The exclusion of beneficiaries from the In-Work tax credit has been deemed discriminatory by the Child Poverty Action Coalition but ruled lawful by the High Court in October.
Labour says that the party's future wage policies such as the $5000 tax-free zone, and minimum wage would mean families in wages were better off and incentives to work stronger.
"It is essentially a moral and ethical issue," said Deputy leader Annette King.
"It's unfinished business for a Labour Party."
"We consider that the ways the In Work Tax Credit stigmatises beneficiary families, undervalues care, and keeps poor families income unnecessarily low outweigh any remaining issues about work incentives," the policy says.
Labour would also extend access to 24-hour free health care for children aged under six to after-hours medical services - something National announced last week it would also do.
Labour abolish the Families Commission and set up a Ministry of Children under a Minister for Children.