Budget good news for superannuitants

Budget 2010 is good news for those receiving New Zealand Superannuation, Minister for Senior Citizens John Carter says.

“In addition to receiving an income tax cut, recipients of New Zealand Superannuation will be fully and permanently compensated for the increase in GST from 1 October 2010,” Mr Carter says.

“This means people who receive New Zealand Superannuation will get a considerable increase to their after-tax income.

"For example, a married couple on NZ Super with no investment income will get a tax cut of $11.52 a week, a $10.12 increase in their NZ Super payments and pay an extra $10.87 in GST. Overall they are $10.77 a week, or about $560 a year better off.

“The compensation component of this increase will never run out or expire, as the usual adjustments from 1 April 2011 will ensure this is permanent.”

The 2.02 per cent increase in payments to recipients of NZ Super to compensate for the increase in the rate of GST reflects calculations of the actual effect on prices of the rise in GST.

“Both Statistics New Zealand and the Treasury have advised that the expected increase in the Consumer Price Index (CPI) as a result of increasing GST is about 2 per cent. That is based on prices on items covered by GST going up by 2.22 per cent, but only about 91 per cent of spending on goods and services is on items that incur GST,” Mr Carter says.

Items exempt from GST include rent for private premises, mortgage repayments, school donations and some credit service charges.

If local authorities factor the GST increase into the rates-setting process for 2010/11, the rates rebate scheme will be adjusted to take account of the corresponding upward CPI movement

“Many older New Zealanders have saved for their retirement and we don’t want the GST increase to reduce the effectiveness of those savings. That is why we have cut the tax rates on interest earned from investment and savings,” Mr Carter says.

From 1 October 2010 resident withholding tax (RWT) rates applying to interest will be reduced so they align with the new personal tax rates. The rates for Portfolio Investment Entities and managed funds will also drop. These changes will increase after-tax earnings on savings.

“This Government is committed to maintaining the New Zealand Superannuation married rate payment at 66 per cent of the after-tax average wage, from the age of 65,” Mr Carter says.

More information on how Budget 2010 tax changes affect superannuitants, including tax calculators, can be found at www.taxguide.govt.nz

ENDS

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