The Coalition Government have delivered on their promise of income tax relief to the majority of working New Zealanders in Budget 2024, with income tax thresholds set to increase as of 31 July 2024 - the first improvement in tax bands in 14 long years.
The coalition government will reduce income taxes for the average worker by $832 annually by adjusting most tax brackets upward by 11.5% and introducing targeted tax credits. This policy aligns with promises made during National's election campaign and will be funded by cutting spending in other areas and increasing targeted tax revenue.
Finance Minister Nicola Willis stated that working-age New Zealanders would save an average of $832 a year, equivalent to $16 a week.
Individuals earning over $78,101 per year will experience the full impact of the income band adjustments, resulting in savings of approximately $20 per week. However, the tax changes are primarily aimed at benefiting middle-income New Zealanders, as the top tax band of $180,000 remains unchanged.
Households with children receive an extra boost and are expected to benefit by an average of $39 per week, while approximately 1.9 million households will see an average increase of $30 per week.
These tax changes will take effect from 31 July 2024, with the FamilyBoost initiative commencing on 1 July 2024.
Key Highlights of the Budget 2024 Tax Changes:
Personal Income Tax Thresholds Adjustment:
The increase in personal income tax thresholds will benefit individuals earning more than $14,000 annually. This adjustment marks the first reduction in personal income tax since October 2010.
Independent Earner Tax Credit Extension:
The income limit for the independent earner tax credit has been extended to $70,000 per annum. This change allows an additional 420,000 individuals, who are not receiving Working for Families, main benefits, or Superannuation, to be eligible for up to $20 per fortnight.
In-Work Tax Credit Increase:
An estimated 160,000 low-to-middle-income working families will receive up to an additional $50 per fortnight through the increased in-work tax credit.
FamilyBoost Payment:
The new FamilyBoost payment aims to assist approximately 100,000 families with early childhood education costs, providing up to $150 per fortnight.
Updated Income Tax Brackets and Rates:
| Current Brackets ($) | New Brackets ($) | Rate |
|---|---|---|
| 0 - 14,000 | 0 - 15,600 | 10.5% |
| 14,001 - 48,000 | 15,601 - 53,500 | 17.5% |
| 48,001 - 70,000 | 53,501 - 78,100 | 30% |
| 70,001 - 180,000 | 78,101 - 180,000 | 33% |
| 180,001+ | No change | 39% |
These changes aim to provide significant financial relief to a broad range of New Zealanders, fostering a more equitable and supportive economic environment.