Tax Changes in New Zealand: What’s Going Down.
I thought I would start this with the (possibly) good news.
In fact this bit is really good – if the new Zealand government were do it, it could make life very cosy indeed for Skilled Migrants who can earn relatively high salaries. (Right up until New Zealand companies screw you over by saying that you don’t need to earn as much now anyway).
Top Income tax Rate could go to down to 30%.
At the moment if you earn over $70,000 (by no means what should be considered a high salary) you pay 38% tax on every dollar over that level. Now this is being touted as saving someone about $20 a week – which really isn’t a whole lot.
But what happens if you earn $100k a year?
I’ve worked out that if just the top tax bracket comes down from the current 38% to 30% then you end up paying $406 a month less in tax. So instead of your take home pay being about $5,831 it would now be $6,237.
That’s an extra 116 coffees a month!
(Rough calculations only – this does not include ACC or Kiwisaver deductions.)
Also, trust and company tax rates may be going down – but it’s a bit unclear. The Tax Working group says it wants to make personal, trust and company tax rates all the same to avoid people being able to siphon off income into lower tax bands. So dropping the personal tax rate to 30% and then dropping the company tax rate below its current 30% doesn’t actually make that happen.
Why is this happening?
Because looking at this graph below shows that until you earn over $240,000 a year in New Zealand, you are better off from an Income Tax point of view moving to Australia because their income tax rates are cheaper. This of course completely ignores whether the cost of living is higher in Australia – but its something that is causing a lot of Kiwi’s to move.
In fact – this whole tax report seems to start with the theory that personal income tax rates must come down. That takes up roughly 5 pages of the report. The other 74 pages are all about the taxes that need to go up in order to pay for it.
There’s a surprise.
We will apparently know exactly what the income tax rates will be in May this year – at the budget. When we will also get the bad news about who amongst us has to pay for it all.
I don’t think that’s going to be a good day for me.
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- And New Zealand Interest rates come down yet again.
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Comments
One Comment on Tax Changes in New Zealand: What’s Going Down.
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Hubby on
Sun, 31st Jan 2010 9:56 pm
Interestingly enough one of the weekend papers, Sunday Star Times I think, had a long ‘focus’ article on the pro’s & con’s of Aus vs. NZ life & work.
They’re still trying to deny that the tax take is any different. I think when even an NZ Govt. sponsored committee says that there is an appreciable difference, those on the opposing side just have to rest their case.
Still, lowering personal income tax is a good thing. More money in your pocket, and choice about what to do with it – spend, save, invest etc. makes it quite interesting. Will all those demanding more social justice & equality give their ‘tax refund’ to charitable causes? Or will they keep it?
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