The Budget released last Thursday focuses on controlled spending and long-term initiatives.
Key Numbers
The budgeted numbers for the upcoming year to 30 June 2027 are:
- 5% Nominal GDP growth
- 5% unemployment
- Crown Debt 45.6%
- 1.6% inflation
- $11.4 billion deficit for the year to 30 June 2027
A return to surplus is forecasted one year earlier than expected in the 2028/2029 year.
Distribution of Funding
While spending was restrained, there were some increases across Health, Defence, Roads and topping up Government Superannuation. Some of these were released prior to the Budget. Specific spending included:
- Health for operating spending and digital investment
- Defence including drones and ship maintenance
- Government Super to fund an ageing population and inflation
- Road upgrades for the Waikato Expressway and state highway
- Rail upgrades and city rail renewals
- Government guaranteed loans to businesses to eliminate or reduce dependence on gas
- Law and Order for additional police, prison officers, police stations and court upgrades
- Hospitals to upgrade facilities in Auckland, Tauranga, Hawkes Bay and Palmerston North
- Housing Growth Fund as an incentive for councils to encourage housing growth
- Schools for additional classrooms and maintenance
- Resource Management to assist with the rollout of a new planning and environmental system
- Fuel Crisis Response to build strategic fuel reserves and increase the In-Work Tax Credit and Contingency Funding.
Taxes and Levies
While there was no change in tax rates or tax bands there have been some modest tax changes. These include:
- A new prudential levy on banks, non-bank deposit takers, insurers and other financial market participants to fund the cost of the Reserve Bank. Expected Revenue is $ 209 million over 4 years.
- A new cap on tax credits for donations of $33.3k a year.
- The Research and Development tax credits scheme has been extended to oil, gas and mining, but some software development credits will be more restrictive.
- There are proposed changes to the Foreign Investment Funds (FIF) regime namely:
- An increase in the FIF threshold from $50,000 to $100,000.
- Expansion of the Revenue Account Method (RAM) being extended to “all New Zealand taxpayers”, noting this is expected to be limited to just natural persons and family trusts.
- There will be a reform of the FBT regime including a focus on how the vehicle is used and logbooks will no longer be required.
- Non-Resident Contractor Tax (NRCT) reforms see changes including increasing the de minimis threshold from $15,000 to $75,000.
- In regard to shareholder loans, when a company lends to a shareholder and that company is removed from the Companies Register, a tax liability will arise for the shareholder to the value of the debt.
The Alliott NZ team are available to help you understand how the Budget and any enacted measures might impact you.
We can assist you to capitalise on any opportunities or minimise your risk. As always, the detail is important so please let us know if we can assist. We will keep you up to date with key developments as things progress.
