Working for Families debts build
Mother-of-two Rose has been handed a big Working for Families bill each year for the past two years, despite having her income assessed by Inland Revenue.
‘‘I dispute it because they do a big assessment in February, then I receive a $1300 bill in March.’’
Rose, who did not want to be identified, says her partner works fluctuating hours through the year, so their income changes.
‘‘But I have no idea why I get such a high bill. It doesn’t make sense to get a $1300 bill if they have adjusted the income payments in February. Really annoying.’’
She was able to get last year’s debt wiped but said she was still waiting to see what would happen with this year’s.
‘‘We don’t cope. If we didn’t get help from family we wouldn’t be able to feed our kids.’’
Another woman said she had been left with a surprise debt, too. ‘‘I can’t get hold of Inland Revenue no matter how many goats I sacrifice in the new moon before I call them.’’
Inland Revenue’s latest annual report showed the country’s tax take exceeded $100 billion for the first time in the 2022 year, up 7.3%.
However, the overall amount of tax debt increased by 10.5% to $4.8b at the end of June.
There were 55,888 people who received Working for Families who were in debt, which is a 27% increase on the June 2021 year.
A spokesperson for Inland Revenue said the increase in Working for Families ‘‘overpayments’’ that left people with debt was mostly due to a period between April 2020 and March 2021, when many people were affected by Covid.
‘‘Incomes and circumstances were more uncertain then.’’
But Susan St John, Child Poverty Action Group spokesperson for Working for Families, said the situation could get worse due to high inflation.
‘‘Looking back to 2018, Working for Families debt has grown 79% and there is every reason to expect that this debt growth will continue into the current uncertain financial year.’’
Because Working for Families was based on annual income and the structure of a household, it worked best when things were stable.
‘‘For many families the Covid-19 pandemic has meant income is more variable and harder to estimate accurately. Family structure may change including children losing eligibility if they leave school to get a job to help their families.
‘‘At the end of the year, any underpayments can be rectified but overpayments result in a debt.’’
She said the current review of Working for Families was taking too long.
‘‘One serious problem not discussed by Inland Revenue is that the design of Working for Families leads inevitably to overpayments in inflationary times. The threshold for full entitlement to Working for Families has been fixed since 2018 at $42,700 of annual income. When families earn more just because of inflation increasing wages or extra overtime to manage the high cost of living, 27% of each extra dollar reduces entitlement to Working for Families and creates on overpayment debt.’’
She said the in-work tax credit also required that people were in some paid work to qualify.
‘‘In uncertain times, as families lose work, or partnering changes they may not realise they lose entitlement to the in-work tax credit.’’
She said the Government should immediately index Working for Families to wages each year.