Are you paying more income tax than your parents 20 years ago?

How have the Global Financial Crisis, petrol price hikes, GST rise, and different parties leading New Zealand’s Government affected income taxes over the last 20 years? The tax-paying generation of the early 1990s included the Baby Boomers and ‘Generation X’. Twenty years on, their children, ‘Generation Y’, are now paying tax. A lot has happened in the world since then, including a global recession. How does our personal income and tax situation compare to 20 years ago? New Zealand’s tax system is quite straightforward compared to others around the world. It has hardly any loopholes or tax incentives, therefore preventing opportunities for tax avoidance. In 1891, income tax was introduced, with the more you make, the more tax you pay. At that time only people earning a higher income paid tax, whereas these days in New Zealand, everybody is taxed on any money earnt. Since then, income tax rates have risen and fallen with different policies and government expenditure needs. In 1989, higher incomes were taxed at 33 per cent. This continued into 1999 when the higher personal income tax rate increased to 39 per cent. In 2008 the top income tax was returned to 33 per cent, spreading the tax load onto the lower income earners. The range of personal income tax as it stands today is: $0 – $14,000 at a rate of 10.5%, $14,001 – $48,000 at a rate of 17.5%, $48,001 – $70,000 at a rate of 30%, and over $70,000 at a rate of 33%. It is hard to compare these rates with those 20 years ago on a whole, as there is a different climate in way of salaries, and changes with the global financial crisis. There are more hidden taxes that are present in our generation that were not there in the early 1990s, such as in petrol prices and GST, but our personal income taxes did not go down. In New Zealand, people are actually working harder to earn the same amount of income as previous generations would have had. Experience shows us that history will always repeat. What will the next generation have in store, and will we ever find a cultural ‘Robin Hood’ – that will take higher tax off the rich and give to the poor? If you would like to know more about the income tax rate in New Zealand, talk to a tax agent or contact Inland Revenue.