Government plans FamilyBoost changes after low uptake revealed

• Finance Minister Nicola Willis plans to announce improvements to FamilyBoost after the Budget.
• Government overestimated the number of families that would be eligible for the full FamilyBoost payment despite officials’ “best efforts”.
• Uptake figures as of April 9 show 249 households have received the full payment.

The Government will announce improvements to its flagship childcare tax policy in June with the hope of increasing the number of families receiving its cost-of-living relief.

It comes after the Government admitted the number of families it initially said would be eligible for the full $75 weekly payment of the scheme – 21,000 – was wrong. The actual number of eligible families remains unclear.

Finance Minister Nicola Willis said she will review the application process and the eligibility criteria of FamilyBoost, which provides a 25% rebate on families’ weekly childcare costs.

“There are some design choices that we have which would improve the uptake of the scheme and I’m keen to work through those choices so that more Kiwi families can benefit from FamilyBoost.”

Labour has also released data obtained from written parliamentary questions showing just 249 families, as of April 9, had consistently received the maximum quarterly payment since the scheme started late last year.

Before the election, National campaigned on a series of policies aimed at tackling the cost of living (and helping the squeezed middle), including FamilyBoost – a tax credit for childcare costs for families earning up to $180,000.

It was introduced as Government policy in March 2024 and started in July that year.

Families had to keep copies of their early childcare invoices to submit for a payment, which raised questions about how many eligible families would end up receiving the payment.

Prime Minister Christopher Luxon and Finance Minister Nicola Willis. Photo / Mark Mitchell

Willis said hundreds of millions of dollars had been set aside in “good faith” for the scheme and that money would remain available for the families who needed it.

This will be reflected in the upcoming Budget, to be released in May.

Willis said she had asked officials for advice on what improvements could be made to ensure more funding went to families, including the eligibility criteria, abatement levels and income thresholds.

They would also investigate how to make the scheme as “easy as possible” to apply for, she said.

“I understand that Inland Revenue have been thinking very hard about that question and are preparing advice for me on it.”

No decisions on tweaks to the policy had been made yet, but she intended to make an announcement in June.

Willis said she wanted to wait for more fulsome data before making significant changes.

“As we get the data coming in now, [which] is for the fourth quarter of the scheme ... [we will get] a better sense of how many families in the year have successfully claimed for the scheme.

“How does that compare with our aspirations and therefore what changes could we make to get closer to the estimates that IRD first gave us?”

While launching the policy last year, Willis presented IRD modelling that reckoned 21,000 families would be eligible for the full $975 a quarter – or $75 a week.

But Willis has said IRD now thinks this number was wrong because fewer people spend $300 a week or more on childcare than officials originally thought.

New data shows that as of April 9, just 249 families had claimed the sum for each of the three quarters the scheme had been open and therefore got the maximum benefit of the tax credit.

The more a family spends on childcare, the higher the rebate – up to a limit of $300.

A higher number have claimed the full amount in one or two quarters, but not in all three. The number of families receiving the full amount is expected to rise as families have up to four years to claim a rebate.

IRD had found the modelling for FamilyBoost challenging because it did not have reliable data on how much parents were paying for early childhood education, Willis said.

“Now that we have much more granular information about the fees, I want to study that and take advice on it before I provide another estimate.

“And I think you can imagine that IRD will be looking very carefully at their figures before they give me a new set.”

She said just over 55,000 families had received payments under the scheme and IRD had advised more than 70,000 families had registered.

“I’m really pleased that more than 50,000 families are benefiting from the scheme, and I want to see as many people benefiting from it as possible.”

IRD acknowledged the uptake of FamilyBoost had been lower than its initial estimates, which tended to be conservative to ensure there was enough money to pay families throughout the year.

“Revised take-up assumptions will be reviewed after the scheme has been in place long enough to settle into a regular seasonal pattern and actual application numbers across quarters can be considered,” an IRD spokesperson said.

Labour’s finance and economy spokeswoman Barbara Edmonds called the policy a “failure”, saying people were not getting what they were promised.

“We’ve been asking the Government to make the policy easier for families to access, because it currently requires families to keep invoices and make claims retrospectively which can be a bureaucratic nightmare for busy parents.

“We’ve also been asking them to consider an end of year wash-up, so people get what they’re entitled to over the year rather than different amounts each quarter.”

Julia Gabel is a Wellington-based political reporter. She joined the Herald in 2020 and has most recently focused on data journalism.