Working For Families Vs PAYE
Working for Families and PAYE both sit with Inland Revenue, and that is why they get mixed up. They are not the same thing. PAYE is tax taken from wages. Working for Families is money paid into a bank account to help with the cost of raising children.
They meet in one place: family income. The wages that PAYE is deducted from are part of the family income Inland Revenue uses to work out Working for Families. A higher wage can mean more PAYE and a smaller Working for Families payment in the same year.
System 1: PAYE
Tax taken from wages
Your employer deducts PAYE from salary or wages using your tax code, files employment information each payday, and pays the deductions to Inland Revenue. PAYE is based on your individual income, not your partner's. It comes off before the money hits your account. The year end income tax assessment then checks whether the right amount of tax was taken.
System 2: Working for Families
A payment into your bank
Working for Families is paid by Inland Revenue, or by Work and Income if you get a benefit, as one combined amount. You can take it weekly, fortnightly, or as a lump sum after 31 March. It is based on combined family income (you and your partner), the number of dependent children, and which of the four credits you qualify for. It is not a PAYE deduction.
How they differ
The two systems run on different clocks, different income tests, and different payers. Mixing them is how a family can think Working for Families is "tax off the payslip" when it is a separate transfer.
| PAYE | Working for Families | |
|---|---|---|
| What it is | Income tax and ACC earners levy deducted from pay | A family payment into your bank |
| Who pays whom | Employer pays Inland Revenue | Inland Revenue or Work and Income pays you |
| Whose income | Yours, by tax code | Yours plus your partner's, plus some adjustments |
| When it happens | Every payday | Weekly, fortnightly, or a lump sum after 31 March |
| Year end | Income tax assessment or IR3 | Square up against actual family income if you took instalments |
Source: Inland Revenue Working for Families overview, govt.nz Working for Families payments, and Work and Income Working for Families. Employer payday filing sits on the PAYE and payslips hub.
The four Working for Families payments
Inland Revenue combines every credit you qualify for into a single payment. You may get all four, or only some.
Family tax credit
The main payment. From 1 April 2026 the full weekly rate is $152 for the eldest child and $124 for every other child ($7,921 and $6,454 a year). Full amount if family income is $44,900 or less. Above that, it abates first.
In work tax credit
For families earning income from paid work, including wages, self employed income, or a shareholder employee. From 1 April 2026 the maximum is $147 a week for the first three children ($7,670 a year), plus $15 a week ($780 a year) for each extra child. This $50 a week lift is temporary: Inland Revenue says it may drop back to $97 if petrol stays below $3 a litre for four weeks, and after 31 March 2027 the maximum returns to $97 a week. Hours of work are not required for this credit (that rule ended on 1 July 2020). You can keep it for an unpaid break of 2 weeks or less if you tell Inland Revenue.
Best Start
Help in a child's first three years, up to $77 a week per child. For a child born on or after 1 April 2026, the $77 reduces when family income is over $79,000, including in the first year. For a child born before that date, the first year is not income tested; years two and three still abate over $79,000. Best Start abates at 21 cents in the dollar, separately from the family tax credit.
Minimum family tax credit
A top up so working families reach $703 a week after tax ($36,604 a year). It does not change with the number of children. A single parent must work at least 20 hours a week on a salary or wage; a 2 parent family must work at least 30 hours between them. Self employed income on its own does not qualify. Inland Revenue: small income changes can wipe the whole credit, and you repay every dollar already paid.
Source: Inland Revenue family tax credit, in work tax credit, Best Start, and minimum family tax credit pages, plus IR201 (March 2026). Abatement for family tax credit and in work tax credit: subtract $44,900 from family income, then multiply by 27.5%. Family tax credit comes off first; any leftover abatement comes off the in work tax credit.
Where PAYE wages feed Working for Families
Family income starts with the income in your (and your partner's) income tax assessment or IR3, then Inland Revenue adds or takes away certain adjustments. Children's earned income is generally left out, but a child's passive income over $500 a year is added. Child support you receive is included; child support you pay is taken off. A non resident partner's worldwide income counts. Major shareholders in a close company include their share of net profit. Household expense help over $5,000 for the year is included in full.
That is the join with PAYE. A pay rise, overtime, or a second job increases PAYE on the wage, and it can also lift family income enough to abate Working for Families. To see what a wage looks like after PAYE, ACC, KiwiSaver and student loan, run it through the PAYE calculator, then treat that gross wage as one input to family income, not as the Working for Families figure itself. Inland Revenue's own calculator is the one that estimates the credits.
If you receive Working for Families you also cannot claim the independent earner tax credit. Use M or M SL, not ME. That clash is explained in the IETC eligibility and ME code guide.
Weekly pay versus a year end lump sum
govt.nz: weekly or fortnightly payments make sense if income is steady and you do not expect a new baby, a job change, or a child leaving home. Choose a lump sum if income jumps around or a change is coming. Inland Revenue: instalments are based on estimates, then squared up after 31 March against actual family income. If you were paid too little, the rest is refunded. If you were paid too much, you repay the overpayment by the due date. A lump sum uses actual income, so there is no estimate to miss, unless the information you gave was wrong.
What people get stuck on
r/newzealand threads about Working for Families debt keep landing on the same bill: weekly payments based on an income estimate that turned out low, or a family change that was not reported. Inland Revenue and govt.nz both say tell them straight away in myIR so instalments can drop. Underestimating income means an overpayment after the tax assessment, and late repayment can attract penalties and interest. The hours myth is also stale: in work tax credit has not needed 20 or 30 hours since 1 July 2020; those hours still apply only to minimum family tax credit. And if you have a temporary tax exemption as a new or returning resident, applying for Working for Families ends that exemption for you and your partner.
Frequently asked questions
Is Working for Families the same as PAYE?
No. PAYE is tax your employer deducts from wages and pays to Inland Revenue. Working for Families is a separate payment into your bank to help with the cost of raising children. They sit in the same tax year because your PAYE wages form part of family income, which can reduce Working for Families through abatement.
Does PAYE include Working for Families?
No. Working for Families is not a line on your payslip. Inland Revenue or Work and Income pay it as one combined amount weekly, fortnightly, or as a lump sum after 31 March. Family tax credit and Best Start can be paid with a benefit if you get one from Work and Income.
Why do people end up with a Working for Families bill?
Weekly or fortnightly payments are based on an estimate of family income. If actual income is higher, or a family change is not reported, Inland Revenue squares it up after 31 March and you repay the overpayment. A lump sum at year end uses actual income, so there is no estimate to miss. Minimum family tax credit is especially sharp: going a little over the after tax limit can mean paying the whole credit back.
Can I get IETC and Working for Families?
No. If you or your partner are entitled to and receive Working for Families, you cannot use the ME or ME SL tax code for the independent earner tax credit. Use M or M SL instead.