Working for Families & Best Start Calculator: Calculate Working for Families Entitlement

Est. Read Time: 9 mins | Last Updated: 22 December 2025 12:06 AM

To calculate working for families entitlement in New Zealand, you must accurately assess your total household income before tax, the number of dependent children in your care, and your weekly work hours to determine the specific tax credits you qualify for under Inland Revenue (IRD) guidelines.

Navigating the New Zealand welfare system requires a precise understanding of the four main components of the Working for Families package. These payments are designed to support low-to-middle-income earners in meeting the rising costs of living.

In this definitive 2025 guide, we break down the calculation mechanics to ensure your family receives every cent it is legally entitled to. From the Best Start payment to the In-Work Tax Credit, we cover the essential fiscal landscape for Kiwi parents.

How do I calculate working for families entitlement for the 2025 tax year?

The calculation process begins with your Adjusted Taxable Income (ATI). This includes not just your salary, but also any fringe benefits, shareholder salaries, or trust distributions that IRD considers part of your family’s resource pool.

Once you have your total income, the IRD applies an abatement rate—currently set at 27 cents for every dollar earned over the $42,700 threshold. This reduces your entitlement as your income rises, making it vital to project your annual earnings correctly to avoid a tax debt.

Many families find that using an automated calculator is the most efficient way to manage these variables. However, understanding the underlying math ensures you aren’t caught out by mid-year income changes or bonuses that could trigger a repayment obligation.

“Precise income forecasting is the single most important factor for NZ families to avoid large end-of-year tax bills when receiving Working for Families payments.”
— Senior Financial Advisor, Auckland Treasury Group

• Gather all P60 equivalent records for the current financial year.
• Include any income from rental properties or overseas investments.
• Determine if you meet the ‘full-time work’ requirement for the In-Work Tax Credit.
• Check the age of your children to ensure you are receiving the correct Best Start amounts.

What is the Best Start payment and who qualifies?

The Best Start tax credit is a universal payment for the first year of a child’s life, regardless of how much you earn. It is currently valued at approximately $79 per week, providing a crucial buffer for new parents during the transition to parenthood.

For the second and third years of the child’s life, the Best Start payment becomes income-tested. If your household income is below the current threshold, you will continue to receive these payments until the child turns three, helping cover the costs of early childhood education.

This payment is distinct because it does not stop if you are receiving Paid Parental Leave (PPL). However, you cannot receive both Best Start and a Foster Care Allowance or Orphan’s Benefit for the same child simultaneously.

• Year 1: Universal payment (everyone gets it).
• Year 2 & 3: Income-tested (abatement applies).
• Paid weekly or fortnightly via the IRD.

Eligibility and Income Thresholds for Kiwi Families

To qualify for any part of the Working for Families package, you must be a New Zealand resident and have been in the country for at least 12 months continuously at any point. The children in your care must also be NZ residents and financially dependent on you.

The primary threshold for 2025 remains at $42,700. For every dollar your family earns above this amount, your total Working for Families credits are reduced by 27%. This is why the calculator is so critical for families earning between $50,000 and $120,000.

It is important to note that ‘income’ for Working for Families purposes is broader than ‘taxable income.’ IRD looks at your total economic power, which may include the value of certain company cars or interest earned in a child’s name if it exceeds certain limits.

Understanding the Family Tax Credit and In-Work Credit

The Family Tax Credit is the cornerstone of the system. It provides a set amount per child, with a higher rate for the eldest child. In 2025, these rates have been adjusted to reflect the inflationary pressures facing New Zealand households.

The In-Work Tax Credit is specifically for families who are in paid work and are not receiving an income-tested benefit. One of the recent policy shifts has been the removal of the strict ‘hours-per-week’ rule, making it more accessible to those in part-time or casual employment.

Finally, the Minimum Family Tax Credit ensures that every working family has a basic level of income. If your total income is below the set floor (currently around $35,200 after tax), this credit tops you up to ensure your family can afford the essentials.

For more detailed information on specific legislative changes, you can visit the Inland Revenue Department or check the Work and Income New Zealand website for additional benefit interactions.

Frequently Asked Questions

Does the Best Start payment affect my other benefits?

No, the Best Start payment is not considered income for other Work and Income benefits. It is an additional support layer designed to assist with the high costs associated with a child’s early years.

What happens if I underestimate my income?

If you underestimate your income when you calculate working for families entitlement, you may end up with an ‘overpayment.’ IRD will then require you to pay back the excess amount at the end of the tax year, often via a lump sum or reduced future payments.

Can I receive Working for Families if I am self-employed?

Yes, self-employed parents are eligible. However, you must be particularly careful with your income declarations, as your year-end profit will determine your actual entitlement. Many self-employed Kiwis choose to receive their payments as a lump sum at the end of the year to avoid debt.

About the Expert

Alistair Graham is a Senior Policy Consultant with over 15 years of experience in the New Zealand social security and taxation sector. Based in Christchurch, he specializes in helping families optimize their household budgets through precise fiscal planning and entitlement maximization. He holds a Masters in Public Policy from Victoria University of Wellington.