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Childcare Subsidy Calculations Catch Family Out
Susan Edmunds, Money Correspondent
When Claire Nickson applied for the Family Boost early childhood education rebate this week, she was surprised to be declined.
"Our combined income is around $150,000 - well below the $180,000 cap that has been advertised."
Claims for rebates from the new scheme began to be accepted by Inland Revenue from the start of this month.
The subsidy took effect in July but is paid out quarterly.
Families can claim 25 percent of their weekly cost of childcare, up to a maximum $75. Payments for those earning between $140,000 and $180,000 are gradually reduced and those earning more than $180,000 are not eligible.
Nickson said the payment would be a help to her family. Her daughter has just started daycare and will increase to four days a week from January next year. She expected to pay almost $17,000 a year in fees.
She and her partner each took six months of parental leave, and she said when her partner returned, he received a small amount of back pay.
That, on top of there being seven paydays for them in the quarter instead of six, took their household income above the quarterly cap of $45,000.
"This is despite the fact you can easily calculate our income forward and find that we will not have not made anywhere near $180,000 by the end of the tax year."
She said there were likely to be others in her situation.
Inland Revenue said FamilyBoost was assessed per quarter, with entitlements abating from $35,000 up to the $45,000 income cap.
"There is no yearly 'square-up' process for FamilyBoost as there is for Working for Families tax credits; rather, each quarterly calculation is full and final for that quarter.
"The annual income equivalents are more relevant for customers who have other types of income - such as self-employed people. For example, someone with a total taxable income of $130,000 from their latest income tax return will be assessed on $32,500 for each relevant quarter."
IR said for parents with salary and wages reported each payday, their entitlement will be determined based on the income information it held for that quarter after the quarter ends.
"As noted, this does mean that the pay cycle and timing/number of paydays for the applicant and their partner will be a factor in the calculation of FamilyBoost. For example, a person who has seven paydays in one quarter and only six in the next quarter may find they do not qualify for one quarter, but do in the next.
"FamilyBoost relies on taxable income. If income is not taxable it will not be included in the FamilyBoost calculation. However, a taxable lump sum payment such as a redundancy payment could cause a 'spike' in earnings for the quarter."
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