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35 families earning $150,000 get tax credits
By VERNON SMALL – The Dominion Post
Last updated 05:00 21/08/2009
Thirty-five families with a household income of more than $150,000 are pocketing Working for Families cash.
In total, property investors are claiming $13 million extra in Working for Families payments by offsetting losses on rental properties to cut their taxable income.
Inland Revenue identified more than 9700 such households in a background paper this week for a Government-mandated working group looking at tax reforms.
Figures supplied to The Dominion Post show that in total they receive $59m in assistance, an average of $6223 each a year.
That could be cut to $46 million if losses on investment properties averaging $10,300 a year were not taken into account, the IRD deputy commissioner for policy, Robin Oliver, said yesterday. But very few households would have structured their affairs specifically to qualify for Working for Families, he said.
It had not been a big issue before the scheme was extended to higher-income families by Labour in its last term a policy National has since endorsed.
Labour revenue spokesman Stuart Nash said families earning more than $150,000 were not the type envisaged for the scheme.
If there were abuses, then loopholes should be closed.
But Working for Families had lifted thousands of children out of poverty and it was the most effective income-redistribution policy “ever”.
More than 370,000 families receive help through the scheme and about 80 per cent have an income of less than $59,000 a year.
Prime Minister John Key has said it is unfair if individuals are structuring their affairs to take tax dollars from other New Zealanders.
But the Government would wait until a tax working group reported in December before considering any changes.
Mr Oliver said some households used trusts to shelter income from businesses, enabling them to declare low levels of taxable income including by making payments to children, which are not taken into account when calculating Working for Families assistance.
“We know it’s a growing issue. We are worried about it in terms of cost to the government but also the integrity of the tax system. We’re challenging those operationally that we find and winning. Be warned.”
The department was also looking at possible policy changes, including ways to take trust income into account and tie assistance more closely to cash income.
Many of the family trust arrangements may have been set up to lower parental incomes so tertiary students could qualify for study grants.
But families were finding they could get a second helping of taxpayer cash because they also qualified for Working for Families.
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