Rt Hon Helen Clark
Prime Minister of New Zealand
18 August 2005

Media Statement

Tax relief for thousands more working families

Labour in government will provide tax relief to 60,000 more working families from April next year, Prime Minister Helen Clark announced today.

Under the new policy, a family with two children, and an income of $65,000 will receive $64 a week in tax relief from April next year, rising to $84 by April 2007.

Families with children earning less than $35,000 a year will, in effect, be paying no tax at all from 1 April next year.

The new policy brings the total number of families receiving targeted tax relief next year to 350,000.

"Today's announcement is a major step forward in Labour's commitment to put families with children first," Helen Clark said. "The changes will mean tax relief for many more middle income families in New Zealand.

"The policy will make a measurable difference to working families by providing tax relief at the time they need it the most – when they have dependent children.

"The tax relief will be delivered through Inland Revenue and builds on that support delivered to thousands of low and modest income families through the Working for Families package." This increase is in line with Labour's priority of extending tax relief to more families with children.

The fiscal outlook in the Pre-election Economic and Fiscal Update meant it was now possible to fund further targeted tax relief.

"The stronger than forecast surplus track creates room for extra tax relief.

However, economic and fiscal considerations mean it would be irresponsible over the next year to 18 months to spend or forego all of this additional revenue." Helen Clark said targeted tax relief was by far the best option for supporting working families.

"By targeting tax relief to people facing the costs of raising children, we are able to provide substantial relief to all but the top quartile of families for much less than the cost of an across the board tax cut.

"Today's announcement means a family with one child and a household income of $51,000 will now gain an extra $70 per week in tax relief next year. Tax rates would need to reduce by 7 cents in the dollar across the board to boost their income by the same level at a cost of around $5.2 billion per annum." Helen Clark said accessing the extra tax relief would be a straight forward process.

"Families already receiving targeted tax relief do not need to do anything as increased payments will automatically be made to those eligible. For those who have become eligible, they simply need to fill out one application form from the IRD, and then payments can be made.

"The additional tax relief will be achieved by both increasing the income threshold for eligibility to full Family Support and reducing the rate at which it abates.

"Labour's Working for Families package, announced in the 2004 budget, initially targeted most relief to low and modest income families. The priority now is to extend the range of families which can benefit.", Helen Clark said Families can work out how much they will be entitled to receive by using the calculator on the Labour website at www.labour.org.nz

ENDS

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