The Treasury

Global Navigation

Personal tools

Treasury
Publication

Average Marginal Income Tax Rates for New Zealand, 1907-2009 WP 12/04

Appendix 3: Exemptions Data

Exemptions of certain income from tax were an important feature of the New Zealand personal income tax system up until the 1970s. A portion of income was exempt from tax for a specified set of circumstances. These included:[24]

  • General personal exemption: The first New Zealand income tax exempted the first £300 of income. The level of the general exemption subsequently varied between £200 and £468.
  • Dependent wife/husband exemption: Introduced in 1933, the dependent spouse exemption ranged from £50 in 1933-45 to a maximum of £200 in 1960. The exemption was abated against both spouses' incomes, and was in place until at least 1967.
  • Child/dependent exemption: Allowances for dependent children were first introduced into the Land and Income Assessment Amendment Act 1913. An exemption of £25 for each child under 16 applied, subject to a household income limit of £425. The rate was increased to £50 per child and the age limit increased to 18 from 1922.
  • Housekeeper exemption: From 1933 an exemption applied to widows and widowers (later divorcees and unmarried people) with dependent children. The exemption ranged from a maximum of £50 to a maximum of £200.
  • Life insurance exemption: An exemption was given on life insurance premiums in the Land and Income Assessment Act 1891. Premiums were tax deductable up to £50. Contributions to National Provident Fund, superannuation and insurance funds were also tax deductable.

The general exemption was the most significant exemption. Initially, the exemption applied to all taxpayers, but from 1917 until 1935 it abated such that it only applied to incomes below a certain level. From 1936 it applied to all income earners again. Other exemptions were also dependent on income and were abated as income increased. However, we have only been able to account for the impact that abatement of the general exemption had on EMTRjs. Table A1 below sets out the abatement regimes which applied from 1917 to 1935.

From the early-mid 1920s, NZOYBs provide data on the total value of exemptions claimed by size of assessable income, by exemption category, captured via income tax returns filed with Inland Revenue. In the 1920s, exemption data were presented as an aggregate across all classes of taxpayer, but in general exemptions only applied to the incomes of Class I taxpayers (individuals). An exception was an exemption of 5% on the capital value of unimproved value of land from which income was derived, and which also applied to certain registered companies.

Table A1 - Abatement of general exemption, 1917-1935
Period Abatement regime
1917 - 26

y ≤ £600: £300 exemption

£600 < y < £900: exemption withdrawn at £1 per £1 over £600

y ≥ £900: no exemption

1927 - 30

y ≤ £450: £300 exemption

£450 < y < £750: exemption withdrawn at £1 per £2 over £450

£750 < y < £900: £150 exemption, reduced by £1 per £1 over £750

y ≥ £900: no exemption

1931 - 32

y ≤ £260: £260 exemption

£261 < y < £560: exemption withdrawn at £1 per £3 over £260

£560 < y < £800: exemption of £160, reduced by £1 per £1 10s. over £560

Y ≥ £800: no exemption

1933 - 35 As above with £50 deducted from the exemption ascertained

Table A2 shows the common form of aggregate exemption data presented in the NZOYB for the 1925/26 income year. It shows that the general exemption made up the majority of exemptions and was predominantly received by low income earners (since the exemption was abated with income). With the exception of land value exemptions, other exemptions also appear to be claimed mainly be those with incomes below £1000.

Table A2 - Exemptions by size of income for the 1925/26 income year
Size of Income (£) Total Exemptions (£)
  5% of Capital Value General exemption Life Insurance Children Other
Under 300 45133 3989872 563 293 856
300-399 83206 6856449 499928 125113 625041
400-499 97739 3760667 636448 142353 778801
500-599 100794 2097296 410484 114778 525262
600-699 102758 1169087 252207 83734 335941
700-799 98422 453408 160940 60640 221580
800-899 80456 129274 117923 48190 166113
900-999 78975 23474 71816 36233 108049
2,000-2,999 574160 117944 266026 126411 392437
3,000-3,999 263633 48056 54784 52927 107711
4,000-4,999 164674 27925 14882 16713 31595
5,000-5,999 126585 12714 8345 11416 19761
6,000-6,999 78401 3396 3450 5169 8619
7,000-7,999 67920 2578 2050 2537 4587
8,000-8,999 62854 1319 950 1010 1960
9,000-9,999 52007 8110 1000 1961 2961
9,000-9,999 42971 350 446 796
10,000-19,999 176275 4447 600 1155 1755
20,000-20,999 108907 250 13 263
30,000-39,999 82690
40,000-49,999 65919
50,000-99,999 99822
100,000 and over 63417
Total 2717718 18706016 2502996 831082 3334078

Data presented in the NZOYB are ‘effective exemptions'. That is, where the exemption amount exceeded assessable income, the allowable exemptions were reduced accordingly. From 1935 the distribution of exemptions by size of income were presented as an average per £100 and from 1948 exemptions distribution data are again presented as total exemptions claimed rather than as averages.

Notes

  • [24]At various times during the sample period, other forms of income, were entirely exempt from tax such as war pensions or social welfare benefits. Because those forms of income were non-assessable they are not captured in our tax-return based data, and are therefore not included in our exemption adjustments for the AMTR calculations.
Page top