Govt's tax credit top-up 'out of touch' with reality — advocates

Source: 1News

A Government support package which will see more than 340,000 families receive an extra $20 a week shows little understanding of the plight of families and children in financial distress, the Child Poverty Action Group (CPAG) says.

The announcement will see the Family Tax Credit - a payment for dependent children based on income - increase by $15 a week for one child and $13 for subsequent children, while the Best Start payment goes up $5 a week, from next April.

Child Poverty Action Group (CPAG) spokesperson Susan St John said in a statement on Saturday that when adjusted for inflation, low-income families will be “just $5 better off in April next year than they would have been without this announcement”.

St John said the top-up falls “well short of the recommendations of the Welfare Expert Advisory Group”.

She said families receiving the credits whose incomes are above the abatement threshold “will lose 27 cents instead of 25 cents of every extra dollar earned”, marking “a major policy shift” which she deemed “unheralded and very surprising”.

It means that families earning over $48,000 will face an effective marginal tax rate of least 57 per cent.

CPAG spokesperson Janet McAllister said the announcement shows that the Government is “out of touch”.

"Low-income children and their families are in real distress right now, and food banks are overwhelmed. Families needed a very significant payment well before now, let alone April next year,” she said.

McAllister added that they are “still waiting for the full modest benefit increases” which she said had been promised - but “only partially implemented” - in May.

“Children cannot live on promises of minor changes next year."

CPAG made the “strong recommendation” for all low-income families to receive the full Working For Families package, adding that currently, children whose caregivers receive benefits - regardless of whether or not they are also in paid work - miss out on at least $72.50 a week.

The full package would see $500 million a year delivered to struggling families over the $68 million per year announced by the Government.

The charity also called for Working For Families income support for children to be “indexed annually to wages” - in line with adult income support.

Green Party social development and employment spokesperson, Ricardo Menéndez March, welcomed the announcement, but agreed that the Government needs to go further and faster to ease the hardship many families are currently experiencing.

“These changes fall far short of what the Welfare Expert Advisory Group recommended, and show a lack of urgency when it comes to lifting families out of poverty,” Menéndez March said in a statement.

Menéndez March said the Government appeared to be “window dressing” while “behind the front door are tens of thousands of families struggling to make ends meet”.

“If the Government is serious about reducing how much people need to make ends meet, then it needs to significantly increase benefits and stop tinkering at the edges.”

Statistics New Zealand figures showed around 210,000 children were living in poverty prior to the Covid-19 pandemic.