Bill English didn’t mention it – and nor did John Key, in his comedy act called his budget speech.
But we spotted it. On page 69 of the 2010 Budget speech handed out to MPs this afternoon was this sentence :
“The redundancy tax credit will be removed from 1 October 2010.”
Labour introduced the redundancy tax rebate in 2007 to make the taxing of redundancy payments fairer for workers who were pushed into a higher tax bracket as a result of receiving lump sum compensation payment for redundancy. This applied to redundancy payments paid on or after 1 December 2006.
This was because it was simply not fair to have to pay a higher level of tax because a worker loses their job through no fault of their own.
But now National will ensure that workers who do receive redundancy pay can be overtaxed like they used to be. Talk about punishment.
This comes on top of the government’s recent failure to support legislation that would have given all Kiwi workers minimum redundancy payments .
Now, thanks to National, even those workers who do receive compensation will also be penalised.
Mean, mean, mean.
Disgusting
NACT really knows how to kick the average Joe when he is down.
In fact they’d probably sell tickets to the show.
A good idea I believe – the tax system need to be simple and without complication. But when taken with the tax cuts announced today – someone being made redundant (after 1 October)will now pay a lower rate of tax. Good work Bill and John on another improvement.
Monty you just made my point
People who spend their redundancy money to supplement any benefit they receive will be attracting GST at a rate greater than any benefit. They will be worse off from the GST increase. let alone the tax change mentioned here.
The same impact occurs for those on benefits and Super who spend investment income – as their spending is greater than their actual current income they will be receive compensation in this tax reform package and will be worse off as a result.
The promise that no one would be worse off has been broken a number of times for a number of groups of people.
‘But now National will ensure that workers who do receive redundancy pay can be overtaxed like they used to be’
So how come it took until 2007 before this was instituted?
Because in a solid growth economy it wasn’t nearly as important.
Monty’s profile picture is back!
The Right still has a prediliction for day dreaming about the past.
Labour has moved on to the road ahead and what needs to be done in the future – while the neocon Right is still relitigating the last 10 years.
It almost seems as if they have no idea of what to do in the future, so have to spend time attacking history.
*Couldn’t be*.
(Could it?) :rolleyes:
Have a National goverment ever been anything other than Mean and unfair to average kiwis?
They don’t. They’re absolutely terrified of the future which is why they keep looking to the past for answers to today’s problems that are a direct result of the past.
You get money – its taxed. Fair is fair to all.
Why should someone not get taxed at the same rate just because its a redundancy payment?
What happens if they walk out and get a new job the following day.
Simple tax rates that treat all by the same rules.
Anyway – as Monty said – thanks to National – at least they will only be paying a fair rate of Tax – and are possibly still better off than what you had done.
Only Monty could come up with this clanger
“someone being made redundant (after 1 October)will now pay a lower rate of tax”
mmmm . No job so you pay less tax !!
LOL
“someone being made redundant (after 1 October)will now pay a lower rate of tax.”
Monty, yes they cut the tax rate BUT it is still going to be higher than the cash left from a redundancy cheque cut 12 months ago.
tax cut versus tax credit = loss of income for redundancy payout. Hope that helps you understand.
Tracey @11:23am “tax cut versus tax credit = loss of income for redundancy payout. Hope that helps you understand.”
Really Tracey, are you really advocating that the Government should take the tax from redundant workers at the time of their redundancy and then give it back later in the form of a tax credit? Are you aware of the costs of doing a money-go-round like that? And why? so that the grateful worker thinks the benificent gummint has given him/her something where it is really only giving them some of their own back?
How much better to have a lower tax rate and not take it off them in the first place? Less cost and the redundant person gets the extra cash when they walk out the door, not some months (about 15 months when it happened to me) later.
http://www.scoop.co.nz/stories/PO1005/S00240.htm
Redundancy by definition is wages or salary grossed up and paid in advance – of course it should be taxed! It is income as defined under the Tax Administration Act. Sorry, but that is most definitely one hand-out too many.
If Labour thinks this is so unfair, then why are they happy to continue taxing self-employed people up until the receive their last dollar of income before their contract runs out or business dries up etc?
@Rebecca – not saying it shouldn’t be taxed. But redundancy is not salary or wages grossed up. It is compensation for losing a job. I know you are bitter about the self employed, but you need to look beyond blame and start to come up with some constructive ideas – for example, why is it the government’s fault that the self employed are paid so little?
Because, starting with the 4th Labour government, they instituted the “free-market” model and the “free-market” never pays full price if it can help it. Which it usually can because the people paying are rich and the people taking are the people who need to put food on the table. They’re working for less than cost price and going backwards but not quite so fast as they would be if they didn’t have any income at all.
Self-employed are not paid so little – the people you are referring to have most likely jumped into things such as buying a big fancy rig without much thought to the economics involved. I have discussed that issue at length and sorry, but I believe you have been completely misinformed – what you have been told is far from representative of the industry. However, that is for the association to take up with you if they feel that is worthwhile & appropriate.
Self-employed people do however, have to wear the cost of everything – there is no annual leave, sick leave, holiday pay etc let alone redundancies.
Self-employed people make the choice to be self-employed either because they feel there is no other option or because it suits them better for whatever reason.
Employees make this same choice also.
Employees get a lot of back up through law – especially compared to those who are classed as self-employed contractors where they don’t own the company, have to work to company specifications but have to account for their own tax, ACC & try their hardest to avoid being sick.
While I think getting redundancy as you wanted to push for is a good idea, I do not agree with the tax credit.
Redundancy is based on your current salary therefore it is income therefore it should be taxed. This is what I believe so I agree with NACT removing the tax credit.
That tax credit is a cost that has to be met by tax contributions somewhere. I would prefer that in tight economic times that money went into serving the greater good – such as our health system.
@ Draco – thanks – this is why I have pursued (and will continue to do so) the issues around independent and dependent contractors. My question to Rebecca was to get her to think beyond blaming Labour for increased ACC levies and start to think about exactly what you are saying.
@Rebecca – I think what you are saying is that may workers don’t get a hell of a lot of choices. Redundancy is the same. No-one chooses to lose their job.
Darien yes but neither does a self-emloyed contractor! Like employees they are at the mercy of the company & the economic climate but unlike employees they can’t get a redundancy package.
Basically the argument rests on your definition of income as defined by the Act. I would argue that the statutory interpretation is not meant to preclude redundancy or any other one-off lump sum payment (such as bonuses) that are resultant of a person’s employment and are calculated on their actual salary or wages.
In terms of you wanting me to ” to think beyond blaming Labour for increased ACC levies and start to think about exactly what you are saying” – I am not quite sure what you mean by that.
I, along with thousands of other people in our position do not hold Labour in a favourable light due to the sudden exorbitant increases in ACC & Road Users however, I also look at the wider issues.
The differences lie in ideology vs reality.
You haven’t tried being a builder in Auckland have you? I can assure, there is no choice – it’s either self-employed or a dependent contractor. No one in Auckland hires builders on PAYE. I use it as one of the proofs that competition is more expensive as every single builder has to supply their own tools (about $50k worth) whereas a business would supply only the tools necessary to keep everyone occupied.
Well, Labour were going to decrease ACC levies by shifting out the fully funded model from 2014 to 2015 but they got voted out. RUC does need to go up though to cover the costs that the trucks cause to the roads. It’s quite interesting that you think taxes should go down but that you should still be subsidised by the taxpayer.
It most definitely does.
Draco – re builders, like truck drivers, the emphasis would be then “they feel there is no other option”.
I was just playing nice & referring in general to self-employed which can range from contractors with or without withholding taxes deducted to entrepreneurs & small business….
In terms of ACC levies – Labour increased the levies for Truck owner/drivers by 94% why their employers – that is, the big companies who control everything in this industry, saw their levies go down. In the words of Ruth Dyson, this was to ensure that the levies represented a more “level playing field” – translation, Truck owner/drivers are paying $1.47 more per $100 of income that employees doing the same job.
Translation this has meant they all now paying thousands & thousands of dollars more in ACC levies post 2007 than what they did before 2007.
YET truck crashes have gone down and fatalities involving trucks are the fault of the other drivers/road users 70% of the time.
It is this issue I have brought to the attention of Darien and it is this to which she is referring by implying we all should build a bridge & get over it.
This is the reason why some of us who are self-employed feel that expecting those who are fortunate enough to actually get a redundancy package pay tax on that liable income.
In terms of road users – that is another debate altogether and one you would most definitely lose. For example, you may not be aware that trucks have been paying more than their fair share for years. This has been well-documentated. The increases were completely unjustified and what were their consequences? Higher costs to us as the consumer for goods we either consume or use.
But that is a topic for another post.
Bottom line, the canceling of this tax credit was a good move and is hardly going to persuade voters back to Labour.
Sale of assets….well, that is a little more tricky.
@Rebecca : Have you had a look at how much ACC invested in reducing truck accidents over the past decade? It was megabucks, and that’s why truck accidents have reduced, even although one person a week is still being killed from truck related crashes and accidents involving trucks cost the country $420 million last year. And as for RUC – no-one can tell me how much there is in unpaid RUC, but I do know the prosecutions over the last year resulted in $12 million in fines. So who’s paying their fair share? My point about all this is not blaming the truckies, but looking at how they are actually compensated properly – for every km, every cost and every hour.
@ Rebecca : 6,478 operators were prosecuted between 1 December 2008 and 1 April 2010 for Road User Charges related offences, involving a total of 8,335 prosecutions. The total fines associated with these prosecutions amounts to $12,144,599.40. What’s that about?