7. AARON GILMORE (National) Link to this
to the Minister of Revenue
What examples can he give of families claiming social assistance for which they are not entitled, and what has this Government done to stop this abuse?
Hon PETER DUNNE (Minister of Revenue) Link to this
I am aware that 9,700 families have been using losses from investment properties to reduce their family income and to increase their Working for Families entitlements, and that some families who structure their financial affairs through trusts are also claiming Working for Families tax credits, despite earning substantial incomes. For example, a family whose trust-owned company earned over $700,000 a year in taxable income was able to claim $12,000 in Working for Families tax credits. Working for Families tax credits are intended to support families in genuine need, not to boost the incomes of wealthy families like those. Therefore, the Government will change the law later this week to extend the definition of “income” for Working for Families purposes, to prevent such abuses continuing. This will make it fairer for middle-income New Zealand families, in particular, and for the taxpaying public, which foots the bill for these social assistance programmes.
Is the Minister aware of other examples of families unfairly claiming Working for Families tax credits?
Yes. I am also aware of other examples of families with substantial economic means reducing their family income by placing their investments in their children’s names. I have been informed of a family with parents who earned about $36,000 a year, but with children who had a combined investment income of nearly $90,000 a year, and that family claimed $13,000 in Working for Families tax credits. Another family’s children earned over $150,000 a year in investment income, yet that family was still able to claim more than $4,000 in Working for Families tax credits.
I said in my primary answer that legislation will be passed later this week to broaden the definition of “income” for Working for Families. The new income test will include trustee income, major fringe benefits, and the income of overseas spouses. It will also apply to the parental income test for eligibility for student allowances and the community services card. The principle is simply that parents should not be able to receive different levels of assistance depending on how they structure their affairs to maximum advantage, because that is simply inequitable, unfair, and wrong.