Benefits, Working for Families and supplementary assistance

The following recommended changes need to provide people on low incomes with significantly more than they currently receive (without disadvantaging others on low incomes). Recommendations 19 to 23 should be implemented urgently.

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 of the full report
• 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

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.