Tax cuts, pension boost for Kiwis 

Source: NZPAMichael Cullen

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New Zealanders will have more money in their pockets from October with the start of a three-year programme of personal tax cuts which will also boost superannuation payments.

Finance Minister Michael Cullen has stuck to his warning of a week ago that tax cuts in the Budget could not be huge at a time when government revenue is lower than forecast. 

He has reported an operating surplus of $3.1 billion for the current financial year and a cash deficit of $3.5 billion when contributions to the New Zealand Super Fund and capital spending are taken into account.

The election-year Budget delivers a three-year programme of tax cuts costing $10.6 billion and boosts to Working for Families tax credits to take account of inflation costing $1.1 billion over four years, both starting from October 1.

The Budget is seen as crucial to Labour's hopes of winning a fourth term.

Cullen has created a new tax rate of 12.5% on the first $14,000 earned and the amount a person can earn before higher tax rates cut in, will be raised.

The 21% rate will apply at $40,000 instead of $38,000, the 33% rate takes effect at $70,000, up from $60,000 and the top rate of 39% that currently hits those earning $60,000 will apply now to those earning more than $70,000.

FIND OUT HOW MUCH YOU WILL BE GETTING

Cullen says a couple on the current average household income of $72,000 with two children aged 11 and eight will be better off by $2,223 a year ($43 a week) from October, rising to $4397 a year ($85 a week) from 2011.

The changes mean somebody on $50,000 a year will have $16 a week more in take home pay from October 1, $22 more from April 2010 and $32 extra from the following April. That's an annual increase in take home pay of $1,670 from 2011.

There will be a boost to the Family Tax Credit and an increase to the Working for Families Tax Credit income threshold from October, which will be worth $14 a week for a family on the average wage with two young children.

A further expected increase to the Family Tax Credit and income threshold from 2011 will be worth an extra $16 a week for the same family.

"This tax cut programme should hopefully provide some relief from the current increases in the cost of living, although for many families they will not compensate them totally," says Cullen.

"This year we have seen households around the world come under considerable pressure, as all nations cope with rising food and petrol prices and higher mortgage repayments driven up by the credit crunch."

He says the tax cuts are designed to be as fair as possible to all workers, with those on low incomes to feel the greatest impact on average take home pay.

Older New Zealanders

New Zealand Superannuation payments will increase from October as a result of personal tax cuts.

The net married couple rate of NZ Superannuation is maintained above 66% of the net average wage.

The increase in net payments for a married couple will be $45.88 a fortnight and $23.84 for a single superannuitant living alone. This is on top of the annual adjustment made to reflect increases to living costs.

There will be further increases to the rates of net NZ Superannuation in April 2010 and 2011.

As part of New Zealand First's confidence and supply agreement with the government, the Budget also provides $72 million over four years to provide free off-peak travel for SuperGold Card holders on public transport and $18 million to increase the subsidy for hearing aids.

There's a $24.6 million boost to assist 7,500 caregivers caring for more than 10,000 children. The new funding enables the Unsupported Child's Benefit and Orphans Benefit to match the Foster Care Allowance from next April.

Also, $446.5 million is allocated to fully fund contracted essential services delivered by community organisations for vulnerable families, children and young people and to make annual adjustments.  This includes elder abuse and neglect services.

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