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Source: New Zealand Government

The Coalition Government is delivering on its commitment to ease the cost-of-living by increasing main benefit rates in line with inflation and ensuring the Minimum Family Tax Credit threshold remains aligned with this change, Social Development and Employment Minister Louise Upston says.

The Social Security (Benefits Adjustment) and Income Tax (Minimum Family Tax Credit) Amendment Bill was introduced under urgency in Parliament today. It amends the Social Security Act 2018 to ensure main benefits keep pace with inflation by indexing them to the Consumers Price Index (CPI).

This reverses the changes made by the previous government in 2019 to index main benefits to net average wage growth.

“These changes will protect the real incomes of benefit recipients and low-income working families for years to come, while also making sure the cost of the benefit system to taxpayers is sustainable and manageable in the long-term.”

The Bill also amends the Income Tax Act 2007 to adjust the Minimum Family Tax Credit threshold from $34,216 to $35,204 (after tax) so that it remains aligned with changes to the rate of main benefits.

“This change will ensure low-income working families remain better off financially in full-time work and receiving the Minimum Family Tax Credit than they would be on a main benefit.

“The cost-of-living crisis that the previous government left us is hard on beneficiaries, and this change will mean their purchasing power is protected. 

“Over the longer-term, taxpayers will gain from savings in benefit expenditure, while benefit recipients retain a consistent level of income.

“This government’s plan to ease the cost of living will benefit both people in work and those receiving benefits. We have committed to providing income tax relief, increasing tax credits for working households, and introducing a new childcare tax credit to help address financial pressures.

“This change also supports our relentless focus on getting people who can work into work by improving incentives to move off benefits. We know that a job is the best way for New Zealanders to get ahead, and we want to make sure the rates of main benefits reflect this.

“Indexing main benefits to inflation is a measure that has been used for 31 of the past 35 years by governments across the political divide. It’s a responsible and common-sense way to maintain the income support system.”

Restoring the indexation of main benefits to CPI is projected to save taxpayers $669.5 million over the forecast period through to 2027-28.

The Bill is being progressed under urgency to ensure the rate of main benefits will reflect the rise in inflation when the yearly indexation is implemented on April 1.

Notes for editors

  • Main benefits include Jobseeker Support; Sole Parent Support; Supported Living Payment (with and without children); Youth Payment; Young Parent Payment; Orphan’s Benefit; Unsupported Child’s Benefit; rates of generally abolished former Widows’ Benefits; rates of generally abolished former DPB for solo parents; and rates of benefit payable to long-term hospital patients
  • The Minimum Family Tax Credit is a payment that tops up your family’s after-tax weekly income to an amount that is more than what you could potentially receive on benefit. Following these changes, the guaranteed minimum income for families in full time work will be $35,204 (after tax)

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