Universal Basic Income FAQ

Universal Basic Income FAQ

  • Do I pay tax on the UBI?

    Answer

    No. The UBI is paid tax free, you get the full $13,000 per year in the hand.

  • Do I get the UBI on top of my student allowance / supported living payment / NZ Super?

    Answer

    No. Everyone will be paid the UBI, then if your current transfer was larger than the UBI (e.g. NZ Super), you will be paid the difference as that transfer. So the UBI plus the top up is the same amount as (or greater than) the original transfer.

  • How do I get paid the UBI?

    Answer

    The exact method needs to be determined, but it will be paid fortnightly or weekly directly into your bank account. (Ideally this will be a unique bank account for each taxpayer to ensure the individual has access to their money, in any circumstances, by stopping any direct transfers to shared accounts).

  • Can I opt out of getting the UBI?

    Answer

    The UBI will have to be applied for initially, so it will not be paid if not applied for. The flat 33% income tax will still apply to any individual regardless of their UBI status.

  • Won't giving out free money with the UBI just result in inflation?

    Answer

    There is the potential for this to happen however, given the current low inflation environment it is unlikely that general overall inflation will increase markedly and certainly not outside the Reserve Banks 1% to 3% preferred range. With an extra $16B in circulation (before the property tax is paid) in an economy of $310B GDP the maximum additional inflation would be 5% if there was no ability to increase supply or reduce consumption of goods and services. Given the complexity of interactions that result in inflation the number expected would be lower than this.

  • Won’t paying 33% on everything I earn offset the UBI making me worse off?

    Answer

    No. The worst situation is for someone earning over $70,000 per year, for them the UBI and the 33% tax still leaves them $3,920 better off before the application of the property tax if they own property.

  • Won’t this just encourage people to not work and go surfing?

    Answer

    Maybe. There will likely be some people for whom this is an attractive idea. However, people who are able and willing are more likely to pick up seasonal, or short term work in the absence of the incumbent stand down periods and reductions in eligibility of the current transfer / benefit system. In other words, it is designed to incentivise more work, not less.

  • Isn’t this just an attack on NZ Super recipients?

    Answer

    No. The tax-free payment of NZ Super top up over the UBI will be higher than their current level, to ensure that those with a small amount of additional income to supplement NZ Super are not negatively impacted by the change in tax rates from 17.5% to 33%. 50% of NZ Super recipients will either be better off or no worse off with these changes.

    The worst situation possible is for someone receiving the NZ Super couple rate and a total taxable income (including NZ Super) of $70,000 per year. They will be $85 a week worse off. This affects less than 10% of current NZ Super recipients and will usually apply to those only recently eligible for superannuation. Even so, they will still see an increase over their take home pay prior to turning 65.

    Example 1

    Michelle lives alone in her freehold home valued at $850,000. She receives Single Alone NZ Super giving her an after-tax income of $21,380. With the small increase in NZ Super and the property tax ($8,415) Michelle is significantly worse off. However if she defers the property tax until the house is sold her disposable income increases by $806 or 3.8% per annum.

    Example 2

    John and Sue are both over the age of eligibility and receive the couples rate of NZ Super. They own their $900,000 home freehold and also have a rental property valued at $300,000. The rental property returns $300 per week and expenses cost $100 per week so it returns $10,400 per year which is over the income ($9,000) subject to property tax, so standard income tax on the $10,400 is due. Currently they have a combined after tax income of $41,472. If they defer the property tax then their after tax income is unchanged, and with the property tax their after tax combined income drops by $9,070 to $32,402.

  • How much can my partner earn before my UBI is affected?

    Answer

    Your UBI is unaffected by your partners income. Unlike current transfers, the UBI is an individual based payment (not a household payment), so everyone gets $13,000 per year.