Removing the requirement to file a tax return for taxpayers who receive Working for Families tax credits

(Clauses 88(12)(a)(i), 106, 108, 109, 111 and 120)

Summary of proposed amendment

Currently, taxpayers who receive Working for Families tax credits are required to file an income tax return or receive a personal tax summary. This requirement also extends to a recipient’s spouse or civil union or de facto partner. The proposed amendment will remove this requirement for Working for Families recipients who are not otherwise required by law to file an income tax return.

Application date

This amendment will apply for the 2014−15 and later tax years.

Key features

Under the proposed amendment, a Working for Families recipient (and their spouse, civil union or de facto partner) will no longer be required to file an annual tax return, if they are not otherwise required by law to file. They will, however, still be required to provide family scheme income information and family details to square up their Working for Families entitlement against their actual circumstances each year.

It is estimated that the proposed amendment will remove the compliance cost of annual income tax return filing for 260,000 taxpayers.

Background

The key information that Inland Revenue needs to determine a family’s entitlement to Working for Families tax credits is a recipient’s family scheme income, and family details (such as the details of the children in their care). In the past, some of this information has been obtained by requiring recipients to file tax returns or receive a personal tax summary. This in turn has contributed to large numbers of taxpayers filing or receiving annual tax returns.

Requiring this group to file an annual tax return to assess their annual income tax liability merely because they receive Working for Families is unnecessary. The amount of PAYE that has been withheld from recipients’ salary and wages is not needed to determine their entitlement to the tax credits.

Depending on the source of their family income, some taxpayers will still be required to file an annual income tax return. Others will be able to file if they choose to. However, if they are not otherwise required by law to file a tax return, they will be subject to the new four-year rule.