May 15, 2010
Bold highlighting is mine.
Income tax cuts for everyone will be announced in next week's Budget.
They will take effect in October and cost about $2.3 billion a year.
Finance Minister Bill English is promising no dramatics in his second Budget.
"There'll be a few unexpected twists in it but the broad picture has been pretty well articulated," he told the Weekend Herald.
The cuts are likely to reduce personal tax rates from 38c, 33c, 21c and 12.5c in the dollar to 33c, 19c and 10c.
This would give someone on $50,000 - just above the average wage - an extra $20 a week in the hand.
But the Budget will also increase GST from 12.5 to 15 per cent, and once this rise is taken into account, the net benefit will be only $6.
Net gains for people in the $48,000-to-$70,000 tax bracket will be minimal because the 33c tax rate on income in that range is not expected to be cut to offset the GST price rises.
...
The present diversity of rates encourages people to shelter income in trusts, companies and portfolio investment entities to cut their tax liability or reduce income for the purposes of receiving Working for Families payments, calculating child support and making student loan repayments.
The company tax rate of 30c is not expected to be cut in the Budget.
The tax allowance for depreciation on buildings is expected to be removed, but the Government is not expected to set up a capital gains test on short-term property sales, such as those within two years of purchase.
They will take effect in October and cost about $2.3 billion a year.
Finance Minister Bill English is promising no dramatics in his second Budget.
"There'll be a few unexpected twists in it but the broad picture has been pretty well articulated," he told the Weekend Herald.
The cuts are likely to reduce personal tax rates from 38c, 33c, 21c and 12.5c in the dollar to 33c, 19c and 10c.
This would give someone on $50,000 - just above the average wage - an extra $20 a week in the hand.
But the Budget will also increase GST from 12.5 to 15 per cent, and once this rise is taken into account, the net benefit will be only $6.
Net gains for people in the $48,000-to-$70,000 tax bracket will be minimal because the 33c tax rate on income in that range is not expected to be cut to offset the GST price rises.
...
The present diversity of rates encourages people to shelter income in trusts, companies and portfolio investment entities to cut their tax liability or reduce income for the purposes of receiving Working for Families payments, calculating child support and making student loan repayments.
The company tax rate of 30c is not expected to be cut in the Budget.
The tax allowance for depreciation on buildings is expected to be removed, but the Government is not expected to set up a capital gains test on short-term property sales, such as those within two years of purchase.
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