Kiwi kids growing up in poor families would be better off if they were Australian, a new report has found.
The problem is our system of tax credits, Working for Families, doesn't do much for the very worst-off - those growing up in families whose primary incomes are benefits.
"The Australian system of family tax benefits for children is significantly better both in design and level," said Child Poverty Action Group (CPAG) researcher Susan St John.
"Families across all our modelling scenarios show that families get a much lower level of support in New Zealand."
Any families who receive any kind of income-tested benefit or student allowance aren't eligible for the in-work tax credit, regardless of how much paid work they might do - missing out on at least $72.50 a week. Changes that kicked in on July 1 removed the minimum number of hours worked made an extra 19,000 families eligible, St John said - just a small fraction of those who could really benefit from it.
In contrast, the Australian families tax credit system makes people on income support "eligible for the maximum rate of payment automatically", and this combined with Australia's more progressive tax system - which includes a rate of zero for the first AU$20,000 earned - makes it easier for low-income families to get by.
CPAG's report, Family tax credits: Do children get the support in New Zealand that they would get in Australia?, looks at other ways the Australian system is more generous than ours.
The abatement rates in Australia are generally lower and the thresholds higher, meaning parents can earn more before losing all of their entitlements.
In New Zealand payments can vary each week, creating "the potential to create difficulties for families, whose income from tax credits may be unpredictable due to fluctuations throughout the year as Inland Revenue applies its adjustments". In Australia, the adjustment is made just once a year - and a supplementary payment is held back until this annual date to cover any overpayments the parents might have to pay back.
Australia's tax credits are adjusted annually, whilst New Zealand's only change when they're 5 percent behind inflation - and the in-work tax credit is only reviewed every three years.
"At present, the Australian system is significantly more generous, evident in the higher rates across all six modelled household scenarios," CPAG's report says. "This is particularly the case for families receiving income support. The New Zealand system is discriminatory, penalising the children of parents receiving a benefit."
And anyone receiving the new payments for people out-of-work thanks to COVID-19 is required to have no work at all, meaning they too lose the in-work tax credit - even though people whose jobs were supported by the recent wage subsidy kept it, whether they had work to do or not.
"In light of COVID-19 and associated job losses, it is critical that Working For Families be redesigned so that the children of caregivers who become unemployed do not miss out on these crucial payments," said St John.
CPAG has been campaigning for changes to the In-Work Tax Credit for several years.
Around one in eight Kiwi children lives in material hardship and one in five in poverty, with rates higher for Maori and Pacific children.