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A series of significant tax changes and income disruptions Thursday will leave some people better off and others possibly scratching their heads.
Here’s a rundown of the key legislative changes that will go into effect on April 1.
Minimum salary to raise
The minimum wage will go up to $ 20 an hour, from $ 18.90 an hour.
The government estimated that it would mean $ 44 more each week before taxes for people who work 40 hours a week at the minimum wage. Around 175,500 New Zealanders were expected to benefit.
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Minimum starting and training wages will also go up to $ 16 an hour, to stay at 80 percent of the minimum wage for adults.
The companies called for a delay in the increase, with the borders still closed and the Covid-19 pandemic a threat. The Ministry of Business, Innovation and Employment (MBIE) also advised delaying the increase until October and reducing it by 25 cents due to the economic uncertainty caused by Covid-19.
Lynn Grieveson / Press room
The minimum wage will go up to $ 20 an hour, from $ 18.90 an hour.
However, the government kept its electoral promise and the minimum wage will increase by $ 1.10 an hour on Thursday.
New maximum tax rate
A new maximum tax rate of 39 percent will apply on individual income earned above $ 180,000 beginning April 1.
The government has estimated that the change would affect 2% of wage earners, generating an additional $ 550 million for fiscal year 2021 and increasing to $ 634 million by 2024.
The new threshold matches Australia’s maximum tax threshold of A $ 180,000, although Australians who earn above that threshold pay a higher rate of 47 per cent.
There are also changes to other tax rules to ensure that the new proposed maximum personal tax rate is applied uniformly throughout the tax system.
Mike Judd, director of tax services for Baker Tilly Staples Rodway, said the tax changes made in the past 12 months, including the recent move to end investors’ ability to offset interest paid on home loans with income per rental, they were “probably more significant and of higher value. consequence than anything that has happened in the last 10 years, possibly 15 years.”
New fringe benefits tax rate
Fringe benefits are non-cash benefits provided by an employer to employees.
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The existing 49 percent fringe benefit tax rate would remain for anyone making less than $ 180,000.
A new fringe benefits tax (FBT) rate of 63.93 percent will be applied to individuals with a marginal tax rate of 39 percent, to ensure that there are no incentives for companies to switch between cash and pay compensation. non-monetary compensation of employees.
The existing 49 percent fringe benefit tax rate would remain for anyone making less than $ 180,000.
There is concern that employers will find the cost of benefits too expensive for their employees, adding to the complexity.
Many employers have chosen to pay a one-time FBT rate (49 percent) as it reduces administrative costs. But with the new higher fee, a one-time fee becomes much more expensive to apply across the board.
Increase in earnings before benefit payments are reduced
Beginning April 1, 2021, people who receive a benefit will be able to earn more through work before their benefit payments are affected due to changes in the income reduction threshold.
Currently, a person receiving job applicant support could earn up to $ 90 per week before their benefit began to be reduced. Single parents and individuals with Supported Living Allowance, Veteran’s Pension and NZ Super could earn up to $ 115 per week before being affected.
Starting Thursday, these people could earn up to $ 160 a week before their benefit was cut.
The government estimated that around 82,900 low-income New Zealanders and their families would be better off averaging $ 18 per week.
More changes to come
The government has introduced a bill to double the legal minimum paid sick leave to 10 days a year by the end of 2021.
The maximum amount of sick leave that an employee can accumulate will remain at 20 days.
The law is expected to change in mid-2021, with the changes taking effect two months after approval.
The move will align New Zealand with countries such as Australia and the United Kingdom.
Companies wanted to delay the increase in sick leave for workers, as they faced difficulties as a result of the Covid-19 pandemic.
