National warns well-off could cheat Working for Families scheme

A loophole in the Government's family assistance scheme meant high income earners could rort the system by forming family trusts, the National Party said yesterday.

The Working for Families programme extends financial support to middle income families with children.

National's finance spokesman, John Key, said self-employed high income earners who would not normally be eligible could form a trust to own their company. The trust would then pay them a small wage, so they would be eligible.

Mr Key said the programme was only income-tested, not asset-tested.

"Self-employed people on higher incomes have the opportunity to structure their businesses so they can get these state payments," Mr Key said.

"So we have a situation where people who are not otherwise eligible for Working for Families are being funded by Kiwis who are far less well off. That's bizarre."

Prime Minister Helen Clark said Working for Families was an extension of the family support system that had been in place since the mid-1980s.

"It's always possible that those who are asset rich and cash poor are able to take advantage of such schemes," she said. "I don't have any information that the issue is any different to what it's been for more than 20 years."

Helen Clark said if anyone did try the rort described by Mr Key the Government would devise a way to deal with it.

- NZPA