The average earner will be $15 a week better off, under the biggest shake-up of New Zealand's tax system in nearly a quarter of a century, today's budget shows.
Finance Minister Bill English has announced across the board tax cuts which he says will strengthen economic growth and help families get ahead in New Zealand.
From October 1 all personal tax rates will be cut.
The 12.5 per cent rate for income up to $14,000 will drop to 10.5 per cent, the rate on incomes between $14,001 - $48,000 will drop from 21 percent to 17.5 per cent, while those earning $48,001 to $70,000 can expect a cut from 33 per cent to 30 per cent. Those earning more than $70,000 will now pay 33 per cent instead of 38 per cent.
The average family is expected to be $25 per week better off under the changes.
Secondary tax and resident withholding tax rates will also be reduced from October 1 to align with the cuts in personal tax rates.
GST will rise to 15 per cent while New Zealand superannuation and Working for Families will rise 2.02 per cent from October.
Company tax rates will fall to 28 per cent.
The Government has also announced it will end depreciation tax breaks on buildings from April 1 next year, removing the incentive for people to invest in property purely for tax reasons.
The Government's coffers are expected to be boosted by at least $2.48 billion over the next four years as a result of changes to property tax, which would then be returned to taxpayers as part of across the board tax cuts.
"Closing loopholes that allow well-off families to use investment losses to inflate their eligibility for Working for Families payments will remove another incentive to invest in property," English said.
A property investor with a portfolio of 25 properties will be $288 per week worse off under the changes.
A person on the average annual wage of about $50,000 paying an average rent or mortgage will get a weekly income tax cut of about $29 per week before the increase in GST is applied, and $15 post the increase.
A typical family with two children and an average household income of $76,000 will be about $25 per week better off.
The Government estimates workers earning between $15,000 and $50,000 a year will be paying between 40 and 50 per cent less tax than they were in 1996 under the tax changes.
English says the cuts in tax will reward effort, encourage savings, and help families get ahead.
* Average income household - $24.71c per week better off
* Average wage worker - $15.91c per week better off
* Couple receiving New Zealand superannuation - $10.77c per week better off
* Professional property investor with 25 properties - $288.18c per week worse off
* Couple saving for their first home - $40.38c per week better off
* Domestic purposes beneficiary - $2.45c per week better off
* Minimum wage worker - $6.36c per week better off
* Student - $2.66c per week better off
* Business owner structuring income to claim for Working for Families - $153.03c per week worse off.
Individuals and families can work out how Budget 2010 tax changes will affect them at taxguide.govt.nz.