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The Child Poverty Action Group (CPAG) has won its bid to take legal action against the Government's Working for Families package.
CPAG claimed Working for Families' In Work Payment and its predecessor, the Child Tax Credit, discriminated against 250,000 children whose families did not qualify for payments.
In a landmark case last year the Human Rights Tribunal ruled in favour of CPAG challenging the Working for Families package.
The Government appealed the decision in the High Court in Wellington, claiming the tribunal did not have jurisdiction to hear CPAG's case.
But in a reserved decision in the High Court today, Justice Ronald Young dismissed the challenge to the case going ahead.
The In Work Payment was $60 a week with an extra $15 a week for the fourth and each subsequent child in a family.
The Government has said the payments would give an extra $1.6 billion to low and middle-income earners. But CPAG said children in families who did not qualify were being left behind in poverty.
It wanted the Human Rights Review Tribunal to declare that the In Work Payment and the Child Tax Credit were inconsistent with the Human Rights Act -- that they discriminated.