Budget 2025: Best Start payments to be means-tested across all three years

The weekly Best Start payment will now be means-tested across all three years it is offered to new parents, Finance Minister Nicola Willis said in today’s Budget announcement.

Currently, all parents receive the payment in the first year after having a child, with means-testing in years two and three.

The payment will now be means-tested for all three years, saving $211 million, Willis said.

Best Start payments start to diminish above a family income of $79,000 and cutting off entirely when a family earns just over $97,000 a year, Social Development and Employment Minister Louise Upston said.

Families of children born before April 1 next year won’t have their Best Start payments income-tested and would continue to receive the maximum amount until their child turned 1.

Means-testing had been expanded to help fund changes to the abatement threshold for Working for Families.

The current threshold has been unchanged since 2018, despite inflation and wage growth, Upston said.

“This means the scheme has become less effective at supporting low- and middle-income families.

“Accordingly, the Government is lifting the Working for Families abatement threshold from $42,700 to $44,900 and raising the abatement rate from 27% to 27.5%.”

Families with incomes close to the new threshold will get greater additional payments – up to $23 a fortnight, she said.

“The cost of the extra support will be met by income-testing the first year of the Best Start tax credit.”

Willis said the move to means-test Best Start was to ensure money went to families who needed it the most.

Her Budget increased spending in areas such as health, education and spending while reducing debt, Willis said.

“The Government is not promising today’s Budget will solve all of New Zealand’s problems.”

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In its first response to Budget 2025, Labour labelled it an “Austerity Budget that leaves women out”.

“After a year of job cuts, now we are on to pay cuts and stealing from our kids’ retirement funds,” Labour leader Chris Hipkins said.

Working for Families changes – $14 a fortnight

Tweaks to Working for Families tax credits meant people would keep more of their tax credits as their income from work rises with wage inflation, Upston said.

The increase was worth $14 a fortnight on average and up to $23 a fortnight.

The cost of the change was $205m over four years.

However, the Government was also raising the abatement rate from 27% to 27.5%.

This meant when people’s incomes rose, they’d lose their tax credits faster than before.

It marked a steady increase in the abatement rate over successive governments. Not long ago it was closer to 20%.

Do you have questions about the Budget? Ask our experts – business editor at large Liam Dann, senior political correspondent Audrey Young and Wellington business editor Jenee Tibshraeny – in a Herald Premium online Q&A here at nzherald.co.nz at 9.30am, Friday, May 23.