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Key recommendations
Benefits, Working for Families and supplementary assistance
Recommendation 19: Adopt the following 10 principles to redesign the income support system.
- Income support is adequate for meaningful participation in the community, and this support is maintained over time.
- Income support ensures people are always better off in paid work and high effective marginal tax rates are avoided as much as possible.
- Main benefits cover a larger proportion of people’s living costs than they do currently (reducing reliance on other assistance).
- Child-related payments follow the child and can be apportioned with shared care.
- Payments for specific costs provide support that is adequate, appropriately designed and easy to access.
- Changes to income support reduce disincentives to form relationships.
- The income support system proactively supports people to access their full and correct entitlements and promotes these entitlements to the broader population.
- The income support system is easy to access and provides timely support, including to people transitioning in and out of the system.
- The income support system is as simple as possible balanced against the need to provide adequate support for people in a variety of circumstances at a reasonable cost to government.
- People are treated with dignity and respect when accessing this support.
Recommendation 20: Reform main benefits by:
- increasing main benefits by between 12% and 47% as set out in table 2, page 99.
- increasing the abatement thresholds for:
- Jobseeker Support to $150 a week
- Sole Parent Support and Supported Living Payment to $150 a week and $250 a week.
Recommendation 21: Fully index all income support payments and thresholds annually to movements in average wages or prices, whichever is the greater. Index Accommodation Supplement rates to movements in housing costs.
Recommendation 22: Consider introducing a Living Alone Payment that contributes to the additional costs of adults living alone (without another adult) on a low income.
Recommendation 23: Reform Working for Families and other tax credits by:
- increasing the Family Tax Credit to $170 a week for the eldest child and to $120 a week for subsequent children
- increasing the abatement threshold for the Family Tax Credit and changing the abatement rate to:
- 10% on family annual incomes between $48,000 and $65,000
- 15% on family annual incomes between $65,000 and $160,000
- 50% on family annual incomes in excess of $160,000
- replacing the In-Work Tax Credit, Minimum Family Tax Credit and Independent Earner Tax Credit with a new Earned Income Tax Credit
- introducing an Earned Income Tax Credit of up to $50 a week for people with and without children and with a couple-based income test
- making the Best Start Tax Credit universal for all children aged under 3 years.
Recommendation 24: Reform supplementary assistance and hardship assistance so they are adequate, appropriately designed and easy to access.
Recommendation 25: Require the Ministry of Social Development to, within 2 years, complete work, including commissioning independent research and focus groups, to establish a minimum income standard for New Zealand (with 5-year reviews).
Recommendation 26: Increase, as soon as possible, overall income support to levels adequate for meaningful participation in the community, as defined by the minimum income standard (which reflects different family circumstances, for example, children, disabilities and regional area) and maintain this level of support through appropriate indexation.
Passing on child support
Recommendation 27: Pass on all child support collected to receiving carers, including for recipients of Unsupported Child’s Benefit.
Clarifying eligibility and relationship status
Recommendation 28: Move income support settings over time to be more neutral on the impact of being in a relationship in the nature of marriage.
Detailed recommendations
Benefits and supplementary assistance
| Theme |
Detail |
| Main benefits |
- Remove youth rates of main benefits. Increase Jobseeker Support for under 24 years living away from home (and the rate of Youth Payment) to match the rate for people 25 and older, and increase Supported Living Payment for 16–17 year-olds to the rate for people aged 18 and over.
- Remove initial income stand-down periods.
- Remove the 13-week non-entitlement period for voluntary unemployment.
- Remove the 30-hour rule.
- Introduce individual entitlement to Jobseeker Support while retaining a couple-based income test.
- Keep sole parents on Sole Parent Support until their youngest child turns 18 (rather than switching them to Jobseeker Support once their youngest child turns 14).
- Consider changing the name of Jobseeker Support – Health Condition or Disability to better reflect people’s needs (for example, Health Support).
|
| Hardship assistance |
- Increase income and asset limits to allow a larger proportion of low-income working people to access payments.
- Review and increase grant limits so they cover current costs, including for emergency dental treatment.
- Make a larger proportion of payments non-recoverable (for example, those for the costs of school uniforms).
- Review the Temporary Additional Support formula, including the accommodation loading and maximum amount, so it adequately covers costs.
|
| Income definition |
- Align definitions of income and assets with those established by Inland Revenue, unless there are clear and robust reasons for a different definition.
- Treat earnings-related compensation from ACC the same as other income from work in the benefit system.
- Review how income is measured and allocated to people, including assessment periods – especially in the treatment of lump-sum payments, retrospective payments, joint investments and annual business income.
|
Assistance related to children and families
| Theme |
Detail |
| Family Tax Credit |
- Align shared care rules for the Family Tax Credit with child support – 35% of care.
- Extend the 4 weeks ‘terminal payment’ to the Family Tax Credit.
- Consider how increases in the Family Tax Credit should impact on the rates of Unsupported Child’s Benefit and Orphan’s Benefit.
|
| Best Start Tax Credit |
- Consider changing the interaction between Best Start and Paid Parental Leave to avoid overpayments.
|
| Child Tax Credit |
- Repeal the Child Tax Credit.
|
| Childcare Assistance |
- Change the definition of income to remove other non-taxable transfer payments (for example, Accommodation Supplement, Disability Allowance and Temporary Additional Support).
- Improve take-up by promoting greater awareness to working families, alongside Inland Revenue (given its role in administering Working for Families).
- Review subsidy rates (and their interaction with minimum session times in childcare and Out of School Care and Recreation (OSCAR) services), to determine if they are adequately subsidising costs, and increase the rates if they are inadequate.
- Consider increasing income thresholds to provide greater subsidisation of childcare costs for low- and middle-income working families, so that effective marginal tax rates for these families are not too high.
|
| Child support |
- Treat child support received as income for benefit abatement (already income for the Family Tax Credit).
- Treat child support paid as a reduction in income for benefit abatement (already a reduction in income for the Family Tax Credit).
- Remove compulsory application for child support (except for recipients of Unsupported Child’s Benefit).
- Shorten the application form and make more application options available (for example, online).
- Review the expenditure table to reflect changes in Family Tax Credit payments.
|
| Shared care |
- Align shared and split care rules for main and supplementary payments with the Family Tax Credit and child support.
|
Clarifying eligibility and relationship status
| Theme |
Detail |
| Ensuring benefit settings have less impact on partnering decisions |
- Allow a 6-month period (rather than the current 6 weeks) after people move in together as a couple before a relationship is deemed to exist for the purposes of determining benefit eligibility.
- Do not deem two people who do not live together as being in a relationship for the purposes of welfare support.
- Investigate other moves towards greater neutrality in respect of relationship status, including increased individualisation of benefit entitlement, bringing the couple rate of benefit closer to two times the single rate, and improving alignment between the approach taken by MSD and in other legislation.
- Consider introducing a short-term entitlement (for example, 6 months) to a main benefit for partnered people who lose their jobs or incomes (due to redundancy, a health condition or disability, or a health condition or disability of a dependent child) through an earnings disregard of their partner’s income (up to a cap of around $48,000 a year) for this period.
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