25 May 2017 marked the first budget from Steven Joyce.  This was expected to be a "steady as she goes" budget and did not disappoint.  The main winners in this budget are low to middle income New Zealanders with the centre piece of the Budget being the Family Income Package which includes an increase in the tax rate thresholds and Working for Families Tax Credits. 

Tax Rate Threshold Changes

As expected, the tax rate thresholds have increased from 1 April 2018, meaning more money in the hand for most New Zealanders.  The tax rate thresholds from 1 April 2018 will be as follows:

 

 

Currently

From 1 April 2018

10.5%

$0 to $14,000

$0 to $22,000

17.5%

$14,001 to $48,000

$22,001 to $52,000

30%

$48,001 to $70,000

$52,000 to $70,000

33%

$70,001 +

$70,001 +

 

So what does this actually mean for you:

  • Individuals are taxed on a sliding scale in New Zealand.  The first portion of your income is taxed at 10.5%, the next portion at 17.5% and so on.
  • If you earn over $14,000 p.a. you will be paying less tax from 1 April 2018. 

For a person earning say $50,000 p.a. these threshold increases would result in the following annual tax saving:

 

Tax Rate

 

Annual tax prior to increase

Annual tax after increase

Saving

10.5%

1470

2310

 

17.5%

5950

4900

 

33%

660

0

 

Total Tax Paid

$8,080

$7,210

$870

 

Working For Families Tax Credits

Those on low incomes who receive the Family Tax Credit under Working for Families, as well as the Accommodation Supplement will more than likely see an increase in the credits they receive each week.   

Working for Families Family Tax Credits will rise by $9.25 a week for a first child under 16, and between $17.75 and $26.81 for other children.  It means families get the same rate for younger children as for those aged 16-18. 

An average boost of $35 a week for the Accommodation Supplement will help some 136,000 households.  Some households will receive more with areas in South and West Auckland and Christchurch being moved into categories which get higher payments to reflect the higher rents payable in these areas.  

Unfortunately, some households on middle incomes will get less with the income threshold at which Working for Families Tax Credits start to abate reducing from $36,350 to $35,000 and an increase in the abatement from 22.5 cents in the dollar to 25 cents in the dollar.  


Independent Earner Tax Credit

The Independent Earner Tax Credit of $10 per week for those earning between $24,000 and $48,000 has been removed.  The Government has said this was often not claimed by those entitled to it and the above changes should more than make up for the tax credit removal. 

 

What Else

  • Further tax cuts have been signalled once the Government has the money to do so. 
  • Couples on superannuation will receive an extra $13 a week. 
  • Mental Health & Disability Support are set to get a boost in funding.  An extra $224 million will be spent over the next four years on mental health support and an extra $205.4 million over the next four years for disability support. 
  • Auckland's City Rail is to get its first funding injection of $436m.
  • $392 million is to go on new schools and classrooms.
  • The school funding freeze is over, with funds being injected to keep up with the increase in demand due to growing school populations. 
  • Almost $47 million to be spent on new initiatives to cut burglary and youth offending.
  • Science and Innovation will receive an increase of $373 million funding.
  • Insurance premiums are set to rise by up to $69 a year with the increase in the earthquake levy to help top up the Natural Disaster fund.