Prime Minister Mark Brown says government is reviewing the country’s tax-free income threshold in light of the recent increase to the minimum wage, to ensure lower-income earners are not unfairly taxed.

The comment was made in Parliament on Wednesday following a question from Akaoa MP Robert Heather during the Question-and-Answer session.

Heather raised concerns that the current tax-free threshold may be too low now that the minimum wage has increased, and asked whether the government would consider adjusting it so that people can benefit more from the higher wages.

“I am seeking information in reference to what we call the tax threshold and I truly believe this amount is set to $14,600,” Heather said.

“We all know that the minimum wage has been increased for our people and I truly believe that this is a loss for our government and whether it is necessary for us to relook at this matter.”

“So I am seeking clarification from the PM whether we will reconsider this to increase the amount so by increasing the minimum wage, it can enable us to put more money into our people’s pockets so that they cause it for the benefit of the whole nation.”

In response, Prime Minister Brown confirmed that discussions have already begun with the Ministry of Finance to explore this very issue.

“Good question, very pertinent question and I guess the Member is already ahead of the thinking because I had discussions with our financial Secretary to look at this very particular issue,” he said.

“And this is part of a broader tax policy where as our incomes increase so too does our tax burden as we rise into a higher tax bracket.”

“So it’s important too that as income rise, we also take time to address the tax brackets so that they are appropriate and that income earners are not being disproportionately taxed.”

Brown said that the government’s intention is to keep the minimum wage below the tax-free threshold, and if that meant increasing the threshold, then it would be considered.

“The intention is the minimum wage should not exceed the tax free threshold, it should always be below so if it needs to increase the tax free threshold, then that is something that we need to do,” he said.

“So that’s something that we will be looking at not just at the minimum wage and the tax free threshold but at the other threshold that we now have for our income earners.”

As it stands, individuals living in Rarotonga are not taxed on the first $14,600 of their annual income, while residents in the Pa Enua enjoy a significantly higher tax-free threshold of $60,000.

The rest of Rarotonga's income tax brackets are: $14,601 to $30,000: taxed at 17 cents per dollar; $30,001 to $80,000: taxed at 27 cents per dollar; Over $80,000: taxed at 30 cents per dollar.

The government announced earlier this year that the minimum wage will increase from $9.50 to $10 per hour starting July 1, following recommendations by the Minimum Wage Review Panel.

The decision was based on consultation with workers, employers and industry representatives, with the government aiming to ease cost-of-living pressures and support working families.

At $10 per hour, a full-time minimum wage earner working 40 hours a week would earn approximately $20,800 annually—significantly above the current $14,600 tax-free threshold for Rarotonga, meaning a portion of their income would be subject to tax under the current regime.