Budget 2025 Boosts Working for Families Programme Amid Cost-of-Living Pressures

In a significant move to help working families cope with the rising cost of living, the New Zealand Government has announced targeted reforms to the Working for Families (WFF) programme as part of Budget 2025. These changes aim to ensure financial support is better directed toward those who need it most — low and middle-income families with children.

Beginning 1 April 2026, these adjustments are expected to provide immediate relief for around 142,000 families, offering them an average increase of $14 per fortnight in Working for Families payments. The overwhelming majority of these households have annual incomes below $100,000.

“We want financial support to go to families that need it most,” said Social Development and Employment Minister Louise Upston. “The changes in this Budget will help families with cost of living and support them to remain in work.”

Key Policy Change: Adjusting the Abatement Threshold

The core mechanism through which Working for Families assistance is delivered will be refined through changes to the abatement threshold — the income level at which government support starts to taper off.

As of April 2026:

• The abatement threshold will rise from $42,700 to $44,900.

• The abatement rate (i.e., how quickly payments reduce as income rises) will increase slightly from 27% to 27.5%.

Families earning just above the current threshold will see the most benefit, with some receiving up to $23 more per fortnight.

Minister Upston explained, “The current threshold has been unchanged since 2018, despite inflation and wage growth. This means the scheme has become less effective at supporting low and middle-income families.”

Best Start Tax Credit to Be Income-Tested

To fund the extra Working for Families support, the Government will revise the Best Start tax credit eligibility criteria. Currently, all new parents receive this payment in the first year of their child’s life, regardless of income.

However, starting 1 April 2026, the first year of the Best Start payment will become income-tested, aligning it with the second and third years of the scheme. The new system will:

• Begin abating the payment above a family income of $79,000.

• Completely phase it out once family income exceeds $97,000 annually.

Importantly, families with children born before 1 April 2026 will continue to receive the full first-year Best Start payment, regardless of income, until their child turns one.

Reducing WFF-Related Debt: A Consultation on the Way

The Government is also addressing a common issue for families: overpayments and resulting debt due to mid-year changes in income or family circumstances. Revenue Minister Simon Watts acknowledged the distress such debt causes and announced plans for systemic reform.

“To address this, the Government is releasing a discussion document with proposals to make Working for Families payments more accurate,” Watts stated. “This includes using past income over shorter periods to calculate entitlements, reducing the chances of overpayment and debt.”

Public consultation will be central to these changes, with the Government seeking feedback on how to make the system more responsive and less punitive when life circumstances shift unexpectedly.

Legislative Timeline and Implementation

The legislation to enact these changes will be introduced in Parliament on Budget Day, and will take effect from 1 April 2026. This allows time for legislative scrutiny, public engagement, and system adjustments by Inland Revenue and the Ministry of Social Development.

Broader Context: A Targeted Approach in Tough Economic Times

This recalibration of Working for Families reflects the Government’s broader strategy in Budget 2025 — to prioritise support for households most vulnerable to inflation, while ensuring fiscal responsibility. Rather than across-the-board increases, the targeted approach focuses resources where they will have the most impact.

As the Government continues to roll out initiatives under Budget 2025, these changes to Working for Families underscore a central theme: bolstering support for those striving to make ends meet and raise children in the face of economic uncertainty.