Government unable to tell whether anyone has received full tax rebate

The National front benches (from left): Chris Bishop, Todd McClay, Nicola Willis, Mark Mitchell and Stuart Smith listening as Prime Minister Christopher Luxon has the floor during Question Time. Photo / Mark Mitchell

• Inland Revenue says it is not “geared up” right now to say how many people have received full tax rebate of $252.
• IRD and Government attribute the issue partly to insufficient data.
• The $252 is comprised of several tax benefits.

The Government is unable to say how many families – if any – have received the full fortnightly $252 tax rebate National promised during the election.

Before the election, National campaigned on a series of policies aimed at tackling the cost of living and helping the “squeezed middle”, including up to $252 a fortnight for an “average” income household.

The centrepiece of the Government’s first Budget was a $14.7 billion annual tax package. It included tax band changes and a new FamilyBoost childcare tax credit for families earning up to $180,000.

In an example provided at the Budget, families with an “average” household income ($125,000 a year) with two children in early childcare could get up to “around $252 a fortnight” under the Government’s tax plan.

The $252 figure was comprised not of one single tax benefit, but several bundled together.

Getting the full amount meant both adults in the “average” household would need to qualify for the right amount of tax cut from three sources: the FamilyBoost childcare tax credit, the independent-earner tax credit, and National’s main income tax cut package.

To get the full amount, the couple would need to receive the full $150 a fortnight in FamilyBoost, the full $20 each a fortnight in independent-earner tax credit, plus roughly $30 each in ordinary tax cuts.

That means that five criteria would need to be hit to receive the full amount (two tax cuts per person in the couple, plus the full amount of FamilyBoost, which is given shared between the couple).

Tens of thousands of families will get some money from each or several of these individual tax cuts (including 58,000 receiving FamilyBoost), but very few are likely to get large amounts from all three at the same time.

As the Herald revealed in April, just 249 households as of April 9 had received the full amount of FamilyBoost in the first three-quarters of the year. The Government has confirmed it is changing the settings to boost uptake.

A page from National's 2023 fiscal plan promising $250 a fortnight for an average-income family with young children. Photo / National

While the 249 figure is expected to rise, it means that only 249 households could possibly be getting the full $252 promised as of April 9.

Just how many in that group are getting a further $100 in the other two tax credits taking their tally to $252 is unknown as the Inland Revenue Department (IRD) is not currently set up to be able to say.

IRD not ‘geared up’ to calculate final figure

The IRD told the Herald there were a number of problems in knowing how much tax relief people had received.

To start with, families have up to four years to claim FamilyBoost, so the number of families getting the credit is almost certain to rise in the coming years. There is also a lag when it comes to calculating individual tax liabilities, which can take up to a year.

This means the IRD does “not have a complete picture” of who is getting what “at this stage”.

The problem in knowing how many people received the full $252 a fortnight is even more complicated as it requires the IRD to look back to the period before the tax cuts were brought in, to see what people were earning back then and compare it to what they are getting now.

The IRD told the Herald it was “not geared up” to “calculate how much tax [households getting FamilyBoost] would have paid based on historic rates”.

That means the IRD cannot currently compare those households’ current level of taxation with the tax they paid before the new changes, meaning that currently, IRD cannot say how many people, if any, received the full amount.

The IRD confirmed that to work out an accurate number, it would need to re-run the individual income tax run using last year‘s rates, compare it to the tax they actually paid and combine it with FamilyBoost household data.

‘Obvious complexity’ - Willis

Willis said there was “obvious complexity” in the IRD calculating how those changes have come together to impact individual families.

The tax relief package included some changes that were calculated on a per person basis (through changes to tax thresholds) and some that were calculated according to household and family circumstances, such as FamilyBoost.

“These complexities would not be solved through further research at this time, in part because they depend on data that is yet to be received.”

Willis says the $250 figure was used as part of an example to show how personal income tax changes combined with FamilyBoost could benefit a family, depending on their personal circumstances.

“People’s entitlements for tax relief and FamilyBoost have been delivered exactly as outlined in that example.

“The Government has honoured all the policy commitments underlying the $250 figure, through the delivery of our Budget 2024 tax relief package,” she said.

Labour’s finance spokeswoman Barbara Edmonds said: “how convenient that the Government can’t say whether it has delivered on its biggest cost-of-living promise”.

“Nicola Willis promised Kiwis $252 a fortnight, but she can’t even say how many people got it.

“For all we know, nobody received the full amount. Kiwis need a real plan to tackle rising costs, not another broken promise,” she said.