Working for Families Tax Credits in New Zealand: The Full 2026/27 Guide

What is Working for Families in NZ?

Working for Families (WFF) is a package of four separate tax credits for families with dependent children, administered by IRD. From 1 April 2026, the abatement threshold rose to $42,700 — family income above this reduces your combined Family Tax Credit and In-Work Tax Credit by 27 cents per dollar (up from 20%, with a lower threshold, in prior years). This is the biggest WFF change in several years.

See how Working for Families interacts with your take-home pay using our free PAYE Calculator.

The Four Working for Families Credits

“Working for Families” isn’t one payment — it’s an umbrella term for four distinct credits, each with its own eligibility rules:

Credit	What it’s for	Who can get it
Family Tax Credit (FTC)	Ongoing support for families with dependent children	Both working and beneficiary families
In-Work Tax Credit (IWTC)	Additional support specifically for working families	Working families only — generally requires at least 20 hours/week (single parent) or 30 hours/week (couple) of paid work
Minimum Family Tax Credit (MFTC)	Tops up income to a guaranteed minimum for working families on very low pay	Working families whose after-tax income would otherwise fall below the guaranteed threshold
Best Start Tax Credit (BSTC)	Support for the costs of a new baby	Families with a child under 1 (universal); income-tested for the child’s 2nd and 3rd years

The Big 2026/27 Change — New Threshold, New Abatement Rate

Budget 2025 introduced what’s been described as the biggest Working for Families shake-up in years, with most changes taking effect from 1 April 2026:

Setting	Previous	From 1 April 2026
Abatement threshold	$42,700 was itself an increase from a lower prior threshold	$42,700
Abatement rate	20%	27%
MFTC guaranteed annual net income	Lower prior figure	$35,316

What “abatement” actually means: for every dollar your family income exceeds the $42,700 threshold, your combined Family Tax Credit and In-Work Tax Credit reduces by 27 cents. This is a steeper reduction than the previous 20% rate, meaning entitlements now decline faster once a family’s income crosses the threshold — though the threshold itself is also higher than in some earlier years, partially offsetting this for lower-middle income families.

(Source: Inland Revenue — Working for Families and Budget 2025 announcements.)

Worked Example — How Abatement Reduces Your Payment

Assume a family’s combined FTC + IWTC entitlement, before any abatement, would be $12,000/year, and their family income is $55,000 — $12,300 above the $42,700 threshold.

Step	Calculation	Amount
Income above threshold	$55,000 − $42,700	$12,300
Abatement reduction	$12,300 × 27%	$3,321.00
Actual entitlement after abatement	$12,000 − $3,321	$8,679.00

The practical takeaway: every extra $1,000 a family earns above $42,700 reduces their combined FTC/IWTC entitlement by $270 — worth factoring in if you’re weighing a pay rise, extra hours, or a second income against the resulting reduction in Working for Families support.

Best Start — What Changed for Years 2 and 3

This is a genuinely significant structural change. Previously, Best Start support extended with more generous universal access; from 1 April 2026, the rules tighten specifically for older children:

Child’s age	Best Start treatment from 1 April 2026
Under 1 year	Universal — paid regardless of family income
Year 2 and Year 3	Income-tested, abating against a $79,000 family income threshold, at a 21% abatement rate

Why this matters: a family that previously received Best Start payments into their child’s second or third year regardless of income may now find that support reduced or removed entirely if their family income exceeds $79,000 — a meaningful change for higher-earning families with young children specifically.

Who Counts as a “Dependent Child” for Working for Families?

Generally, a dependent child is someone 18 or younger who you financially support and who isn’t financially independent themselves (e.g., not working full-time or receiving certain other government support in their own right). The Family Tax Credit specifically applies per dependent child in the family, so the total combined entitlement scales with the number of qualifying children.

How Working for Families Interacts With Your Tax Code

This is a genuinely important connection many people miss. If you or your partner receive Working for Families, you cannot use the ME tax code (the Independent Earner Tax Credit code) — regardless of your individual income level. This is because IETC and Working for Families are mutually exclusive support mechanisms; you use the standard M code instead.

(See our full NZ Tax Codes Explained guide for how this interacts with your specific tax code selection.)

How to Apply and Get Paid

You apply through myIR, and can generally choose to receive payments:

• Weekly or fortnightly, throughout the year, based on an estimate of your family income — useful for ongoing cashflow, but carries a risk of over- or under-payment if your actual income differs from the estimate
• As a single lump sum, after the tax year ends, once your actual income is confirmed — avoids the estimate risk entirely, but means waiting until after 31 March for the payment

If you’re paid throughout the year and your income ends up higher than estimated, you may need to repay some of what you received — a genuinely common surprise for families whose income fluctuates or who received a pay rise partway through the year.

Budgeting around these credits? Compare net pay vs gross pay, see what the living wage pays after tax, and project your savings with the KiwiSaver calculator.

Frequently Asked Questions