How much does the $350 Cost of Living payment cost the Government? This year's budget was light on any significant tax changes, however a new Cost of Living Payment has been introduced and this has now been passed into law.
While the administration of this seems relatively easy for salary and wage earners, for self-employed people there are a few more issues to consider.
Self-employed people who earn $70,000 or less in the year qualify for the Cost of Living Payment, however this cannot be assessed until they file their 31 March 2022 tax return. Accordingly, unlike a salary and wage earner who will receive 3 monthly payments beginning on 1 August 2022 and ending with 3rd of October 2022, for self-employed people they will need to wait until their tax return is filed.
The final date for making the Cost of Living Payment is 31 March 2023 (which happens to be the final date for filing the 2022 tax return). If the 2022 tax return is filed after this date you will not receive the payment.
The Cost of Living Payment, while administered by the Inland Revenue Department, is not a tax credit to be offset against other income tax. It is a payment paid by the IRD to you. IRD will only make this payment if they have your bank account
Eligibility criteria are; income of $70,000 or less in the 2022 year, not receiving the winter energy payment, over 18 years of age, a New Zealand tax resident who is present in the country, and someone who is not in prison or deceased.
While the payment is only $350 per individual earning $70,000 or less, collectively it is estimated in budget 2022 this will cost $814 million and apply to 2.1 million people.
Based on these numbers you can easily see why reductions in the tax rate or a tax free threshold are very expensive for a Government to implement.