Working for Families — Best Start Tax Credit

What Is This Payment?

Best Start Tax Credit is the Working for Families component aimed squarely at the new-parent and toddler years. It is administered by Inland Revenue and runs from a child's birth (or registration) until their 3rd birthday, paying a per-child amount on top of Family Tax Credit (FTC) and, where applicable, the In-Work Tax Credit (IWTC).

Best Start sits alongside FTC but uses a much more generous threshold and abatement profile. FTC abates from $44,900 at 27.5 cents per dollar; BSTC abates from $79,000 at 21 cents per dollar. The practical effect is that many middle-income families lose all their FTC entitlement but still receive a meaningful Best Start payment for each under-3 child — roughly half their full BSTC remains at $90,000 of family income for a single child.

Paid Parental Leave (PPL) interacts with BSTC in the first year. While a parent is receiving PPL for a child (typically the first 26 weeks), Best Start does not also pay for that same child. Once PPL ends, Best Start commences for the remaining year-1 entitlement and continues weekly until the child turns 3. There is no transitional taper at age 3 — the cliff is absolute.

A policy nuance worth flagging: when the regime was designed, Best Start year 1 was treated as universal (no abatement) so every newborn family received the full payment. In Inland Revenue's operating practice some borderline families above the threshold still see the full year-1 payment. The rule engine in this guide applies the standard abatement formula uniformly, so verify directly with IRD if your year-1 estimate sits close to the threshold.

How Much Can You Get?

The amount is calculated annually and paid weekly (or as a lump sum at the end-of-year square-up). The Java engine implements the formula below and the four worked examples that follow.

1. Count eligible children: sum of count_under_1 and count_1_to_3.
2. Full entitlement: eligible children × $3,838 (2025-26) or × $4,041 (from 1 April 2026).
3. Abatement: max(0, family annual income − $79,000) × 0.21.
4. Payable: max(0, full entitlement − abatement).

Worked example 1 — single toddler, low income

One 14-month-old child, family income $40,000. Below the $79,000 threshold so no abatement applies. Payable: 1 × $3,838 = $3,838 per year (≈ $73.81/week).

Worked example 2 — twins under 1, middle income

Twins aged 8 months, family income $90,000. Full entitlement = 2 × $3,838 = $7,676. Excess income = $90,000 − $79,000 = $11,000. Abatement = $11,000 × 0.21 = $2,310. Payable: $7,676 − $2,310 = $5,366 per year (≈ $103.19/week combined).

Worked example 3 — only child aged 4

One 4-year-old child, no other children. count_under_1 + count_1_to_3 = 0 so the formula returns $0 regardless of income. The child has aged out of BSTC; FTC continues until age 18.

Worked example 4 — mixed ages, modest income

Three children aged 9 months, 2 years and 5 years; family income $60,000. Only the 9-month-old and 2-year-old count as under-3 (the 5-year-old does not). Eligible = 2. Full entitlement = 2 × $3,838 = $7,676. Income is below $79,000 so no abatement. Payable: $7,676 per year (≈ $147.62/week).

Eligibility Conditions

1. count_under_1 + count_1_to_3 > 0 — at least one child under age 3 in the family.
2. NZ tax residency for the principal caregiver — ordinarily resident with citizenship, permanent residence or a qualifying visa.
3. Family income matters but there is no hard cut-out — entitlement abates linearly from $79,000 at 21c per dollar and only reaches $0 at very high incomes (about $97,300 for a single under-3 child in 2025-26).
4. No employment test, no main-benefit conflict, no asset test — Best Start is universally accessible to qualifying families.

How To Apply

Channel: Apply through Inland Revenue using myIR — Best Start is part of the same Working for Families registration as Family Tax Credit, so existing WFF families add the new child rather than starting a fresh application.

Evidence: IRD number for the child (issued automatically with birth registration), the child's birth certificate or Births, Deaths and Marriages confirmation, and a family-income estimate for the current tax year.

Timeline: Best Start is paid from the date you register the child for WFF. For newborns, registration within 8 weeks of birth allows backdating to the birth date — register late and you lose entitlement for the early-life period. Weekly payments can be elected on registration; otherwise the entitlement reconciles at year-end via the IR3 square-up.

PPL transition: Register Best Start near the end of your Paid Parental Leave period so weekly payments commence the week after PPL ends with no gap.

Annual square-up: Actual family income is reconciled at year-end. If you under-estimated income, you may have a small debt to repay; if you over-estimated, IRD pays the shortfall.

Open the official source →

Rule-Based Scenarios

Scenario 1 — Valeria, 6-month-old, low income

Valeria is a sole parent in Hamilton with a 6-month-old daughter. Her annual income is $35,000, well below the $79,000 abatement threshold. Eligible children = 1, full entitlement = 1 × $3,838 = $3,838. Excess income = max(0, $35,000 − $79,000) = $0, so no abatement applies. BSTC payable: $3,838 per year, paid weekly at about $73.81 alongside her Family Tax Credit. From 1 April 2026 her rate steps up automatically to $4,041 per year (≈ $77.71/week) until her daughter turns 3.

Scenario 2 — Xavier and Zara, twins under 1, middle income

Xavier and Zara live in Wellington with 9-month-old twin boys. Combined family income is $95,000 in 2025-26. Eligible children = 2, full entitlement = 2 × $3,838 = $7,676. Excess income = $95,000 − $79,000 = $16,000. Abatement = $16,000 × 0.21 = $3,360. BSTC payable: $7,676 − $3,360 = $4,316 per year (≈ $83.00/week combined for the household). Their Family Tax Credit cuts out entirely above $44,900, but Best Start still delivers a meaningful weekly payment for both twins until each turns 3, then the entitlement drops to zero overnight.

Scenario 3 — Brenna, only child aged 4

Brenna lives in Christchurch with her 4-year-old son. Family income is $52,000, comfortably under the BSTC threshold, but the formula checks count_under_1 + count_1_to_3 first. Her son is 4, so the eligible count is 0. The full entitlement is 0 × $3,838 = $0, and the calculation stops there regardless of income. BSTC payable: $0 per year. Brenna's son still attracts FTC (and any IWTC her household qualifies for) until age 18, but Best Start has ended permanently — there is no taper between age 2 and age 3, just an absolute cliff on the 3rd birthday.

Common Mistakes

• Confusing BSTC threshold with FTC. Best Start abates from $79,000 at 21c per dollar; Family Tax Credit abates from $44,900 at 27.5c per dollar. Using the FTC numbers for BSTC under-estimates entitlement by hundreds or thousands of dollars at middle incomes.
• Missing the age-3 cliff. BSTC stops on the day the child turns 3 — there is no taper down to age 4 or partial payment in the third year. Some families assume a transitional period and over-budget weekly cash flow.
• Forgetting older siblings don't count. Only count_under_1 and count_1_to_3 children count for BSTC. A family with a 5-year-old and a newborn receives BSTC for ONE child ($3,838/yr), not two — older siblings remain in FTC but contribute zero to Best Start.
• Missing the 8-week newborn backdating window. Register the child for WFF within 8 weeks of birth and BSTC backdates to the birth date. Register later and you forfeit entitlement for the early-life period — at $73.81 a week, six weeks of late registration costs about $443.
• PPL overlap confusion. Paid Parental Leave during the first 26 weeks typically means BSTC does not also pay for that child during PPL weeks. Some families assume both pay concurrently and double-count first-year cash flow; in practice BSTC commences when PPL ends.
• Forgetting the 1 April 2026 uplift. The per-child rate rises from $3,838 to $4,041 per year on 1 April 2026 — about $3.90 extra per week. Using the old rate for a budget that spans the rate change underestimates entitlement by roughly $200 per child per year.

Related Benefits

• Working for Families — Family Tax Credit — the universal WFF foundation paid per child to age 18; stacks alongside Best Start for under-3 children using a separate $44,900 threshold.
• Working for Families — In-Work Tax Credit — supplement for working families not on a main benefit; can be received alongside Best Start when the family meets the working-hours test.
• Working for Families — Minimum Family Tax Credit — top-up to a guaranteed minimum income for full-time working low-income families; a complement to Best Start when work hours hit the MFTC threshold.
• Paid Parental Leave — typically received in the first 26 weeks after birth; Best Start picks up after PPL ends and continues until the child turns 3.
• Childcare Subsidy — separate Work and Income payment toward early-childhood education costs for under-5s; held alongside Best Start with no conflict.
• Independent Earner Tax Credit — IRD tax credit for adults without children on $24,000–$70,000; mutually exclusive with WFF, including Best Start, because IETC excludes WFF recipients.