Budget 2010 tax changes wef 1 October

[norma]

Income tax rates are being reduced wef 1 October 2010. For those of you working on a budget, the new rates are summarised here:

http://www.taxguide.govt.nz/budget-2...-a-glance.html


There are also a series of calculators for those already in NZ to see how the new rates may affect you:

http://www.taxguide.govt.nz/index.html


But GST is jumping to 15%.

[Duncan74]

As far as I can tell, then assuming you're 'breaking even' or better each month, ie spending less or the same as your income then for all apart from penionsioners then everyone should be better off. Those oversepending (ie temporarily on one income for instance, or on no income) are going to get hit by the GST but not get the >2.5% increase in take home. Pensioners will end up being .5% worse off, assuming they spend everything each month I think.

[Mamee & Co]

There will always be a certain level of expenditure on items without GST. Prices will rise by 2.22% but Statistics NZ reckon you only pay 91% of your income on goods with GST..therefore rise is a 2.02% so a pensioner should technically not be worse off.

[Duncan74]

Hm, so pretty closely balanced and I'd guess that a lot of pensioners spend a bit more than their pensions (ie eat through a bit of savings) each month. But you're probably right, it's designed to be about neutral, althoughwhat about inflation?

[Ngeru]

There will always be a certain level of expenditure on items without GST. Prices will rise by 2.22% but Statistics NZ reckon you only pay 91% of your income on goods with GST..therefore rise is a 2.02% so a pensioner should technically not be worse off.

That 'certain level' can pretty much be defined as everything except rent or mortgage and household rates. I expect the majority pay more than 9% of income on housing costs. Conversely I do not imagine there are too many pensioners with mortgage, although I guess a lot of them will be paying rent.

The 'hidden' inflation that this will cause as companies mark-up or round up to the next level will take out any expected savings. Imagine everything that ends with a $9.95 will go up to $10.17, I don't think so

[Ngeru]

But you're probably right, it's designed to be about neutral, althoughwhat about inflation?

There's far less concern for taking inflation out of the equations here, we don't get basic inflationary increases year on year in the tax or benefits structures. Which is pretty much how this Government can fund such 'generous' tax decreases now. Until two years ago there had not been any restructuring of the tax levels for the previous nine or more years, which pushed relatively low income earners into the top tax bracket of 40%.

Lest people forget, the previous Labour Government had planned and announced a tax decrease over a two year period, of which we did get the first tranche and there was quite a radical change and lowering of the tax brackets to be done in two hits. However, National immediately scrapped the second phase of this and these planned tax reductions were not forthcoming. So really if you've been here a while it's just a matter of catching up to where we would have been over a year ago, except of course now we have the additional GST to pay.

[chocolate cake]

Alittle puzzling how a budget advertised as self financing with little in the way of spending cuts, can apparently leave everyone better off. Surely some are going to be worse off otherwise it wouldn't be self financing.

There's little doubt that with income tax starting at $1, NZ's tax rates are high compared to other countries, so the reduction has to be welcomed. GST at 15% though less than much of Europe does apply on practically all spending except for rent & mortagages, so everyone will be effected by the increase and it's a regressive tax.

[Kiwi Mac]

Almost everything I buy is through one or other of the businesses or the trust, all of which are GST registered.

With the exception of a few clothes and food I can't think of much that I don't get it back on. Perhaps a small part of the utilities that are not put through the businesses, the odd bits of ammunition and new firearms for shooting (although I claimed my shotguns and ammunition for pest control!) and one-off personal items like eye glasses etc.

Of course, I'll loose out somewhere because it will add 2.5% to the costs of every tourist visiting NZ so they may well reduce their budgets accordingly and that might affect the businesses.

[Kiwi Mac]

Also, since benefits and pensions are going to be increased I wonder if salaries will be?!

[IanW99]

...
GST at 15% though less than much of Europe does apply on practically all spending except for rent & mortagages, so everyone will be effected by the increase and it's a regressive tax.

They keep saying that it is a regressive tax but is it?

If the activity being taxed is more likely to be carried out by the poor and less likely to be carried out by the rich, then the tax may be considered regressive

Does GST really fit that description?

Ian