KiwiSaver and Working for Families are two of the most significant government financial programmes for working New Zealanders. If your family receives Working for Families tax credits, it’s worth understanding how KiwiSaver contributions interact with those calculations.
What Is Working for Families?
Working for Families (WFF) is a package of tax credits for families with dependent children. The key credits include:
- Family Tax Credit — the main WFF credit, income-tested
- In-Work Tax Credit — for families where at least one parent works minimum hours
- Best Start Tax Credit — for families with children under 3
WFF entitlements are calculated based on family income — the combined income of both partners.
Does KiwiSaver Affect Working for Families?
Yes — in specific ways.
KiwiSaver employee contributions are deducted from your gross pay before the income figure used in most tax calculations, but for Working for Families purposes, IRD uses your adjusted family scheme income — which adds back certain deductions.
In practice, KiwiSaver employee contributions do not reduce your Working for Families income. The income test is based on gross income, not after-KiwiSaver income.
What this means: Increasing your KiwiSaver contribution rate does not reduce your WFF entitlements.
Does the Member Tax Credit (MTC) Count as Income?
No. The Member Tax Credit ($521.43 maximum per year) is paid by IRD to your KiwiSaver provider — it does not appear in your personal income and does not affect your Working for Families calculation.
This makes the MTC particularly attractive for families receiving WFF: it’s a guaranteed $521.43 annual return with zero impact on your WFF entitlements.
The MTC Is Especially Valuable at Lower Incomes
For families on lower incomes receiving Working for Families, the Member Tax Credit represents an even higher effective return:
- Contribute $1,042.86/year → receive $521.43 MTC → 50% guaranteed return
- No reduction in WFF tax credits
- No tax on the MTC itself
At lower income levels, the MTC is often the single best financial return available. See the $521 Member Tax Credit guide.
Low Income Families — PIR Rate
Families on lower incomes may be eligible for the lowest PIR rate (10.5%) on KiwiSaver investment returns — if their income is under $14,000/year.
Most families receiving Working for Families have incomes above this threshold. The most common PIR for WFF-eligible families is 17.5% (income $14,001–$48,000). Ensure your PIR is set correctly with your provider — an incorrect PIR means overpaying tax on returns, which is not automatically refunded.
KiwiSaver and the In-Work Tax Credit
The In-Work Tax Credit requires at least one parent to work 20 hours/week (single parent) or the couple to work a combined 30 hours/week. KiwiSaver membership or contributions have no effect on this work test.
Strategies for Families Receiving Working for Families
| Strategy | Benefit |
|---|---|
| Contribute $1,042.86/year to claim full MTC | $521.43 free money — no WFF impact |
| Set correct PIR rate (likely 17.5%) | Avoid overpaying tax on returns |
| Contribute at minimum 3% (don’t opt out) | Maintain employer match |
| Voluntary top-up before 30 June if below MTC threshold | Capture the full MTC |
What If Your Income Changes?
WFF entitlements are recalculated annually based on your end-of-year income square-up with IRD. If your income (including KiwiSaver employer contributions) changes significantly during the year, update your WFF estimate with IRD to avoid a large end-of-year debt.
Note: Employer KiwiSaver contributions are not included in your personal income for income tax purposes — ESCT is deducted at source. They do not affect your WFF calculation either.