Financial services experts say new money available from today following this year’s general adjustments will help struggling Kiwis, but the extra cash will be nothing more than a drop in the ocean for most people.

Thousands of Kiwis are set to benefit from a cash boost from today through various Government payments such as benefits, superannuation, minimum wage, Working for Families and Best Start tax credits.

Others, however, will be hit in the pocket by new charges, including a hike to the trust tax rate and the introduction of road user charges for electric vehicles.

From today, Kiwis will see increases across various payments set by the Government.

FinCap chief executive Ruth Smithers told the Herald any money going into people’s pockets is a good thing and would no doubt alleviate cost of living pains.

“However, I suspect that it will be a little bit in a big ocean of debt for some people.”

Māngere Budgeting Services Trust chief executive Lara Dolan said any increase would be good for her clients because they came from vulnerable communities.

“Anything that gives them more money to spend because they spend money on food, accommodation, transportation. They cannot afford any luxuries.”

Dolan echoed Smithers’ sentiments, saying: “I understand we are in a difficult financial situation for New Zealand at the moment and the Coalition Government is doing as much as they can, but from my perspective, it’s not enough.”

She said the service has one client on a benefit whose accommodation costs $596 a week but her benefit is only marginally more at $650.

“How is that enough?”

Meanwhile, Labour criticised the Government’s changes to minimum wage and benefits, saying despite them increasing, Kiwis will be left with less money in their pockets.

The adult minimum wage will increase by 2 per cent, to $23.15 an hour.

From today, Kiwis will see increases across various payments set by the Government, including:

• The adult minimum wage will increase by 2 per cent, to $23.15 an hour.
• The Family Tax Credit - known as Working for Families - will increase by $8 a week from $136.94 to $144.30 after tax for the eldest child and from $111.58 to $117.56 for subsequent children.
• The Best Start tax credit will increase by $4 from $69 to $73.
• Interest deductibility changes come into effect, allowing landlords to claim 80 per cent of their interest costs from their tax bills.

The Annual General Adjustment for main benefits will also see an increase of between 4.66 per cent and 5.28 per cent, according to Work and Income - 370,977 people were receiving a “main benefit” in the week ending March 15.

• A single person on Jobseeker Support without children will see their benefit go from $337.74 to $353.46 a week, while a couple will receive $601.46 a week or $300.73 each, up from $574.70 total or $287.35 individually.
• The Sole Parent Support benefit goes from $472.79 a week to $494.80. A couple with one or more children will receive $635.10 together, up from $606.86.
• Pensioners living alone will receive $1038.94 in New Zealand Superannuation a fortnight, while couples who both qualify will receive $1598.36. That’s an increase of $46.20 and $71.68 respectively. Figures from June 2023 show 883,239 people were receiving superannuation.
  
  Electric vehicle owners will be hit in the pocket by the introduction of road user charges. Photo / Warren Buckland Photo / Warren Buckland

However, among those boosts, a new charge and a new tax increase also come into effect

• Road user charges will be introduced for full or battery electric vehicles, working out at $76 per 1000km, and for plug-in hybrids at $38 per 1000km. Read about the grace period, admin fees and other elements in the Herald’s RUC Q&A. There are also free apps that will help EV owners get to grips with the new system.
• The trust tax rate goes up from 33 per cent to 39 per cent to match the top personal tax rate, though trusts earning less than $10,000 a year will be exempt under proposals from the Government.
• The Government is also planning to make commercial and industrial property owners pay about $575 million more tax a year by preventing them from deducting depreciation as an expense from April 1.

Increasing demand for financial mentoring services

Both Smithers and Dolan said the cost of living crisis was pushing more New Zealanders towards budgeting services.

Smithers said close to 70,000 people used financial mentoring services across the country last year.

“Services across the country up until December 2023 were seeing north of 69,000 clients - an increase from 50,000 in 2022,” she said.

“It’s quite a substantial shift from one year to the next, and we can still see it’s tracking high in the day-to-day data.”

Dolan said people who are “working poor” are now utilising financial services due to high mortgage rates.

“There has been a 15 per cent increase in people using our services, compared to last financial year - we have almost back-to-back appointments trying to help people.”

The cost of living crisis is pushing more New Zealanders towards budgeting services, say Lara Dolan and Ruth Smithers. Photo / 123RF

Labour’s social development spokeswoman Carmel Sepuloni said this Government’s “measly” 2 per cent increase to the minimum wage meant lower paid workers would again fall behind inflation and go backwards in real terms.

Indexing benefits to inflation rather than wage growth meant many New Zealanders will get less this year, as the Government instead gives a big tax break to landlords, Sepuloni said.

“The change means someone on Jobseeker support will be $50 a week worse-off, while someone on a disability benefit will be $60 a week worse off by 2030, which is between $2600 to $3120 less a year.

“These decisions by the National Government will make life a lot harder for those doing it the toughest.”