There are some benefits that are not taxed, but others are. Photo: RNZ
When the government revealed its plans to adjust the tax brackets, reducing tax bills for most people, it pointed out most beneficiaries would not be affected because their benefits were already paid net of tax.
So how does that work, and why are they not getting a tax cut?
What is 'net of tax', anyway?
Benefits such as Jobseeker, Sole Parent Support and the Supported Living Payment are theoretically taxable, but are put into people's bank accounts with the tax already considered paid.
And while the tax being accounted for might change due to the tax bracket shifts, the amount that people receive in their bank accounts will not.
"There's a number that's created and then you work out what the tax should be on the other side," NZ Council of Trade Unions policy director and economist Craig Renney said.
"All income-tested benefits are taxable - emergency benefits, Jobseeker Support, Supported Living… they're all taxable and you've paid tax on the way through and received the benefit net of tax. So they're keeping the end number you receive as a beneficiary the same, but the number that is optically visible to the Crown - but isn't real - might change."
He said the government did not bother to pay and take the tax because it would just be a cheque swap.
"It would be both crediting and debiting itself at the same time - it just nets out."
Which benefits aren't taxed?
There are some benefits that are not taxed, such as the Accommodation Supplement, Childcare Subsidy, Disability Allowance or any Temporary Additional Support (TAS). Renney said that was because they were a payment for service or a minimum income guarantee.
What about the pension?
While other income support recipients are not in line for an increase, superannuitants will benefit from the tax changes by about $4.30 a week for a couple. Super is set at 66 percent of the average ordinary time wage after tax, so the tax cut for other earners will feed through to pensioners.
What about beneficiaries who also work?
Depending on the income support people receive, they may also be able to earn a small amount in addition to the benefit. This is then reduced as their other income increases.
The government has warned that in some cases, if wages increase because of the tax changes, this could affect the amount of support available.
