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Overview of Proposed Tax Changes based on the 2023 Election results

National and Act parties will play a substantial role in shaping the government's future policies. Notably, there were significant tax-related propositions outlined in the May 2023 budget, which both National and Act have expressed intentions to address. Below, we provide an overview of the proposed key tax policies and their potential implications for individuals and businesses:

1. Tax Brackets:

Under a National-led government, there is a proposal to recalibrate income tax brackets to account for inflation, a measure that has not been undertaken since 2010. The suggested tax brackets are outlined as follows:

10.5% for incomes up to $15,600

17.5% for incomes ranging from $15,601 to $53,500

30% for incomes between $53,501 to $78,100

33% for incomes from $78,101 to $180,000

39% for incomes above $180,001

Act, on the other hand, advocates for a phased implementation of a three-rate system:

17.5% for incomes up to $60,000

30% for incomes from $60,001 to $180,000

33% for incomes above $180,001

It remains to be seen what adjustments and potential compromises may transpire in the outcome of these tax brackets.

2. Wealth Tax:

Both the National and Act parties have voiced opposition to the implementation of a wealth tax.

3. GST:

A modification to the GST regulations pertaining to the platform economy received approval in March 2023. This adjustment is targeted at short-term accommodation providers, ridesharing and ride-hailing services, as well as online marketplaces facilitating food and beverage delivery. The change is scheduled to take effect from taxable periods commencing on or after April 1, 2024. National has committed to repealing this legislation.

In contrast, Act proposes a revenue sharing arrangement from new residential properties, suggesting a 50% allocation of GST revenue generated from the construction of such dwellings with the respective consenting local authority. This initiative aims to stimulate further infrastructure and housing development.

Given the anticipated fiscal constraints faced by the incoming government, the likelihood of implementing the proposed GST revenue-sharing mechanism for new residential construction appears uncertain.

4. Company, Land, and Property Taxes:

Both parties concur on maintaining the company tax rate at 28%.

While there exists substantial alignment on issues such as the bright-line test and interest deductibility, noteworthy disparities remain. ACT is resolute in its position to entirely abolish the bright-line test, whereas National seeks to revert it to a two-year timeframe by July 2024.

National envisions a phased three-year reinstatement of interest deductibility for residential landlords, whereas ACT advocates for an immediate reinstatement. It is probable that a mutually agreeable resolution will be necessary in coalition negotiations to address both residential property policies.

Furthermore, National contemplates the elimination of tax depreciation deductions for non-residential buildings, and also proposes to permit foreign home buyers to re-enter the property market for residences valued at over $2 million, subject to a 15% levy. The practical implementation of this charge has been a subject of considerable discussion leading up to the election.

We will continue to monitor developments in this regard and provide updates as information becomes available. Need advice contact us on 578 5416.

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