1 April changes raise incomes for 1.4 million New Zealanders

 1 April changes raise incomes for 1.4 million New Zealanders

Changes to the minimum wage, main benefit levels and superannuation rates that come into force today will raise the incomes for around 1.4 million New Zealanders.

“This Government is committed to raising the incomes for all New Zealanders as part of laying the foundations for a better future,” Minister for Social Development and Employment Carmel Sepuloni says.

“Over the last financial year the average wages for working New Zealanders lifted 3.1 percent, this means Superannuation and Benefit Levels will also be lifted by the same amount.

“This is the second rise in Main Benefits under the new indexation to wage rates.  Under the previous indexation to the Consumer Price Index, beneficiaries would have only received a 1.15 percent rise.

“This change builds on the introduction of the $5.5 billion Families Package, Winter Energy Payment and the $25 per week main benefit rate rise last year. 

“Today also sees the largest rise in abatement levels in two decades. This means that people receiving a main benefit and in part time work can keep more of what they earn.

“We recognise we have more to do, but we are making good progress,” Carmel Sepuloni said.

People earning minimum wage will also receive more money in the hand from today.

“Today’s rise to $20 per hour is estimated to boost wages across the economy by $216 million, giving New Zealanders more money to spend at local businesses,” Minister for Workplace Relations and Safety Michael Wood said.

“This will lift the incomes of around 175,500 New Zealanders – which means $44 more each week before tax for Kiwis working full time on the minimum wage.

“There are many Kiwis who earn the minimum wage who have gone above and beyond in our fight against COVID. I think everyone agrees those who served us so well during lockdown – including supermarket workers, cleaners, and security guards – deserve a pay rise,” Michael Wood said.

Other changes today include:

·        The starting-out and training minimum wages will rise to $16.00 per hour, to remain at 80 per cent of the adult minimum wage.

·        A new top tax rate of 39 percent on income earned over $180,000 will apply.

·        Student Allowance payments will increase 1.15 percent.

  • Annual General Adjustment to increase Foster Care Allowance and the Orphan’s Benefit and Unsupported Child’s Benefit by 1.15%.

Notes for Editors

Contacts:

Office of Minister Sepuloni – Mark Sleeman 021 859 524

Office of Minister Wood – Tom James 027 308 6010

Benefit changes

Over 1.2 million individuals are expected to receive increased financial assistance as a result of the Annual General Adjustment to Main Benefits and Superannuation on 1 April 2021.

The minimum wage rise will affect 175,000 people. Some people on minimum wage will also be receiving a main benefit (or part thereof), therefore it is estimated 1.4m individuals will be affected by today’s changes.

Approximately:

·    369,000 people getting a main benefit will see their payments increase by 3.1%, in line with movement in the net average wage.

·    830,000 people receiving New Zealand Superannuation and Veteran’s Pension will see their pension increase by 3.1 percent so that they remain at 66% of the net average wage.

·    60,000 students receiving Student Allowance will see increases of 1.15% indexed to the Consumers Price Index (less the cigarettes and tobacco subgroup).

·    70,000 people receiving supplementary assistance only will see increases of 1.15% indexed to the Consumers Price Index (less the cigarettes and tobacco subgroup).

–        175,000 people will see a wage rise due to the Minimum Wage adjustment.

Benefit rates adjustments

The following table shows the impact of the net average wage adjustment on selected main benefit rates.

Increases in benefits may reduce other payments people receive, such as Temporary Additional Support and Childcare Assistance, but generally people will be better off because of these changes.

 Main benefit (net rates)Before 1 April 2021From 1 April 2021Amount of increase
Jobseeker Support – single 25 years and over$250.74$258.50$7.76
Jobseeker Support – couple (without children) total$401.20$413.62$12.42
Jobseeker – couple with partner on benefit (with children) total$428.06$441.30$13.24
Supported Living Payment – single 18 years and over$307.14$316.65$9.51
Supported Living Payment – couple (without children) total$495.22$510.54$15.32
Sole Parent Support$375.17$386.78$11.61
Young Parent Payment – couple with partner not on benefit (with children) total$227.46$234.50$7.04

Increase over the last four years (includes $25 increase to Benefits announced in 2020):

Main benefit (net rates)1 April 2017From 1 April 2021Amount of increase over four years
Jobseeker Support – single 25 years and over$212.45$258.50$46.0521.68%
Jobseeker Support – couple (without children) total$354.06$413.62$59.5616.82%
Jobseeker – couple with partner on benefit (with children) total$379.34$441.30$61.9616.33%
Supported Living Payment – single 18 years and over$265.54$316.65$51.1119.25%
Supported Living Payment – couple (without children) total$442.54$510.54$68.0015.37%
Sole Parent Support$329.57$386.78$57.2117.36%
Young Parent Payment – couple with partner not on benefit (with children) total$202.31$234.50$32.1915.91%

Figures with Family Package included

Estimated average income increases by payment type as at 1 April 2021 compared to late 2017 policy settings

Family typeFamily Tax CreditBest StartMain BenefitAccommodation SupplementTemporary Additional SupportTotal not in Winter periodWEPTotal in winter period 
With children
Couple with Children $41.20$24.36$46.36$29.38-$5.78$135.53$31.48$167.01
Sole Parent $32.23$17.29$40.62$31.41-$6.10$115.46$31.79$147.24
Without children
Couple no Children $0.00$0.09$44.39$20.11-$4.41$60.19$29.99$90.18
Single no Children $0.00$0.03$35.32$7.64-$1.81$41.18$19.76$60.94
All beneficiaries
Total$9.64$5.29$37.49$14.98-$3.15$64.26$23.68$87.94
With children $33.48$18.28$41.43$31.13-$6.05$118.26$31.74$150.00
Without children $0.00$0.04$35.90$8.45-$1.97$42.41$20.42$62.83

Superannuation

Benefit (Tax code M)Before 1 April 2021From 1 April 2021
Single Living Alone$423.83$436.94
Couple who both qualify for NZ Super (total)$652.04$672.22

Note: There are a number of scenarios for NZ Super and Main Benefit.  A full list of rates have been published in the Gazette

Abatement Threshold Changes

Abatement thresholds and rates from 1 April 2021:Sole parents, people on Supported Living Payment and people under 65 getting Veteran’s Pension: Payments will reduce by 30 cents in the dollar once they reach the $160 a week income abatement threshold, and 70 cents in the dollar once they reach a second threshold of $250.

People getting Jobseeker Support and some other main benefits, or people who have a non-qualified partner included in their NZ Super or Veteran’s Pension: Payments will reduce by 70 cents in the dollar once they reach the $160 a week income abatement threshold.

For couples where one partner gets NZ Super and the other partner gets Jobseeker Support or Supported Living Payment: Abatement applies only to the Jobseeker Support or Supported Living Payment; the benefit isabated at half the above rates; and NZ Super is not counted as combined income.

BenefitCurrent1 April 2021
Jobseeker Support (except for sole parents)Income over this threshold is abated at 70 cents in the dollar:
$90$160
·        Jobseeker Support – sole parent·        Sole Parent Support·        Supported Living Payment·        Veteran’s Pension (under 65 years old)Income over this threshold is abated at 30 cents in the dollar:
$115$160
Income over this threshold is abated at 70 cents in the dollar:
$215$250
·        NZ Super/Veteran’s Pension with a non-qualifying partner included.Income over this threshold is abated at 70 cents in the dollar:
$115$160

·         Increasing the abatement thresholds to $160 and $250 per week is expected to benefit approximately 82,900 individuals and families by an average of $18 per week. Of these:

–        around 29,500 individuals and families currently receiving a working-age benefit are expected to benefit from the change with an average weekly gain of $29;

–        around 3,100 individuals and families receiving NZ Super are expected to benefit with an average weekly gain of $21;

–        more than half (50,300) are non-beneficiaries receiving Accommodation Supplement, who will gain an average of $12 a week;

–        around 50,200 are families with children; these changes are estimated to reduce child poverty by around 6,000 (+/- 3,000) on the AHC50 fixed line measure and 2,000 (+/- 3000) on the BHC50 measure in 2021/22.

Who is paid the minimum wage?

  • There are an estimated 57,700 minimum wage workers in New Zealand working, including in the following sectors:
    • Hospitality: 12,500 or 13.2% of their workers
    • Retail: 15,600 or 8.2% of their workers
    • Administrative Services: 2,900 or 4.0% of their workers
    • Manufacturing: 4,700 or 2.4% of their workers
    • Health: 3,800 or 1.6% of their workers
  • There are higher numbers of Māori, Pacific people, young people and women on the minimum wage:

o   15% of minimum wage workers aged 16-64 are Māori

o   9% of minimum wage workers aged 16-64 are Pasifika

o   49% of minimum wage workers aged 16-64 are between the ages of 16 and 24

o   56% of minimum wage workers aged 16-64 are female.

  • Around 175,500 workers (currently earning from $18.90 to $20.00 per hour) will receive an increase to the new minimum wage.

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