- Increases to the Government’s childcare subsidies scheme and an increase in the Working for Families Tax Credits will take effect from 1 April 2023.
- The childcare subsidy threshold is tied to wage growth. Family tax credit increases are linked to inflation.
- Higher inflation means a bigger scheduled increase than usual.
Changes taking effect
Schemes announced by Former Prime Minister Jacinda Ardern in 2022 are due to take effect from 1 April 2023.
They include an approximately $189m increase over four years to the Government’s childcare subsidies scheme and an increase in the Working for Families Tax Credits estimated to cost around $26m per year.
The new subsidy threshold and family tax credits are legislatively scheduled and automatic.
Working Families tax credit tied to inflation
Labour has talked about bumping up the Working for Families Tax Credits. However, the increase was already tied to inflation and high inflation has meant a bigger increase than usual.
The payments will increase about $9 a week to $136 for the eldest child and $7 a week for each additional child to $111.
The increases are expected to cost about $26m. Almost 60% of New Zealand families receive the credit.
Childcare subsidy linked to wage growth
According to the Government, more than half of all Kiwi families, including nearly every one parent family, will soon be eligible for the Childcare Subsidy for pre-school children and the Out of School Care and Recreation (OSCAR) Subsidy for before and after school care and school holiday programmes.
Labour has previously claimed the changes will mean parents of around 7500 more children will receive the payment.
How much each family is subsidised will be based on the number of hours worked, parental income earned, the length of time care is required and the cost involved. A link to the Government’s documentation detailing the subsidy can be found here.
The change may mean more than $250 a week for some parents and increases to existing subsidies for many who already qualify.
While substantial, a partial offset is higher wages (eg. a raise to offset inflation) are also pushing many Kiwis into higher tax brackets. This means a higher percentage of your income is paid in tax for an amount that, because of inflation, may not have any more purchasing power than you had the prior year.
National under Chris Luxon has recently announced its own proposal to increase childcare. It would be in addition to Labour’s two programs described above.