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Income Tax Act 2007

Tax credits paid in cash - Abating WFF tax credits

MD 13: Calculation of family credit abatement

You could also call this:

“How to reduce your tax credits if you earn over $42,700”

When you’re getting tax credits paid in cash, the government needs to work out how much to reduce your credits if you earn over a certain amount. This is called family credit abatement.

To calculate this, they use a formula: full-year abatement × days ÷ 365.

The full-year abatement is 27 cents for every dollar you earn over $42,700. This applies whether you’re single or have a partner. If you have a partner, they look at your combined income.

The ‘days’ part of the formula is the number of days in the period you’re entitled to the credit. They don’t count days in months where you get protected family tax credit.

If you get parental tax credit instalments over a 70-day period that crosses two tax years, they’ll work out the abatement separately for each tax year.

If your 70-day parental entitlement period crosses two tax years and you get a lump sum payment in the birth year, they’ll do an extra calculation for the days that fall in the following tax year.

The government can change the $42,700 amount by making an official order.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1518553.

Topics:
Money and consumer rights > Taxes
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Part M Tax credits paid in cash
Abating WFF tax credits

MD 13Calculation of family credit abatement

  1. This section applies for the purposes of section MD 1 to determine the amount of a person’s family credit abatement for an entitlement period.

  2. The formula is—

    full-year abatement × days ÷ 365.

    Where:

    • In the formula,—

    • full-year abatement is,—
      1. if the person has no spouse, civil union partner, or de facto partner during the entitlement period, and the person’s family scheme income for the relationship period containing the entitlement period is more than $42,700, 27 cents for each complete dollar of the excess; or
        1. if the person has a spouse, civil union partner, or de facto partner during the entitlement period, and the person’s family scheme income, the family scheme income of their spouse, civil union partner, or de facto partner, or the sum of those incomes for the relationship period containing the entitlement period is more than $42,700, 27 cents for each complete dollar of the excess:
        2. days is the number of days in the entitlement period excluding the days of any calendar months in which the person receives protected family tax credit as described in section MD 14.

          1. If a person who qualifies under section MC 2 (Who qualifies for entitlements under family scheme?) receives instalments of the parental tax credit in a 70-day period that crosses 2 tax years, the formula is applied so that—

          2. instalments of the parental tax credit received in the first tax year are abated against the person’s family scheme income, the family scheme income of their spouse, civil union partner, or de facto partner, or the sum of those incomes for that tax year; and
            1. instalments of the parental tax credit received in the second tax year are abated against the person’s family scheme income, the family scheme income of their spouse, civil union partner, or de facto partner, or the sum of those incomes for that tax year.

              1. If a person who qualifies under section MC 2 has a 70-day parental entitlement period that crosses 2 tax years and the person receives a lump sum payment of the parental tax credit for the tax year of the birth, then—

              2. an additional amount of parental tax credit abatement for the tax year of the birth is calculated under section MD 16, based on the number of days that are—
                1. in the parental entitlement period; and
                  1. in an entitlement period in the tax year following the tax year of the birth; and
                  2. the formula in subsection (2) should not be used to calculate an amount of parental tax credit abatement for the days described in paragraph (a), except for the purposes of determining the amount of parental tax credit abatement for the single day described in section MD 16(3)(a)(ii).

                    1. In subsection (3)(a), the amounts appearing as the amount of the threshold may be increased as prescribed by the Governor-General by Order in Council under section MF 7 (Orders in Council).

                    Compare
                    Notes
                    • Section MD 13(3)(a)(i): amended, on , by section 11(1) (and see section 11(3) for application) of the Taxation (COVID-19 Support Payments and Working for Families Tax Credits) Act 2021 (2021 No 52).
                    • Section MD 13(3)(a)(i): amended (with effect on 1 July 2018), on , by section 238(1) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
                    • Section MD 13(3)(a)(ii): amended, on , by section 11(2) (and see section 11(3) for application) of the Taxation (COVID-19 Support Payments and Working for Families Tax Credits) Act 2021 (2021 No 52).
                    • Section MD 13(3)(a)(ii): amended (with effect on 1 July 2018), on , by section 238(2) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
                    • Section MD 13(3)(b): amended, on , by section 476(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
                    • Section MD 13(4) heading: replaced (with effect on 1 April 2014), on , by section 173(1) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
                    • Section MD 13(4) heading: amended, on (applying for dependent children born on or after that date), by section 8(1) of the Taxation (Parental Tax Credit) Act 2014 (2014 No 28).
                    • Section MD 13(4): amended (with effect on 1 April 2014), on , by section 173(2) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
                    • Section MD 13(4): amended, on (applying for dependent children born on or after that date), by section 8(2) of the Taxation (Parental Tax Credit) Act 2014 (2014 No 28).
                    • Section MD 13(4): amended, on , by section 117 of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
                    • Section MD 13(4B) heading: inserted (with effect on 1 April 2014), on , by section 173(3) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
                    • Section MD 13(4B) heading: amended (with effect on 1 April 2015 and applying for dependent children born on and after that date), on , by section 173(4) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
                    • Section MD 13(4B): inserted (with effect on 1 April 2014), on , by section 173(3) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
                    • Section MD 13(4B): amended (with effect on 1 April 2015 and applying for dependent children born on and after that date), on , by section 173(5) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
                    • Section MD 13(5): amended, on , by section 173(6) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
                    • Section MD 13 list of defined terms protected family support: repealed, on , by section 476(3)(b) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
                    • Section MD 13 list of defined terms protected family tax credit: inserted, on , by section 476(3)(a) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).