The Government has passed legislation to implement a new top personal tax rate of 39% applying on income over $180,000 with applicability from the 2022 year (so the year commencing 1 April 2021 for most individuals). While most of the measures are as expected, there are a few key points of note.
The new 39% rate
The new top rate applies from 1 April 2021 to income earned by individuals (including bonus payments, back pays and redundancies) on amounts over $180,000 in an income year, and the PAYE, RWT and other withholding rules are being updated to account for this. It will only apply when the total income is more than $180,000 so there is no change for those earning less than that.
Other employment related tax rates have been modified effective from 1 April to remove any planning opportunities for employers, including:
A new top rate for FBT will be added, being 63.93% for fringe benefits (such as cars) provided to employees earning an all-inclusive net pay of more than $129,681 (this is consistent with other FBT bands).
Changes to Employer Superannuation Contribution Withholding Tax (ESCT) deducted from employer contributions to Kiwisaver or Superannuation schemes. A new top rate of 39% will apply when a person’s income from employment plus from employer Kiwisaver contributions is over $216,000 per annum.