RSM New Zealand

Government helps high earners kick coffee habit!


Government Tax Policy - what does it mean?

Government helps high earners kick coffee habit. That is possibly a bit tongue in cheek but not too far from the truth in reality.

Yesterday, Labour announced its much anticipated tax policy. After 4 years in office and post the Tax Working Group review into the tax system, there was only one proposed change - that the individual income tax rate will increase from 33% to 39% for those earning over $180,000. 

This is slated to impact on only 2% of earners, and is expected to raise $550m in increased taxes per annum.

For someone on $200,000 per annum, this is an increase of circa $3 a day.  Almost the cost of your cup of coffee, you may now choose to give up! Or not.

There will be no increase in the corporate tax rate (28%) or trust tax rate (33%) making such structures favourable (as they already are) for asset and business investment.  They won’t assist the salary and wage earner however who will have to consider cutting down their coffee intake.

Labour has not sought to adjust the income thresholds for the current tax rates* applying to individuals.  Although uncertainty reigns as a result of the Covid pandemic, Labour supporters may have hoped for some adjustment here. Sadly that is not the case.
 

*For each dollar of income

Tax rate

Up to $14,000

10.5%

Over $14,000 and up to $48,000

17.5%

Over $48,000 and up to $70,000

30%

Remaining income over $70,000

33%

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Authors

Lisa Murphy
Tax Partner