Government fulfils election undertaking on new top tax rate
The Government will today keep its election promise to put in place a new top tax rate of 39 per cent on income earned over $180,000.
“This will only affect the top two per cent of earners. It is a balanced measure that is about sharing the load so everyone is doing their bit to help our country rebuild after our fight against the Covid-19 virus,” Finance Minister Grant Robertson said.
“It is also about keeping a lid on debt while ensuring we can maintain our investment in health and education. For 98 per cent of earners there won’t be any change.”
It’s important to remember too that this is for individual income. So if a couple together earn over $180,000 but individually earn less than that amount, then there is no change at all to the amount they have to pay.
The new rate will apply from 1 April 2021.
Revenue Minister David Parker said the Government is aware that some people may seek to escape the higher tax rate and shelter their income in trusts, and commentators often make such comments when changes to the top tax rate are proposed.
“This bill includes powers to collect information from trustees to test compliance and the effective operation of the 39 per cent tax rate and to further understand what trustees do with trust assets and income,” David Parker said.
“If trusts are used for the sole purpose of paying a lower tax rate, it is unfair to all those New Zealanders that pay the right amount of tax. If there is evidence of this type of behaviour we will move on it.”
As well as the rate change, the Bill contains a number of consequential changes and a proposed threshold change to the minimum family tax credit.
Changes to the minimum family tax credit comes about as a result of an increase in the main benefit in March by $25 a week.
The adjustment results in a $32 per week increase in the 2020/21 tax year for those receiving the minimum family tax credit. The change ensures that families are better off in the workforce than being on the benefit.