The Child Poverty Action Group says the Government is penalising people for being poor by using a complicated welfare system.

CPAG said Auckland Action Against Poverty’s recent Benefit Impact campaign, here hundreds of people sought help with their Government entitlements, proves the system is not meeting the needs of those who need it most.

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Economics spokesperson Susan St John said the welfare system is a baffling concoction of varying tax credits, and penalties.

"It's far too complicated. There are far too many antiquated rules around things like being in relationships and how much you can work per week and that kind of thing that trip people up."

Ms St John said the 'Working for Families' system supports only some, and leaves beneficiary families even worse off.

She said merging the In-Work Tax Credit with the Family Tax Credit would give the worst-off families an additional $72.50 of income each week.

Ms St John adds as core benefits have been squeezed, these extra payments from Work and Income have become more necessary.

She said a full review of the entire system is needed.