Low-key Budget underwhelms business
‘‘Hardship Budget’’ of 2015 will be remembered for trying to address the financial difficulties faced by many in the community.
What the Budget won’t be remembered for is any headline making proposals to excite the business community.
Commendations from business have been in respect of only a few initiatives: increased funding for research and development; overdue reductions in ACC levies; and the release of surplus Government land for residential property developments.
From a taxation point of view, there were no bold new ideas. There was a vague promise of future tax cuts in 2017, finances permitting. Budget documents include Treasury workings that detail the cost of a 1 per cent decrease at each marginal tax level and the cost of increasing each tax bracket (the income level at which the next highest tax bracket starts) by $1000. Whether or not that’s a hint of the negligible sort of changes that might be made remains to be seen.
Only two things stood out at all in terms of tax and savings. The first was the pre-Budget announcement of a ‘‘bright line’’ test on property speculation. From October 1 this year, property acquired and then sold within two years will be deemed to have been acquired with the intention of resale, and any gain will be taxable (with exemptions for the family home, inheritances and relationship property transfers). This doesn’t mean that property held for more than two years is exempt; it just means that Inland Revenue no longer have to prove an intention of resale if it occurs within two years.
It is distressing to read reports that houses are being purchased by non-residents and left empty, presumably for the sole purpose of capital gain. Non-resident buyers of property will now have to obtain a New Zealand IRD number and have a New Zealand bank account. If they really are buying for rental investment purposes, they would need those credentials anyway.
The second notable announcement was the sudden and immediate end to the $1000 kick-start bonus for signing on to KiwiSaver. For the 2.5 million existing members – no problem.
But there will be many others either lamenting their decision to put off joining up or very disappointed at the unfair and arbitrary way that this was implemented, and wondering about what signal it sends.
In the meantime, Inland Revenue’s tax policy team continue working through their programme, which includes modernising and streamlining the collection of GST, PAYE, and other withholding taxes, sharing information with other Government agencies (both here and overseas), and the collection of GST on imported goods and services (including a focus on digital services).
Other projects that may lead to charges for owner-managed businesses include a review of the tax rules that apply to closely held and look-through companies. The stated objective is to provide ‘‘an improved framework and simplifying the legislation’’ in respect of these structures. Any changes that result from this are more of a ‘‘slow burn’’, through a more consultative process than the immediate changes that are made in Government budgets – be they black, chewy or hard.
Geordie Hooft is a partner at Grant Thornton New Zealand Ltd. Opinions expressed in this column are general in nature and are not intended as a recommendation or guidance to any individuals in relation to structuring their tax or finances. Readers should not rely on these opinions and should always seek independent professional advice specific to an individual’s circumstances.