Budget 2024: What the tax cut calculator says you’ll save

Thursday, 30 May 2024

Most New Zealanders will get a tax cut at the end of July. Here is what you need to know.

You can calculate what your tax cut will be with The Treasury’s tax calculator.

Tax cuts are coming from July 31

The Government is rolling out its adjustment to tax thresholds at roughly the level National promised in the election. That means the tax workers pay on their income above $14,000 and below $78,100 will change.

The tax thresholds will rise to $15,600 (previously $14,000), $53,500 (previously $48,000) and $78,100 (previously $70,000) a year. The top tax threshold will stay at $180,001.

What will you get from the tax changes?

• A person earning $50,000 a year would get an extra $33.92 a fortnight.

• A person earning $70,000 a year would get an extra $30.75 a fortnight.

• A person earning $100,000 a year would get an extra $40.10 a fortnight.

• A minimum wage earner would receive $25 a fortnight.

• A person earning $60,000 with two children over six would receive $80.75 a fortnight.

• A couple earning $150,000 each would receive $80.19 a fortnight.

• A retired couple on NZ Super would get an extra $9 a fortnight. This will rise to $18 from April next year, and $26 from April 2026. (In National’s election promise this was originally $26 a fortnight.)

• A couple earning $60,000 each, with two children in early childhood education (ECE) that costs $600 a fortnight, would receive $251.50 a fortnight.

• A couple earning $100,000 each, with two children in ECE, would receive $80.19 a fortnight.

The basics

The tax on income earned above $14,000 will decrease from July 31, in-work tax credits for some earners will be tweaked, and the FamilyBoost policy, which gives parents part of their early childhood education fees back, will kick in from July.

Finance Minister Nicola Willis said an average income household could see $100 a fortnight, and for households with children that could increase to $250 a fortnight.

She estimated 12,000 households would be able to get the full FamilyBoost rebate of $150 a fortnight.

New tax thresholds

The first $15,600 a person earns will be taxed at 10.5% - an increase from $14,000.

The next $15,600 to $53,500 a person earns will be taxed at 17.5%, which was previously $14,001-$48,000.

The 30% bracket will apply to money earned between $53,501-$78,100, rather than $48,001-$70,000.

Then, the next $78,101-$180,000 would be taxed at 33% - rather than from $70,001.

There was no change to the top tax rate of 39% for the income earned over $180,000.

What else is changing?

The upper limit of the independent earner tax credit will be increased to $70,000 from July 31, up from $48,000 in its current form. That means people earning between $24,000 and $66,000 get the full credit, which is up to $10 a week.

The in-work tax credit for low income families with children increases up to $50 a fortnight.

The Government’s FamilyBoost policy will start from July 1, reimbursing parents part of their children’s ECE fees back up to $150 a fortnight. Families with household incomes over $180,000 are not able to get the FamilyBoost, with the payment reducing for those with incomes over $140,000.

How is it funded?

The tax changes will cost $3.68 billion, which roughly equates to the $3.71 billion in savings.

Within the tax change funding, the tax cuts will cost $2.57b a year, the in-work tax credits $150m, FamilyBoost $180m, meanwhile restoring interest deductibility for landlords will cost $730m.

Within the $3.71b in savings, $1.2b came from baseline savings from government agencies, $780m from stopping programmes such as Fair Pay Agreements, the Clean Car Discount and 20 hours free early childhood education for two-year-olds.

Another $600m comes from the climate dividend, $580 from commercial building depreciation and $220m from changing the first year free tertiary education to the last year.