Personal tax changes kick in today! What is expected and what actions are needed?
Personal Income Tax Thresholds
Changes to individual personal Income Tax thresholds come into effect from 31 July 2024.
Because these tax cuts are effective part way through the 2025 financial year, there will be composite rates that apply for this year.
See below the new income threshold brackets and the composite rates for 2025.
For wage and salary earners, then payroll software providers should already have these new rates already built into their systems so the PAYE calculations should be correct from the effective date. If a manual calculation is prepared each pay period then IRD have already released new PAYE deduction tables, you can find these on the IRD website.
For Shareholder Employees, then the tax system will automatically calculate the tax rate based on the composite rate for 2025. For provisional tax payers, the standard uplift method calculation remains unchanged so for the 2025 year the calculation may be slightly out.
Independent Earner Tax Credit
Changes to Independent Earner Tax Credit (IETC) come into effect from 31 July 2024.
Previously those earning between $24,000 and $44,000 per annum were eligible to receive the IETC in full, the entitlement reduced gradually for earnings between $44,000 and $48,000.
With the change, those earning between $24,000 and $66,000 are now eligible to receive the IETC in full, the entitlement reduces gradually for those earning between $66,000 and $70,000.
The full tax credit entitlement is $20/fortnight (maximum of $520 per annum). There is eligibility criteria that must first be meet including a tax payer not receiving either any social welfare or Working For Families payments.
In-Work Tax Credit
Changes to the In-Work Tax Credit (IWTC) come into effect from 31 July 2024.
IWTC's are available to working families with dependent children who qualify. The base rate for the IWTC increases from $3,770 ($72/week) to $5,070 ($97/week), meaning the IWTC will increase by up to $50/fortnight depending on income.
Minimum Family Tax Credits
Changes to the minimum family tax credit (MFTC) come into effect from 31 July 2024.
MFTC's are available for low income earning working families with dependent children who qualify, in addition to the IWTC. The threshold to get the MFTC increases by $4/fortnight.
FamilyBoost Credits
Did you know about the FamilyBoost (FB) credits?
Families can apply for reimbursement of early childhood education costs through myIR. Registrations for the FB credit start 1 September 2024 but the cost of reimbursement applies from 1 July 2024 with the first of the of the refunds being paid out from October 2024 and paid out each quarter. The amount families can claim gradually reduces for those earning between $140,000 and $180,000/year and families that earn over $180,000 are ineligible.
Families can be reimbursed up to 25% of their early childhood education costs up to a maximum of $75/week for families earning up to $140,000 after the 20 hours free and MSD Childcare Subsidy have been taken into account. Families earning between $140,001 to $150,000 can claim a maximum of $56.25/week. Families earning between $150,001 to $160,000 can claim a maximum of $37.50/week. Families earning between $160,001 to $170,000 can claim a maximum of $18.75/week.