Low and middle income families get boost from today

Low-income families are expected to get a boost to their incomes by an average of $66 a week from this Sunday.

Just how much more money families get will depend on their total income, how many children they have and the age of their children.

At the same time on July 1 the regional fuel tax for Auckland comes into effect, adding 11.5c to the price of a litre of petrol.

The National Party says low-income households will be worst hit by the tax. But the Coalition government argues those households will still be materially better off from the increased support in the Families Package announced last December.

Specifically, from July 1 the Best Start payment of $60 a week will begin for newborn children and for many families continue in years two and three. Incomes of middle and low-income families will also be boosted by increasing the family tax credit and by raising the Working for Families abatement threshold.

A winter energy payment of $450 for single people and $700 for couples also comes into effect for those on benefits and receiving New Zealand Superannuation.

At the same time paid parental leave is increased from 18 to 22 weeks from Sunday before rising to 26 weeks in 2020.

Overall, the implementation of the families package announced in December is expected to cost $1.157 billion in the 2018-19 year. The Treasury expects that will boost household spending and support economic growth.

Replaces National's tax plan
But it replaces the previous National-led government’s own tax package, which was expected to cost $8.36b over five years while the Coalition government’s package will cost just $5.53b over the same period.

National’s package included across-the-board tax cuts while the coalition’s package is aimed specifically at low and middle-income earners. It believes it will not only provide greater targeted support to those households but also be better for the economy because those on lower incomes are more likely to spend the money in New Zealand.

The government estimates in the first year the average increase in household incomes will be $66 a week but that varies depending on the household.

Once the package is put fully into effect in 2020-21 an estimated 385,000 families with children will be better off by $75 a week. Those without children will also benefit but not by nearly as much as families.

National claims the regional fuel tax will detract from any gains low-income families make in Auckland.

Its transport spokesman, Jami-Lee Ross, says it is a regressive tax that hurts those on low incomes the most because a higher percentage of their income is spent on fuel than higher- income households.

“Those who are on a lower income are more likely to live further away from main centres and they are also less likely to have newer and more fuel-efficient cars. This means people on lower incomes are more reliant on fuel because they need to drive further and consume more fuel when they drive,” Mr Ross says.

But the government says low-income earners will still be much better off.

Meanwhile, the government’s clampdown on multi-national tax avoidance also comes into effect on Sunday.

Parliament passed legislation earlier in the week that will ensure companies pay tax on the actual amount of business they carry out in New Zealand rather than being able to shift it to overseas jurisdictions and avoid paying tax.

Revenue Minister Stuart Nash says Inland Revenue estimates the measures could increase the tax take by $200 million a year.

But Mr Nash says it is only a first step and further measures might be required.

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