$2b to boost Kiwi incomes

Joyce unveils ‘carefully designed’ package

A hefty $2 billion will go back into the pockets of New Zealand families, with the Government unveiling a combination of tax cuts and a boost to the accommodation supplement and Working For Families.

Some families could be in line for an extra $150 per week, while the average lift to income would be $26 a week across the 1.3 million families that the package would reach.

The biggest boost would go to people living in higher housing-cost areas (for which the boundaries have been redrawn) and receiving the accommodation supplement.

Finance Minister Steven Joyce unveiled his maiden Budget with a much-anticipated Family Incomes Package as the centrepiece.

He said that it was ‘‘carefully designed to especially assist low and middle-income earners with young families and higher housing costs’’.

People on low incomes with high accommodation costs will be able to tap into an expanded accommodation supplement rate.

The Government also re-jigged New Zealand’s districts according to housing costs, meaning 136,000 people getting the maximum supplement will gain an average $36 per week for housing costs alone.

In some locations, that figure could be higher.

For a two-person household, it increased to between $25 and $75 a week. The maximum increase for larger households rose by between $40 and $80 a week.

So, a single person receiving a main benefit and paying $290 a week in rent while receiving the maximum weekly supplement of $100 in South Auckland, Tauranga or Queenstown, would get a $65 increase in their supplement payment.

Low-income working families facing high accommodation costs could see a bigger increase.

A couple with two young children and one working partner on minimum wage, paying $435 a week in rent, could get a $145 increase in their weekly accommodation supplement.

The Government intends to raise the bottom two tax thresholds, boosting the incomes of about 1.3 million families.

The $14,000 income tax threshold will rise to $22,000, and the $48,000 threshold will be lifted to $52,000. The change provides a tax reduction of $10.77 a week for anyone earning more than $22,000 a year, and a tax reduction of $20.38 a week for anyone earning more than $52,000.

On top of the income threshold changes, the Family Tax Credit rates under Working For Families rise by $9.25 a week for the first child under 16.

Depending on the ages of subsequent children in a family, the Family Tax Credit increases by $17.75 a week or $26.81. But the accompanying abatement rate now kicks in at the lower income level of $35,000 a year, and rises from 22.5 cents in the dollar, to 25c.

This move appears to cut out the provision that past National governments have labelled as ‘‘middle-class welfare’’, and would leave some Kiwi families in either a neutral position or slightly worse off.

Joyce has also handed something to students in the Budget; the accommodation benefit – which is paid to student allowance recipients – will increase by up to $20 per week.

Superannuitants would see an automatic bump of $13 a week because superannuation payments are linked to after-tax wages.

None of these changes take effect until April 1, 2018, meaning National will need to be voted back into Government for these benefits to be felt.

Joyce said the Family Incomes Package would boost the incomes of more than 1 million families by an average of $26 a week.

The abatement rate changes to Working For Families would claw back some increases to target more support to lower-income families, and Joyce conceded some families may be get less because of the tax changes – though they would gain in other areas.

‘‘The measures in this Budget are expected to lift 20,000 households above the threshold for severe housing stress, and reduce the number of children living in families receiving less than half of the median income by around 50,000,’’ he said.