Income Tax (FamilyBoost) Amendment Bill

I present a legislative statement on the Income Tax (FamilyBoost) Amendment Bill.

ASSISTANT SPEAKER (Greg O’Connor): That legislative statement is published under the authority of the House and can be found on the Parliament website.

Hon NICOLA WILLIS: I move, That the Income Tax (FamilyBoost) Amendment Bill be now read a first time.

The bottom line: those who vote against this bill are voting against up to 92,000 families with young children getting more cash into their bank accounts. I dare members of this House to explain to me why families who have young children in early childhood education (ECE), and who are feeling the pressure of juggling their childcare responsibilities and their work and their cost of living, should be denied the relief that this bill promises.

What this bill does is expand on the existing generosity of the Government’s current FamilyBoost scheme. In short, it means that families with children in early childhood education, on a household income—that is a combined income between two parents—of $230,000 or less will be eligible for up to 40 percent of their childcare costs to be refunded each quarter. What does that add up to? That means families can get up to $120 a week back in cash.

Let me talk you through how this works. This short bill is making amendments to the FamilyBoost provisions which already exist in the Income Tax Act 2007. FamilyBoost, of course, started on 1 July last year and helps parents and caregivers meet the costs of early childhood education. It runs on a quarterly basis; parents and caregivers submit invoices for the previous three months, then these are paid by Inland Revenue (IRD) in a lump sum. The great news is that, across the country, early childhood services have come to the party and are making it as easy as possible for the families that use their centres by printing three-monthly invoices so that this can be done very simply.

Currently, of course, households can get back 25 percent of the ECE fees they pay, but that’s after the 20 hours ECE and the Ministry of Social Development childcare subsidy, which, of course, we have kept in place. Those are taken into account, and then parents get this refund on top of that—up to a maximum of $975 a quarter.

Let me make it clear to members that, to get that maximum payment, a household would have to have had ECE costs of at least $3,900 in the previous quarter. Most eligible households won’t have had costs that high, so they won’t get $975 back a quarter. That’s because, actually, most families don’t spend $300 a week on early childhood education costs for a range of reasons, whether it’s because both parents aren’t working and so they only use childcare a certain number of hours a week, or whether it’s that they attend cheaper early childhood education for parts of the week. For a number of reasons, it is not the case that most families are paying that much in fees.

However, they will get exactly what they are eligible for under FamilyBoost, which is 25 percent of the fees they have paid. In other words, they get their full entitlement. FamilyBoost also, appropriately, has a household income cap—currently it is a maximum of $975 and gradually reduces for households with an annualised income of more than $140,000 and cuts out altogether when a household receives $180,000. That’s how FamilyBoost currently works. It’s been very popular. To date, for this financial year, around 67,000 families have received payments—that is tens of thousands of New Zealand families who have received direct cash into their bank accounts. The idea that there are members in this House who say they should not have received that cash—which is what they would be doing if they voted against this bill.

The feedback that Ministers and MPs have had directly from parents, and through Inland Revenue, is that, actually, FamilyBoost is pretty easy to apply for once you’ve got that clear invoice from your ECE service. It’s all done online, and it has helped families at a time when the cost of living is front of mind. It also, of course, allows and encourages greater participation in the workforce, taking away one of the hurdles that can prevent people returning to work after a period of caregiving. This is good for economic growth.

What is the bill about? This bill adjusts a couple of key FamilyBoost settings, and it will increase the number of households getting payment, and it will increase the payment amounts that households get. When this scheme was being developed, IRD modelled what they thought would be the likely take-up and cost of the original scheme. They have been upfront—they found the modelling challenging. They didn’t have any data—well, not reliable data—about how much parents were paying for ECE. Inland Revenue assumed more families were paying higher childcare costs than turned out to be the case. For those reasons, it turns out that the initial conservative estimate of annual FamilyBoost costs was overstated.

There is room for us to give FamilyBoost a boost, and that is what we are doing. We are increasing—and this bill does it—the 25 percent rebate in FamilyBoost to 40 percent. Good news for families with ECE costs.

Hon Julie Anne Genter: For what? Like, five families? How many families qualify?

Hon NICOLA WILLIS: Households will therefore, Julie Anne Genter, be able to get back 40 percent of their ECE fees up to a maximum of $1,560 a quarter.

Hon Julie Anne Genter: Why not just give free ECE for everyone?

Hon NICOLA WILLIS: That’s up to $1,560 every three months, in the bank account. That is up to $120 a week.

I wish to note for the record, because Hansard might not get it down, that Julie Anne Genter, from the Green Party of New Zealand, appears very, very dynamically opposed to the idea of parents with young children getting this relief. I haven’t seen her this excited all day—not since I talked about the Mt Victoria tunnel a week or so ago.

FamilyBoost payments will increase, and this will be welcomed by working families with very young children, who are a bit more pragmatic than Julie Anne Genter and believe that, actually, that cash is meaningful to them.

Also, what this bill does is that the rate at which the maximum payment reduces after a household reaches $140,000 of income will now be relaxed. FamilyBoost payments will now cut out altogether at an annualised household income of just under $230,000 a year, rather than the $180,000 a year at present.

Hon Julie Anne Genter: It’s still a bunch of paperwork. No one is actually accessing this. The people who need it most can’t get it.

Hon NICOLA WILLIS: I want to emphasise that that’s household income, so it is not just an individual’s income; it’s the income collectively brought into a household by parents and caregivers.

Hon Julie Anne Genter: It’s bad policy.

Hon NICOLA WILLIS: The higher cut-out is partly because of the increase in payments and partly because this bill lowers the rate at which the maximum FamilyBoost payment reduces for higher incomes from 9.75 cents—

Hon Julie Anne Genter: People in Wellington know—that’s why they don’t vote for you.

Hon NICOLA WILLIS: Mr Speaker, honestly. Interjections are meant to be short and witty, and Julie Anne Genter hasn’t been either for some time.

ASSISTANT SPEAKER (Greg O’Connor): We’ll just leave the Speaker to decide that, shall we, Ms Willis—

Hon NICOLA WILLIS: Well, honestly, it’s a constant barrage.

ASSISTANT SPEAKER (Greg O’Connor): —and you just carry on with your legislative statement.

Hon NICOLA WILLIS: Yep. From 9.57c to 7c for each additional dollar of income above the annualised $140k. Those are the technical details, members. What is important is that this scheme will be available to thousands more New Zealand households as a result of this bill, and these changes will apply to eligible early childhood education fees incurred on or after 1 July 2025.

This is the reason why this bill needs to be progressed at pace, because we want to ensure that parents can apply for this extra amount of cash from October. We want to make sure that, for the fees they’ve been paying since July, they can get up to 40 percent of that back, and that’s the reason we are progressing this at pace. Because FamilyBoost is paid out every three months, the first increased payments to more families—and there will be more families who just missed out in the past because they earned just a bit too much as a household; they will look upon this as a great move forward because they will now be eligible for the scheme, and they will find that their claims can be processed and paid by Inland Revenue in October this year.

I have had families say to me, “We just miss out on the scheme, but, let me tell you, we would really like to be eligible for it.” I’ve also had families say to me it was actually really easy: “I applied, and the money went in my bank account, and, man, oh man, did that make a difference when I had to go buy the car seat, when I had to pay the electricity bill, when I had to ensure that my older preschooler had the kit-out to start school.”

Inland Revenue has also updated its modelling to include new insights and data from FamilyBoost, which indicates that the changes will result in FamilyBoost reaching 92,000 households based on an uptake rate of 71 percent. We still don’t confidently say that every family will apply for the money that’s due to them, but I urge them to do so. I want to see this policy working and money going out the door.

The scheme will cost around $170 million a year, which is what we’ve already appropriated—so no new funding is required. These FamilyBoost changes will help many more families deal with the increased costs that come with having young children. I commend this bill to the house.

ASSISTANT SPEAKER (Greg O’Connor): This debate is interrupted and set down for resumption next sitting day. The House is suspended until 9 a.m. tomorrow. Have a good evening.

Debate interrupted.

Sitting suspended from 9.58 p.m. to 9 a.m. (Wednesday)