FamilyBoost: Administration costs for new tax credit may hit $43.2m, plans for big marketing campaign to push scheme

Prime Minster Christopher Luxon (left) and Revenue Minister Simon Watts (right). Photo / Mark Mitchell

The Government’s complicated FamilyBoost tax credit scheme will need 95 staff to administer, with administration of the tax cut costing between $9 million and $43.2m to administer over the four-year forecast period.

Administration costs start at $13.9m in the first year of the scheme, falling to $9.1m. The figures were revealed during Revenue Minister Simon Watts’ appearance before the Finance and Expenditure Committee for scrutiny week. He told the Herald not all the admin costs would go to salaries, saying that some would be spent on “overheads”.

The figures put the cost of administering the scheme at about 8%, later falling to 5%, of the actual amount that households will receive from the tax credit, which is designed to help families with young children pay for the cost of Early Childhood Education (ECE) by allowing them to claim up to $75 a week of their (ECE) costs back in a tax credit. The 95 staff will be a mix of permanent staff and “contingent labour” who can be called upon as required.

The credit has already come under fire for the fact that despite pre-election promises that the credit being central to the promise that an average family could get up to $250 a fortnight from the scheme. In fact, less than 3000 will get that amount.

National’s tax package, IRD and Treasury analysis has found that just 4% of households and 12% of households with children will get the credit, with households getting an average of $34 a week - a little less than half the maximum amount.

Treasury’s BEFU forecasts show the scheme will pay out $174m this year, falling to $165m by 2028. As of March 31 this year, IRD had 4400 full-time equivalent staff.

Opposition questions from Labour’s Deborah Russell and Megan Woods, as well as the Greens’ Chlöe Swarbrick pressed IRD officials on how the scheme would be implemented, including what would happen when separated parents both tried to claim the credit and what would be done to ensure all households had equal access to it.

Watts said that IRD’s provision of other socially-focused parts of the tax system like Working for Families meant the department was “well-accustomed to working through some difficult cases.

On the campaign trail, it was promised the scheme would automatically pay out the credits to people’s bank accounts, but in Government Finance Minister Nicola Willis was forced to announce people would need to send IRD their ECE invoices in order to be paid out.

Willis said at the time the Government would look to reduce these administrative costs over time.

Russell asked what was being done to “ensure that everyone who is entitled to [the] payment will get it?” She cited difficulties busy households might have in collecting all their invoices to submit.

Watts and IRD officials told the committee they were gearing up to ensure all communities could access to the scheme including a multi-lingual publicity drive to ensure all communities could receive the scheme.

“There is a campaign that IRD are going to be undertaking in regards to education. They are using multiple channels and means including social media to ensure parents and ECEs are aware of this option for them. ECEs have also been provided with posters and collateral to publicise this mechanism,” Watts said.

“We are used to customers that have different needs or language requirements,” Watts said, saying there were special teams being stood up to help people with specific language requirements to be able to access the scheme.

Watts said IRD had anticipated 100,000 households would get the scheme, and the agency was gearing up to ensure all of them had the support to access support. He said there had been “engagement” with ECE to ensure a seamless approach, however he conceded the Government had considered whether it would be better to hold fire on the scheme until it was more developed.

“The trade-off of getting a perfect solution versus waiting was one that was considered. Our view was we had made a commitment and we wanted to get that money in people’s back pockets as soon as practicable,” Watts said.

Thomas Coughlan is deputy political editor and covers politics from Parliament. He has worked for the Herald since 2021 and has worked in the Press Gallery since 2018.