Labour's family package scraps tax cuts, boosts Working For Families

Labour will increase thresholds and the abatement rate for Working For families. Photo: Lynn Grieveson

Labour has revealed details of its family package, which would see it scrap the Government’s planned tax cuts in favour of diverting the money to families.

The policy is in direct competition with the centrepiece of National’s Budget, which was made up of an $2 billion to be spent in the area.

It included raising the two lowest tax brackets, essentially meaning all workers would pay less tax.

But under Labour’s proposal this would be replaced with an extra boost to Working For Families (WFF).

The tax credit base rate would be raised to $5878 instead of $5303, while the WFF abatement threshold – the level where welfare payments begin to fall - would be increased to $42,700.

Under the Government’s policy this was set to be reduced to $35,000.

Labour leader Andrew Little said those earning higher incomes did not need tax reductions.

The party was committed to reducing child poverty and inequality and the package addressed that, he said.

“Labour’s families package is carefully designed to target low and middle-income families. Every family receiving Working For Families currently will get more with Labour, and 30,000 more families will start to receive payments.

“Families on middle incomes will receive up to $48 a week more in Working For Families with Labour’s package than under National.”

The package also includes a “best start” payment for families with young children.

In the first year of a child’s life, all families would receive $60 a week. For families receiving paid parental leave, the payments would start after that ended.

Families on low and middle incomes would continue to receive the payment until the child was 3. The payment would abate above $79,000 of household income at a rate of 20.8c/$1.

Boosts to WFF and the best start payment are estimated to cost $370m and $303m respectively in 2018/19 and would begin on 1 April next year.

As part of the package, Labour would also reinstate the Independent Earners’ Tax Credit and keep the Accommodation Supplement increase announced at the Budget.

It would also provide a winter energy payment of $700 for couples and parents with children or $450 for single people who receive superannuation or a main benefit.

Labour estimates it would save $1.5b by scrapping the tax bracket changes.

Newsroom Pro will have a more detailed analysis of the policy and reaction later today.