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Income Tax Act 2007

Tax credits paid in cash - Abating WFF tax credits

MD 2: Calculating net contributions to credits

You could also call this:

“How tax credits are reduced by family credit abatement”

When the Commissioner calculates tax credits for a period, they consider the family tax credit, in-work tax credit, child tax credit, and parental tax credit. They treat these as tax credits for that period.

The Commissioner also looks at the family credit abatement for the period. They use this to reduce the tax credits in a specific order:

  1. First, they reduce the family tax credit.
  2. Then, they reduce the in-work tax credit or child tax credit.
  3. Finally, they reduce the parental tax credit.

There’s a special way to calculate how much family credit abatement is used to reduce the parental tax credit. It uses this formula:

(entitlement period abatement amount − amount used) × 365 ÷ 70

In this formula:

  • The ‘entitlement period abatement amount’ is the family credit abatement for the entitlement period within the parental entitlement period.
  • The ‘amount used’ is how much of the entitlement period abatement amount was already used to reduce the family tax credit and in-work tax credit or child tax credit.

This helps figure out how much of your tax credits you actually get after the abatements are applied.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1518512.

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MD 1: Abating WFF tax credit, or

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Part M Tax credits paid in cash
Abating WFF tax credits

MD 2Calculating net contributions to credits

  1. This section applies when the Commissioner calculates the amounts making up the family tax credit, the in-work tax credit, the child tax credit, and the parental tax credit that relate to a period under this subpart.

  2. The Commissioner must—

  3. treat the family tax credit, the in-work tax credit, the child tax credit, and the parental tax credit as tax credits corresponding to the period; and
    1. treat as a debit the amount of family credit abatement corresponding to the period; and
      1. apply the amount of the family credit abatement corresponding to the period,—
        1. first, to reduce the amount of the family tax credit corresponding to the period; and
          1. second, to reduce the amount of the in-work tax credit or, as applicable, the child tax credit corresponding to the period; and
            1. third, to reduce the amount of the parental tax credit corresponding to the period.

            2. For the purposes of subsection (2)(c)(iii) and sections MD 1(3)(d)(i) and MD 16(3)(a), the amount of family credit abatement for an entitlement period applied to reduce the amount of parental tax credit for that entitlement period is calculated using the formula—

              (entitlement period abatement amount − amount used) × 365 ÷ 70.

              Where:

              • In the formula,—

              • entitlement period abatement amount is the family credit abatement for the entitlement period within the parental entitlement period calculated using the formula in section MD 13(2):
                1. amount used is the amount of the entitlement period abatement amount that the Commissioner must apply under subsection (2)(c)(i) and (ii) in calculating a net contribution for the entitlement period.

                  Compare
                  Notes
                  • Section MD 2(1): amended, on , by section 467(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
                  • Section MD 2(2)(a): amended, on , by section 467(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
                  • Section MD 2(2)(c)(i): amended, on , by section 467(3) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
                  • Section MD 2(2)(c)(ii): amended, on , by section 467(4) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
                  • Section MD 2(3) heading: replaced, on (applying for dependent children born on or after that date), by section 5(1) of the Taxation (Parental Tax Credit) Act 2014 (2014 No 28).
                  • Section MD 2(3): replaced (with effect on 1 April 2015 and applying for dependent children born on or after that date), on , by section 169(1) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
                  • Section MD 2(4) heading: inserted, on (applying for dependent children born on or after that date), by section 5(1) of the Taxation (Parental Tax Credit) Act 2014 (2014 No 28).
                  • Section MD 2(4): replaced (with effect on 1 April 2015 and applying for dependent children born on or after that date), on , by section 169(2) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
                  • Section MD 2 list of defined terms family support: repealed, on , by section 467(6)(b) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
                  • Section MD 2 list of defined terms family tax credit: inserted, on , by section 467(6)(a) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
                  • Section MD 2 list of defined terms in-work payment: repealed, on , by section 467(6)(b) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
                  • Section MD 2 list of defined terms in-work tax credit: inserted, on , by section 467(6)(a) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
                  • Section MD 2 list of defined terms parental entitlement period: inserted, on (applying for dependent children born on or after that date), by section 5(2) of the Taxation (Parental Tax Credit) Act 2014 (2014 No 28).