Widening the tax net (IRD are at it again)
Working for Families Tax Credits (WFFTC) are an entitlement for families with dependant children aged 18 or younger and are intended to assist with day to day living costs. The amount of the credit is dependant on how many dependant children there are, their age and combined family income.
There have been some changes in the eligibility rules for WFFTC which came into effect in the last financial year. The income calculation for WFFTC is broader than those for income tax and includes:
- Income from salaries and wages
- Investment income (interest/dividends etc)
- Partnership income
- Income retained by a company (usually small, family owned) where a parent is a shareholder
- Income retained by a trust, where a parent is a settlor
The calculation of WFFTC entitlements can be complex and includes other adjustments not mentioned above.
If you receive WFFTC on a regular basis and are not aware of the adjustments, it may result in having to pay back some or all of these.
We recommend that the calculation be left until the end of the year financial statements and tax returns are completed. This will avoid an unexpected repayment and may give you a lump sum refund that can be spent on the family.
Please give us a call if you have any questions.