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BUDGET 2010 HIGHLIGHTS
From 1 October 2010 there is a substantial drop in personal income tax rates in what the Government is lauding as the biggest tax over haul in 25 years.
These rates have been changed as follows:
|
Taxable Income
|
Rate % up to 30 Sept 2010
|
Rate % from 1 October 2010
|
|
0 - 14,000
|
12.5
|
10.5
|
|
14,001- 48,000
|
21
|
17.5
|
|
48,001 -70,000
|
33
|
30
|
|
70,000 +
|
38
|
33
|
From 1 April 2011 company tax rates will drop from 30% to 28%. This will make New Zealand rates more in line with overseas rates which have been trending downward in recent years.
Trustee tax rate will remain at its present 33% to align with the top personal tax rate. The Government’s aim is to reduce the use of trusts as a tax planning vehicle.
As expected the GST rate will rise from its present 12.5%, to 15% from 1 October 2010.
The maximum PIE rate will drop from 30% to 28% and other PIE rates will be aligned to the new personal tax rates from 1 October 2010.
From 1 April 2011 investments losses will be added back to income for the purpose of determining eligibility for working for families tax credits. Further adjustments to eligibility in relation to other types of incomes will be announced later but are expected to take effect from 1 April 2011 also.
The present 20% loading on depreciation for new plant & equipment will be removed from budget day onwards.
From 1 April 2011 depreciation on all buildings with an expected life of over 50 years will be zero, but application may be made for a provisional rate if you believe your particular type of building should be depreciated. Those buildings with an expected life of under 50 years are unaffected.
The classification of building fit outs will be reviewed and new rules relating to what is a building expense and what is a separate asset, if changed, will take effect from 1 April 2011.
From 1 April 2011 LAQC’s will be taxed similarly to limited partnerships. This will mean their profits and losses will flow through, pro rata, to their shareholders and will be taxed at the shareholders’ marginal rates. This will replace the current regime under which people can choose to have losses deducted at their marginal tax rate, but profits taxed at the lower company tax rate.
The detailed legislation enacting these changes has yet to be worked out, but will be done to take effect from 1 April 2011 or later years. It is likely that there will be some limitation on the amount of losses that are deductible in any one year as is the case presently for limited partnerships.
For those clients requiring more in depth information there is also a comprehensive summary which has been published courtesy of Brookers.
As always, if you have any queries regarding the information contained in this report please contact us - we are here to help.
