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Taxation (Annual Rates and Budget Measures) Act 2011

The Taxation (Annual Rates and Budget Measures) Bill was introduced under urgency on 19 May 2011 and received Royal assent on 24 May 2011. The new Act gives effect to tax reforms announced in Budget 2011 to reduce the fiscal costs of KiwiSaver and Working for Families tax credits. The Act also sets the annual rates for income tax for the 2011-12 tax year.

The Act amends the Income Tax Act 2007 and the KiwiSaver Act 2006.

Working for Families tax credits

The Taxation (Annual Rates and Budget Measures) Act 2011 introduced a number of amendments that affect the calculation of Working for Families (WFF) tax credits. There are three parts to the amendments to the WFF tax credits:

  • The rate at which WFF tax credits are abated will increase by 1.25 percentage points every time the Family Tax Credit (FTC) amounts are increased for inflation, until the abatement rate reaches 25%. The first abatement rate increase will occur on 1 April 2012 when the first inflation increase under section MF 7(2) of the Income Tax Act 2007 applies.
  • The threshold at which WFF tax credits begin to abate will decrease from $36,827 to $36,350 on 1 April 2012. The threshold will continue to decrease by $450 each subsequent time the FTC amounts are increased for inflation, until the threshold reaches $35,000.
  • The FTC amounts for children aged 16 and over will no longer be increased for inflation until the FTC amounts for the eldest child under 16 or for subsequent children aged 13 to 15 equals the respective 16 and over amounts. At this point subsequent increases for inflation will apply.

KiwiSaver

The new legislation introduces changes to member tax credits (MTC) and the taxation of employer superannuation contributions.

Annual income tax rates for 2011-12 tax year

The annual income tax rates for the 2011-12 tax year are specified in schedule 1 of the Income Tax Act 2007.