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Abatement rates must be restored for working families to thrive

A formal agreement between Labour and Greens may spell long sought after improvements to Working for Families (WFF), says Child Poverty Action Group (CPAG).

The agreement document says that an “overhaul” of the welfare system must “ensure access to entitlements, remove excessive sanctions and review Working For Families so that everyone has a standard of living and income that enables them to live in dignity and participate in their communities, and lifts children and their families out of poverty.”

This is a significant commitment and CPAG commends the efforts of the parties to improving the lives of all children who are experiencing income poverty.

If many of the changes in Budget 2017 are maintained in principle, then there will be a noticeable improvement for many families on the lowest of incomes. But changes to the WFF abatement rate under Budget 2017 would reflect sharply on the ability of low-income working families to get ahead with their earnings.

Under its Families Package policies, Labour said it would:

  • Adopt the Budget 2017 changes to the Family Tax Credit base rate for subsequent children and new abatement rate.

While the promise to raise the threshold for maximum WFF eligibility to $42,700 is a much welcome and needed change, the abatement rate for any money received over that amount will increase to 25% in 2018. This reduces the value of each dollar earned over the threshold by reducing Working for Families entitlements by 25 cents for every dollar earned over the threshold. The abatement rate was originally 20%, increased to 22.5% under National in 2012.

CPAG urges the new government to make a firm commitment to the low-income working families, by ensuring that their ability to earn extra is not compromised by higher abatement rates, which sharply reduce the needed child tax credits intended for the wellbeing of their children.