Working for Families overpayments

Section 177C(1B) and (1C) of the Tax Administration Act 1994

The May Budget 2008 brought forward inflation adjustments to Working for Families tax credits from 1 April 2009 to 1 October 2008. From 1 October, the weekly and fortnightly amounts of Working for Families tax credits paid out were increased to reflect the entire inflation indexation adjustment.

Final entitlements to Working for Families tax credits are calculated at the end of the year, however, and are based on the annual amount of the tax credit and the income abatement threshold. In the 2008-09 tax year the annual family tax credit and the abatement threshold are increased to reflect a composite amount; the average between the annual amount before 1 October 2008, and the annual amount after the 1 October 2008 inflation adjustment.

Families paid weekly or fortnightly and whose Working for Families tax credit entitlements changed part-way through the year (due to changes in their family circumstances, such as a child entering the family in the middle of the year) could therefore receive overpayments of Working for Families tax credits. The end-of-year entitlement based on the composite amount will be lower than the fortnightly or weekly amount received for recipients who, for example, have a new child after 1 October 2008. As a result, these overpayments could in turn result in tax bills for affected families at the end of the tax year.

The legislation has been amended to ensure that overpayments caused by the mid-year change to Working for Families tax credit entitlements are not required to be repaid. Working for Families overpayments of up to $100are automatically written off for the 2008-09 income year.

Application date

The amendment applies from 1 April 2009.