Govt raises tax thresholds, giving Kiwis more after-tax income

The coalition Government has used its first budget to address the effect of personal income tax ‘bracket creep’, by adjusting the bottom three tax thresholds.

Previously, taxpayers paid 10.5 cents on the dollar for income up to $14,000. Now, that has been increased to $15,600.

The next tax bracket, which has a rate of 17.5%, has been increased from $14,001 - $48,000 to $15,601 to $53,500.

The bracket after that, with a 30% rate, has risen from $48,001 - $70,000 to $53,501 - $78,100.

The second-highest bracket, with a 33% rate, has changed from $70,001 - $180,000 to $78,101 to $180,000.

The top tax bracket remains unchanged – a 39% rate for all income of $180,001 and above.

Treasury analysis shows the average household will benefit by $60 per fortnight, while the average household with children will benefit by $78 per fortnight.

Tax credit threshold gets increased

Meanwhile, from 31 July, the income range for the independent earner tax credit (IETC) will be extended from $24,000 - $48,000 per annum to $24,000 - $70,000.

Those earning $24,000 to $66,000 will receive the full credit, with entitlements gradually reducing up to the limit of $70,000.

The IETC is a tax credit of up to $20 per fortnight. Eligible taxpayers can receive the IETC during the year by using an appropriate tax code, or claim it in a lump sum at the end of the year.

Parents given childcare relief

The Government has also introduced a new childcare payment, called FamilyBoost, for low- to middle-income families with children aged five and under.

From 1 July, parents and caregivers will be eligible for a partial reimbursement of their early childhood education (ECE), up to a maximum fortnightly payment of $150. Reimbursements will be made quarterly, as a lump sum, with the first payments arriving in October.

Parents and caregivers can get back up to 25% of their ECE fees, after the 20 Hours ECE and MSD Childcare Subsidy have been taken into account, up to the $150 maximum. This maximum payment slowly reduces for family incomes over $140,000 per annum. Families with incomes over $180,000 per annum are not eligible for FamilyBoost.