Saurav Wadhwa
Auckland, October 2, 2023
National and ACT promise incentives; Labour offers relief but Greens hold their own
New Zealanders will exercise their franchise with the general election due to be held on October 14, 2023. Taxation has always been a major strategic and compelling point to target voters.
We have looked at the tax policies of all major parties and reviewed them from the perspective of small business owners. A bullet point summary has been prepared for readers to get a snapshot of the changes being suggested.
Proposed Tax Policies by different parties in the upcoming election.
National Party
(Source: www.national.org.nz)
The top tax bracket of 39% on annual income of $180,000 and above remains unchanged.
Tiered tax structure brackets are aligned to inflation. The change would mean that a 10.5% tax rate would apply to the first $15,600 of income, not $14,000 as it is currently. The 17.5% rate would extend to $53,500 rather than $48,000, and 33% starting at $70,000, increasing to $78,100.
Rental property tax changes would include full restoration of interest deductibility.
This change will be phased in the following stages: Interest deductibility will be (a) kept at 50% in April 2024 (rather than reduced to 25%) (b) increased to 75% in April 2025 (rather than fully removed) (c) 100% will be fully restored from April 2026.
Labour’s Capital Gains Tax by stealth will be removed by taking the Brightline Test for rental properties back to two years, from the existing ten years by July 2024. This means that properties acquired before July 2022 will not be subject to the Brightline Test at the time of sale.
The current Ute tax will be abolished.
The ban on foreign buyers purchasing homes worth less than $2 million will remain. Foreigners purchasing homes worth $2 million or more will be subject to a Foreign Buyer Tax of 15%. This will apply to people who do not hold a Resident Visa in New Zealand.
Depreciation on commercial buildings will end. This current change was introduced as a response to Covid-19 with the intention of making the change permanent later. National will remove this tax break.
The Independent Earners Tax Credit of $10 a week up to $520 a year will be restored. The lower limit of eligibility will be $24,000 and the upper limit will be extended to $70,000 with abatement starting at $66,000.
From April 1, 2024, new GST rules will be applied to marketplace and rideshare companies such as Air BNB. National has promised to abolish GST on the electronic marketplace.
Labour Party
(Source: www.labour.org.nz)
The Labour Party has promised to remove GST on fresh fruits and vegetables as a part of its changes to the Cost of Living Plan from April 1, 2024.
This would save families about $20 a month. The Party has said that there will be no changes to taxes on income and rental investments and that there will be no comprehensive Capital Gains Tax.
Act Party
(Source: www. act.org.nz)
The ACT Party has said that it will abolish the Bright Line Test and repeal the denial of interest deductibility on rental properties.
The Party will take New Zealand from five tax rates on income down to three over the next few years. In order to ensure that every earner receives a tax cut, ACT would also create a new Low and Middle Income Tax Offset, starting in fiscal year 2024-2025. This tax offset would be worth $800 per annum for all earners earning between $12,000 and $48,000.
It would gradually grow at a rate of 8% from $0 per year for taxpayers earning $2000 to the full $800 for taxpayers earning $12,000. At incomes above $48,000, the offset would abate at a rate of 8%, reaching $0 at an income of $58,000.
The Green Party
(Source: www.green.org.nz)
The Green Party has said that it will make the first $10,000 free of tax and introduce a Wealth Tax at 2.5% on the net wealth valued above $2 million.
There is no mention of this being a one-off or recurring but appears to be of annual occurrence.
The Party has also said that it would introduce five weeks of annual leave and support the introduction of a Comprehensive Capital Gains Tax.
Saurav Wadhwa is a Chartered Accountant by qualification. He is the Principal Accountant at IBBZ Accounting Limited, Chartered Accountant & Tax Specialist, located in Botany, East Auckland.
