Budget 2011: Government delivers an austere but sensible Budget
Budget 2011 delivers an austere but sensible reform package that, as expected, includes changes to KiwiSaver, Working for Families and student loans.
It also sets up a $5.5 billion Canterbury Earthquake Recovery Fund to help rebuild Christchurch.
One surprise in the Budget is the axing of the tax-free status of employer contributions to KiwiSaver from 1 April 2012.
The Government subsidy for KiwiSavers (called the Member Tax Credit) will fall from a maximum of $20 per week to $10 per week. Minimum member and employer contributions will increase from the current 2% to 3% from 1 April 2013. The Government's $1,000 kick-start payment for each new KiwiSaver is retained. The changes to KiwiSaver will save the Government $2.6 billion over four years.
High income families will see their entitlements to Working for Families assistance diminish. The Government will adjust the abatement thresholds and abatement rates to achieve this objective. The changes will take place in four steps, starting 1 April 2012. The changes will save the Government $448 million over the next four years.
The Government has decided to reduce the fiscal cost of the student loan scheme by tightening criteria for student loans such as limiting lending to people aged over 55 or with bad debts. This will save about $277 million over five years.
Also announced were changes to the thin capitalisation rules, and reviews of livestock valuation election rules, the taxation of high value assets used for mixed business and private use, and certain aspects of the tax and social assistance treatment of non-cash benefits.
Some of the key reforms will be included in legislation to be introduced later today and passed under urgency.
The Budget speech is available on the Treasury website:
