Budget 2010 - Tax package overview
Overview of the changes
From 1 October 2010, changes are being made to reduce personal income tax rates, GST increases from 12.5% to 15%, and a temporary additional payment to some groups will be made to compensate for the increase in GST.
Personal Income Tax and GST
The reductions in personal tax rates will compensate most income earners for the rise in GST. All rates of personal income tax will reduce, while income threshold brackets will remain the same.
Personal Income Tax Rate Adjustments from 1 October 2010
| Income bracket | Current Tax Rate | Tax rate from 1 October 2010 |
|---|---|---|
| To $14,000.00 | 12.5% | 10.5% |
| To $48,000.00 | 21% | 17.5% |
| To $70,000.00 | 33% | 30% |
| Over $70,000.00 | 38% | 33% |
Due to these reductions, the majority of taxpayers will see their after tax incomes rise by an amount greater than anticipated GST-related price increases.
Reductions in personal income tax rates will not apply to benefits. They will only apply to New Zealand Superannuation and Veteran's Pension. Most forms of government assistance are increased annually in line with inflation, so any price increases due to a rise in GST will be reflected in higher amounts of assistance. However, as this does not occur until 1 April 2011, the government is providing immediate compensation from 1 October 2010 to 31 March 2011 to people receiving certain types of government assistance.
Compensation payments
A Temporary GST Assistance payment is being introduced. It will be paid at 2.02% of the full net rate of the following assistance types
- New Zealand Superannuation & Veteran's Pension (note that these payments will also increase as a result of the personal tax cuts).
- Main benefits, such as the Unemployment Benefit, Sickness Benefit, Invalid's Benefit and the Domestic Purposes Benefit.
- Student Allowances.
Child Disability Allowance and the Foster Care Allowance, and maximum rates of Disability Allowance and Childcare Assistance will also increase by 2.02%.You can see the new rates of payment in our rates comparison tables.
The 2.02% rate for increased assistance is based on Statistics New Zealand's estimation that the overall impact on prices (measured by the Consumers Price Index (CPI)) will be about 2%. This is because about 9% of the goods and services within the CPI (e.g. rent) do not attract GST.
More information
If you would like to see how the tax changes affect New Zealand Superannuation, Veteran's Pension, Student Allowance or benefit payments, please see our rates comparison tables.
These tables also contain the rates of Temporary GST Assistance payable until 1 April 2011.
