Half of lowest earners miss out on Budget perks

Senior Reporter, Health·NZ Herald·

26 May, 2017 05:25 AM4 mins to read

Finance Minister Steven Joyce says higher rent subsidies are unlikely to lead to higher rents. Photo / Mark Mitchell

More than half of the lowest earners in New Zealand will not get any benefits in the Government's Budget package for families.

The workers who are most likely to miss out are single people who are in affordable housing, the Government says.

The centrepiece of Finance Minister Steven Joyce's first Budget, the families package changed tax thresholds and increased the accommodation supplement and Working for Families payments.

A law change to introduce the changes was passed into law under urgency this afternoon with support from all parties except Labour.

Once it comes into force in April 2018, people earning less than $24,000 will get the most money in the hand, taking home an average of $35 more a week.

However, half of the 299,000 people in this category will take home nothing.

"The people that don't benefit from the families package in that lower quintile are single people that have low housing costs and don't have any children," Joyce told reporters this afternoon.

"And the package was very clearly targeted at people that have young families and that have accommodation stress ... [and] we've been quite open about that."

Between 99 and 100 per cent of people in higher income categories will benefit from the package, taking home between $15 and $33 a week.

Around 1.3 million people in total will be better off under the families package, while 3000 people will be worse off, by an average of $1 a week.

Joyce said an estimated 200 families would be worse off by more than $2 or $3 a week. They would be able to apply for support from a $2 million fund.

Around 136,000 families stand to benefit from the lift in the accommodation supplement, which will rise by between $5 and $80 depending on family size, income and region.

The supplement is paid to low-income tenants to help them pay their rent.

Joyce said that in developing the policy, the Government considered the possibility that landlords could hike their rents as a result of the higher subsidy.

"The Ministry of Social Development has done some research dating back to the last [accommodation supplement] change in 2005 ... and they couldn't find any evidence that the last significant increase in the AS had any impact on rental levels."

He warned landlords not to take advantage of a larger subsidy for tenants.

"I'd counsel them to be very cautious about that. Officials at both the Ministry of Business, Innovation and Employment and MSD are going to keep a close eye on that sort of activity over the next little while.

Officials would act if landlords were found to be lifting rents, but he did not give any detail about what sanctions could be imposed.

In his Budget speech on Thursday, Joyce partly justified the removal of the Independent Earner Tax Credit by saying that just 32 per cent of the people who were eligible for it did not claim it during the tax year.

The legislation, however, showed that 80 per cent of the 645,000 eligible people claimed the tax credit in total - often at the end of the tax year or in later years.

Joyce said: "The point I was making in the Budget speech is that a lot of people claim this stuff one, two, three years later and I'd rather they got it through the tax system rather than through this rigmarole."

The removal of the tax credit, which is worth $10 a week, will be offset by the new tax cuts.