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Another NZ Budget perspective

Posted by Vanessa Williams on June 6th, 2022.      0 comments

NZ BUDGET 2022

What was in the Budget

Cost of living payment

budget-723This year’s Budget includes an announcement that a Cost of Living Payment will be made to eligible people who earned up to $70,000 during the period from 1 April 2021 to 31 March 2022 and are not eligible for the Winter Energy Payment.

The payment of $350, paid in three instalments of approximately $116, will be made by Inland Revenue from 1 August 2022. There is no application process — Inland Revenue will pay the amount automatically to people’s bank accounts.

The tax system will be integral to the implementation of the new Cost of Living Payment. The payment will be based on tax information for the 2021/22 tax year, and therefore is likely timed to coincide with the completion of Inland Revenue’s “auto-calc” process and the 7 July 2022 tax return due date for taxpayers without a tax agent.

The payment will be administered by the Inland Revenue. More information will be provided as soon as it is available; in the meantime full coverage of the Budget announcements is available at www.budget.govt.nz.

Tax announcements

In the absence of major tax reform, there were some tax-related items deep in the detail of the Budget documents to note:

  • Forecasted total tax revenue will increase from $97 billion in 2021 to $137 billion in 2026
  • The Revenue Strategy remains mainly unchanged from prior years, with continued focus on tax system ‘fairness’, ensuring taxpayers are not avoiding the top tax rate and commitment to working with the OECD to combat international tax issues
  • The Budget provides estimates of the additional tax revenue expected from last year’s change to interest deductibility for residential property — additional tax revenue in the 2022/23 year is expected to be $200 million, rising to $650 million in the 2025/26 tax year once the phase-out of interest deductions has been completed
  • Inland Revenue receive funding to retain employees to continue to support the response to and recovery from COVID-19 and to continue to administer the Research and Development Tax Incentive (RDTI)
  • The New Zealand Income Insurance Scheme (NZIIS) will be operational from 2024

Business tax measures

There was nothing notable in this Budget for businesses to reduce compliance costs or incentivise economic activity. Businesses still emerging from the impact of COVID-19 hoped for additional support, for example an extension to the tax loss carry-back rules. However it’s important to note that some COVID-19 tax support announced in 2020 is still available.

The official confirmation and implementation of the proposed New Zealand Income Insurance Scheme (NZIIS) is expected in coming months.

A correction to the high FBT cost of businesses investing in electric vehicle (EV) fleets was not forthcoming in this Budget.

Personal tax measures

Personal tax rates remain as follows:

$0 - $14,000

10.5%

$14,001 - $48,000

17.5%

$48,001 - $70,000

30%

$70,001 – $180,000

33%

$180,001 +

39%

With the exception of the 39% tax rate, there have been no changes to these rates since 1 October 2010 (noting that Budget 2017 had proposed changes, but these were repealed in December 2017 with the change of Government). Forecast financial statements show total tax on individuals growing from $45.8 billion in 2021 to $68 billion in 2026.

 

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