The short answer is that for people on the average wage of $48,500 a year will get an extra $15.66 a week and those on $100,000 will benefit by $18.46 according ti Bill English and his Tax Cut plan. From Wednesday when the tax cuts roll out people will have a little extra money in their pay but thats not the end of it in terms of spending out.
There are also going to be increases to benefits and superannuation, and a boost to the minimum wage take effect. The increase the minimum wage from $12 to $12.50 in line with the Consumer Price Index, also the minimum wage for training and new entrants’ will increase from $9.60 to $10. The only problem I am seeing from this is due to the recession we are in now how will this effect the employers in regard to being able to retain their employees with a marked reduction in incoming money for almost all businesses is being felt accross the board.
But the Minister of Labour Kate Wilkinson said on Feburary 9th when the increases were announced, “In reviewing the minimum wage it was clear that, given the current recession, we needed to find a balance between protecting jobs and fair pay for workers.We do not want to see workers priced out of the market during these difficult times, but we are confident that a 50c increase, in line with inflation, will not harm businesses.”
The total cost for this package has been totaled to over $2 billion. And this extra cash will start flowing into taxpayers’ pockets as a result of the tax cuts and a 3.4 per cent increase in benefits and superannuation and student allowances from Wednesday.
On the flip side to this our New Zealand ACC system is in crisis and has needed a huge cash injection from the governement and the tax payer. An increase in Accident Compensation levies will take some of the extra money that we will get from the tax cuts. Here is a breakdown of the extra ACC charges which will be effictive from 1st July 2009 for motor vehciles.
Petrol levy (cents per litre) – From 9.34¢ to 9.90¢ = increase 0.56¢
Average annual licence fee – From $136.48 to $168.45 = increase $31.97
Total average per vehicle – From $254.63 to $287.00 = increase $32.37
Then on top of this you have an increase in the ACC you need to pay on your liable income. This has been rolled out by the Governement and will come into effect the same day as the Tax Cuts (April 1st 2009)
The Government has adopted the following levy rates:
- The Earners’ Account Levy (paid by all employees and self-employed to cover their non-work, non-motor vehicle injuries) will increase from $1.40 to $1.70 (including GST) per $100 of liable earnings
- The average composite employer and self-employed levy will increase from $1.26 to $1.31 per $100 of payroll. This levy excludes GST and is an average rate. Individual rates for industry groups may be higher or lower
- The new rates take effect on 1 April 2009
For an example and to put these into real numbers a person on the average wage of $48,500 per year currently pays $658 a year or $12.61 a week to ACC for the Earners’ Levy. Under the charges an average wage earner would be paying $940 a year or $18.02 a week.
But taking everything into account overall the changes leave fulltime workers on the minimum wage $24.30 a week better off.
The tax cuts will benefit 1.4 to 1.5 million people, the Treasury says.