business
- Scoop
Couple Owes $20,000 Working For Families Debt 'Through No Fault Of Our Own'
, Money Correspondent Just a quarter of 'squared up' Working for Families recipients are getting the right amount. Phoenix Ruka says he and his wife owe about $18,000 to $20,000 in Working for Families debt, despite always doing their best to ensure that they supplied the correct details about their income and circumstances. "We've always stayed up-to-date with my salary and what we received from them and updated my salary every time it went up and down," Ruka said. "What were receiving was what they assured us we were entitled to. But then we got a massive bill saying they had overpaid us." He said his wife had been "relentless" in trying to work out what had happened. It was discovered that a couple of years they had been underpaid, by many thousands of dollars, which they were reimbursed, but one year they were paid too much, which left them with the debt. "I think the really frustrating part is that it's through no fault of our own. We owe a substantial amount of money. Now they're taking $350 a fortnight out of our bank account," Ruka said. "We've gone back and forth and shown them our expenses, that we actually can't afford the amount they're taking. We've shown them our bills, our mortgage - they told us that they can't keep taking money if we can't afford it but we can't." He said there had been multiple times where the money that was being taken to repay the debt was all that was left in their bank account. It's an issue the government is attempting to tackle with proposed changes to the way that income is assessed for Working for Families. As part of the Budget, it was announced that the threshold at which entitlements start to abate was to be increased slightly, and the government would look at options to help avoid the issue of Working for Families debt. Inland Revenue's discussion document said 85 percent of Working for Families households received their payments weekly or fortnightly during the 2022 tax year, based on an income estimate. Only 15 percent were receiving their credits annual based on the family's actual income once income tax had been assessed. Those who were being paid weekly or fortnightly were subject to an end of year "square up" process by Inland Revenue, the document noted, although they were expected to update IRD with any relevant changes during the year. In the 2022 year, only 24 percent of households receiving weekly or fortnightly payments and squared up by IRD had received the right amount of Working for Families credits. Those who were overpaid are left with a debt to repay. The document said debt was a particular problem for low- and middle-income families because it reduced their ability to meet their day to day costs in the future. "Debt undermines the intent of the Working for Families scheme to support low to middle income families to meet basic needs and incentivise work." The amount owed by Working for Families recipients has been steadily increasing over the years. The document noted that in June 2024, 56,800 accounted for $273.5 million of Working for Families debt. There were 21,418 instalment arrangements in place to clear $50 million of debt. "Having to estimate annual income in advance is the most common reason why families do not receive the right amount during the year," the document said. "For many families, estimating yearly income is difficult to do with any accuracy. Under the current income estimation model, families can still be overpaid when their income increases unexpectedly. For example, something as simple as a promotion or starting a new job towards the end of the year could cancel out their Working for Families entitlement and leave them in debt." But the document said assessing people's income very regularly could mean a lot of changes in what people received. If someone was paid fortnightly, some months could have two paydays and some three. Someone who was paid every four weeks would occasionally be paid twice in one month. "Families would need to check in more often to report or confirm their income so that Inland Revenue can recalculate their payments. This would mean an increase in time spent interacting with Inland Revenue and its systems. This could also mean payments would vary every week or month, making it harder for families to budget and plan." The discussion document said the government's current thinking was that a quarterly assessment could strike the right balance between responsiveness, certainty and recipient effort. It was seeking feedback on the idea. The government also suggests a shift from calculating a recipient's Working for Families on the recipient's estimate of future income over the coming year to basing the calculation on past income they actually received. This would help to prevent people going into debt. It is also proposing to simplify the residence criteria for Working for Families and require both caregivers and children to be physically present in New Zealand to qualify. Susan St John, associate professor at the University of Auckland and Child Poverty Action Group spokesperson, said she thought the review was limited. "There are huge difficulties for self-employed in more regular assessment. For income that is not earned regularly it can cause volatility and add to the admin or compliance load. There are other ways - in Australia they hold a portion back until the end of the year." She said the review did not address the problems of Working for Families in a meaningful way. "They arise because the threshold is way too low and the rates of clawback way too high." She said the scheme was confusing with the different types of credits available, and the poorest 200,000 were excluded from the full package, missing out on about $5000 a year. Revenue Minister Simon Watts said the government knew that it could be distressing to have debt to Inland Revenue. "We are interested in what people think of the proposals." Another woman, Amy says she's still paying off the $12,000 in Working for Families debt she was landed with three years ago, amid a messy divorce. She and her husband were shareholders in a business and, she says, he incorrectly reported some of the business profit as income in her name. That prompted the government to think she had been overpaid credit and she was landed with a bill. She now can only receive $172 a week in Working for Families credits for her three children because she is paying back the debt. She is a single parent also paying a mortgage.
