WFF – changes to definition of “family scheme income”

Clauses 114, 115 and 116

Submission

(New Zealand Institute of Chartered Accountants)

The submitter supports the proposed amendments to correct errors and clarify the definition of “family scheme income” but considers they add another layer of complexity to an area where simplicity is fundamental. The process of applying section MB 13 is becoming unwieldy. The “family scheme income” rules in subpart MB should be reviewed and simplified.

Comment

Officials acknowledge that the definition of “family scheme income” for Working for Families (WFF) tax credits has become more complex. Complexity is a feature of social policy income definitions more generally and reflects the desire for accuracy and integrity in targeting financial assistance to those in genuine need.

The broadening of the definition of “family scheme income” from 2011, including the addition of subpart MB 13, was in response to concerns about the fairness and integrity of the family scheme income rules. There had been an increase in the level of the tax credits over 2004–07 and changes in how businesses were being structured (for example, as family trust-owned companies). The 2011 broadening reforms sought to recognise the resources available to families to better identify those families in genuine need of additional government assistance. The trade-off is an increase in complexity, and for some families, an increase in compliance costs.

Recommendation

That the submission be declined.