PM: Super rise to match GST

If GST rises in the upcoming budget then superannuation payments would immediately rise by 2 per cent in addition to any tax cuts that would apply, Prime Minister John Key said today.

The Government is considering lifting GST from 12.5 per cent to 15 per cent and cutting property tax deductions to fund across the board tax cuts.

Mr Key made the announcement at a speech to a Grey Power meeting in Auckland today.

"Superannuitants would get an income tax cut, which would apply both to superannuation payments and to any other income they receive from interest, dividends or part time work," Mr Key said in speech notes.

"In addition to their tax cut, superannuation payments would be increased up front, by just over 2 per cent, to reflect the general rise in prices. The increase in super payments would be immediate from the day GST went up without waiting for the usual annual inflation adjustment."

In addition tax cuts would mean a lift in the after-tax average wage, raising the floor for superannuation payments, which are linked to the average wage.

Super payments to married couples can not drop below 66 per cent of the after-tax average wage, so this increase would flow through to super.

The Government has slowly been releasing its thinking on a tax package since the Tax Working Group made recommendations for changes to the system earlier in the year.

Recently Finance Minister Bill English indicated that aligning the top personal, trust and company tax rates is still on the table, though a need to reduce the company rate even further than the current 30 per cent might not make that possible.

Mr English said any drop in Australia's company tax rate would have to at least be matched by New Zealand

Mr Key also gave another hint in his speech that the second highest tax rate of 33 per cent taxed on income between $48,000 and $70,000 could drop to 30 per cent.

He argued that cuts would help people save and pay off a mortgage.

"A reduction in the second-highest tax rate from 33 per cent to 30 per cent would represent around a 4.5 per cent increase in the return to savers. That sort of increase is in additional reason to favour saving over spending," Mr Key said.

Labour has been campaigning hard against the planned tax package, arguing it will hurt the least well off the most and reward the wealthiest.

Labour leader Phil Goff is launching a bus tour campaign from Auckland to Dunedin on Sunday to "Axe the Tax".

Mr Key said Mr Goff should say whether a Labour Government would reduce GST from 15 per cent and raise income taxes to fund it.

Labour has not taken a position on that.

- NZPA