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Income Tax Act 2007

Tax credits paid in cash - Abating WFF tax credits

MD 16: Additional parental tax credit abatement amount for lump sum if 70-day period crosses 2 tax years

You could also call this:

“Calculating extra reduction for parental tax credit spanning two tax years”

This section explains what happens when you receive a parental tax credit that crosses over two tax years. If you have a baby less than 70 days before the end of the tax year, and you get your parental tax credit as a lump sum in the year the baby is born, there’s an extra calculation needed.

The government works out an additional amount to reduce your parental tax credit. They do this because part of your parental entitlement period is in the next tax year.

To figure out this extra reduction, they use a formula. The formula multiplies two things:

  1. The amount your parental tax credit would be reduced by for one day
  2. The number of days in your parental entitlement period that are in the next tax year

This helps make sure the amount of parental tax credit you get is fair, even when it crosses over two tax years.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1641670.

Topics:
Money and consumer rights > Taxes
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“Tax credit for low-income families with full-time workers”

Part M Tax credits paid in cash
Abating WFF tax credits

MD 16Additional parental tax credit abatement amount for lump sum if 70-day period crosses 2 tax years

  1. This section applies when—

  2. a person is entitled under section MD 11 to a parental tax credit for a parental entitlement period; and
    1. the credit is paid in a lump sum for the tax year of the birth; and
      1. the birth occurs less than 70 days before the end of the tax year; and
        1. a day in an entitlement period is in the parental entitlement period.

          1. An additional amount of abatement for the parental tax credit is calculated for the tax year of the birth using the formula:

            daily parental tax credit abatement × extra entitlement days.

            Where:

            • In the formula,—

            • daily parental tax credit abatement is the amount by which the person's parental tax credit would be reduced by a family credit abatement calculated as if for the person and an entitlement period consisting of—
              1. the last day of the last entitlement period in the part of the parental entitlement period in the tax year of the birth, if there is an entitlement period in that part of the parental entitlement period:
                1. the first day of the first entitlement period in the part of the parental entitlement period in the tax year after the tax year of the birth, if subparagraph (i) does not apply:
                2. extra entitlement days is the number of days, each of which is—
                  1. in the parental entitlement period; and
                    1. in an entitlement period in the tax year following the tax year of the birth.

                    Notes
                    • Section MD 16: added, on , by section 478 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
                    • Section MD 16 heading: replaced (with effect on 1 April 2014), on , by section 174(1) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
                    • Section MD 16 heading: amended (with effect on 1 April 2015), on , by section 174(2) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
                    • Section MD 16(1)(b): replaced, on (applying for the 2014–15 and later income years), by section 118(1) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
                    • Section MD 16(1)(c): replaced, on (applying for the 2014–15 and later income years), by section 118(1) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
                    • Section MD 16(1)(c): amended, on (applying for dependent children born on or after that date), by section 9(1) of the Taxation (Parental Tax Credit) Act 2014 (2014 No 28).
                    • Section MD 16(1)(d): inserted, on (applying for the 2014–15 and later income years), by section 118(1) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
                    • Section MD 16(2) heading: replaced, on , by section 118(2) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
                    • Section MD 16(2): replaced, on , by section 118(2) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
                    • Section MD 16(3) heading: replaced, on , by section 118(2) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
                    • Section MD 16(3): replaced, on , by section 118(2) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
                    • Section MD 16 compare note: repealed (with effect on 1 April 2008), on , by section 78 of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).