The cost of the Canterbury earthquakes and New Zealand’s current economic position has meant that Bill English, Minister of Finance, has had to deliver one of the government’s toughest budgets to date. As the trusted tax agent for everyday New Zealanders we, NZ Tax Refunds, felt it our right, no, our duty, to make you aware of the key announcements and changes that could affect you and the generations that follow.
KiwiSaver
The biggest announcement that will affect approx. 1.7million New Zealanders currently saving for their retirement is the change to the KiwiSaver scheme. The government has announced they will reduce their contribution to the scheme. To help balance the books both the KiwiSaver member and their employer will need to increase their contributions, from 2% to 3% of the member’s pay.
Based on the average New Zealander earning $27,500 per year: The government are now paying $413 less into that member’s scheme and have stated that both the KiwiSaver member and their employers will need to balance the deficit and each will need to pay an additional $276 per year. So although the member is paying more into their KiwiSaver scheme it works out that in total only an additional $138 per year is being deposited. The decrease in government payments will not occur until June 2012 and both the member’s and their employer’s rates will not increase until April 2013.
Will this stop the 20,000 new members joining the scheme every month? We don’t think so; the government are still offering the $1,000 kick start payment as an incentive to get the scheme started. Which is nearly as good as an NZ Tax Refund!
Working for families
Most New Zealand families will be affected by the working for families’ tax credit changes as the Government announced they are reducing the amount of tax credit for higher earners. Families with an income of $35,000 plus will receive less tax credits. However for those families with an income of $35,000 or less you can enjoy an extra $7 a week ($364 a year).
Student Loans
Although there’s over 425,000 domestic students enrolled in tertiary education in New Zealand, the changes to the student loan scheme from the Budget 2011 will not impact all of them. Those that are most affected are:
- Students aged over 55 will experience restricted borrowing, with the exception being tuition fees.
- The overseas-based borrowers will have a shortened repayment window from three years to one year.
- Part time full-year students (93,000+) will no longer have the privilege to borrow for course-related costs.
- Students with an overdue student loan repayment debt of $500 (for more than one year) could face restricted student loan entitlement.
On a more positive note…
District Health Boards will receive an additional $1.6billion to manage price and demographic pressures and increase access to newly backed medicines. Additional funding is also being provided to deliver better public health services, such as $130 million for disability support services and $55 million for mothers and babies.
The budget 2011 provides, over the next four years, an increase of $118 million in new operational funding for school, $550 million for early childhood education and $67 million to increase the number of Trades and Service Academies.
For those of you, like us, in Canterbury, the Budget 2011 has established a Canterbury Earthquake Recovery Fund of $5.5 billion, with $740 million being funded from government agencies’ existing budgets.
The government will raise the funds for the above points and more, by raising approx. $5b – $7billion of funds by partially selling four of its energy companies and increase private ownership of Air New Zealand.
What affect the $1.5 billion which has been reprioritised in government departments will have on the everyday New Zealander we do not know….
