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Income Tax Act 2007

Tax credits paid in cash - Payment of credits

MF 3: Calculating amount of interim WFF tax credit

You could also call this:

“How Inland Revenue estimates your Working for Families tax credit amount”

When you apply for a Working for Families (WFF) tax credit, the Commissioner needs to figure out how much you might get. Here’s how they do it:

First, they work out your yearly income. They take the money you expect to earn during the time you’re asking for the tax credit and turn it into a full year’s worth of income.

Next, they look at a special list called Schedule 31. This list shows different amounts of yearly income and matches them with tax credit amounts. The Commissioner finds the amount on the list that’s closest to your yearly income.

Then, they calculate how much WFF tax credit you would get if you earned that amount for the whole year.

To work out your yearly income, they use a simple math problem. They take the money you expect to earn, multiply it by 365 (the number of days in a year), and then divide it by the number of days in the period you’re asking for the tax credit.

This helps the Commissioner figure out a fair amount of tax credit for you, based on what you’re likely to earn.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1518582.

Topics:

Money and consumer rights > Taxes

MF 2: When person not entitled to payment by instalment, or

“When you can't get tax credit payments in instalments”

MF 4: Requirements for calculating instalment of tax credit, or

“How the government calculates your regular tax credit payments”

Part M Tax credits paid in cash
Payment of credits

MF 3Calculating amount of interim WFF tax credit

This section applies when the Commissioner receives an application under section MF 1 and is required under section 80KD(2) of the Tax Administration Act 1994 to determine the amount of the tax credit to which the person applying would be entitled.
The Commissioner must—
calculate an amount (the annual amount) using the formula in subsection (3); and
ascertain the amount (amount A) that, in schedule 31, column 2 (Annualised equivalent amount for Part M) is the equivalent of the annual amount represented in schedule 31, column 1; and
calculate the WFF tax credit that the person would be entitled to for the tax year in which the calculation period falls if the family scheme income of the person for the calculation period were equal to amount A.

The formula is—
$attributed net income × 365 ÷ days.$

Where:
In the formula,—
attributed net income is equal to such amount of the family scheme income expected to be attributable to the part of the tax year that is the part (the calculation period) for which the Commissioner determines that a tax credit is allowable to the person:
days is the number of days in the calculation period.

Compare

2004 No 35 s KD 5(6)

Notes

Section MF 3 heading: amended, on 1 April 2008, by section 485(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section MF 3(2)(c): amended, on 1 April 2008, by section 485(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section MF 3 list of defined terms apply: inserted, on 2 June 2016, by section 74 of the Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 (2016 No 27).
Section MF 3 list of defined terms family assistance credit: repealed, on 1 April 2008, by section 485(2)(b) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section MF 3 list of defined terms WFF tax credit: inserted, on 1 April 2008, by section 485(2)(a) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).