(PR.co.nz) The Government’s 1 October tax changes will further boost real after-tax wages, leaving the vast majority of New Zealanders better off, Finance Minister Bill English says.
“Treasury advice I’m releasing today shows that even when all forecast cost of living increases for the rest of the year are taken into account – including the rise in GST and a range of other factors – real after tax wages are forecast to grow due to the 1 October changes,” Mr English says.
“The advice shows that real after tax average earnings – based on the Statistics New Zealand series used to calculate NZ Super – are set to increase another 1.2 per cent in the three months to December 31, 2010.
“The forecast rise follows an 8.7 per cent increase in real after tax average earnings since September 2008. This compares with a meagre 3 per cent growth in the previous nine years.”
The main tax changes that take place on 1 October are:
* Personal income tax rates will be cut across the board leaving 72 per cent of taxpayers facing a top rate of 17.5 per cent or less.
* The resident withholding tax rate on things like bank savings will drop in line with personal tax rates.
* The top tax rate on savings in PIE investments will drop to 28 per cent.
* The rate of GST will increase from 12.5 to 15 per cent.
“This is the first part of the most significant tax reform package in New Zealand for nearly 25 years. For ordinary New Zealanders it will reward effort, encourage savings and help families to get ahead.
“As well as improving the incentives to work, the package tilts the economy towards savings, investment and exports and away from the unsustainable borrowing, consumption and over-investment in housing of the past decade.
“After the 1 October GST-income tax switch an average income family will be about $25 a week better off, an average wage earner about $15 a week better off and a couple on NZ Super about $11 a week better off. These benefits will actually grow over time as wages increase.
“At all taxable income levels, the personal tax cuts will more than offset the rise in GST – and low, middle and high income groups broadly receive the same proportionate increase in disposable income.
“New Zealanders can calculate how much better off they’ll be after 1 October by visiting the Government’s tax information website www.taxguide.govt.nz.
“New Zealand families will benefit immediately from tax cuts and they will benefit more over time from the lift in growth and jobs this package will create,” Mr English says.
Media Release 21 September 2010 from Bill English, Minister of Finance.