The new Labour led coalition government has released its first Budget Policy Statement (BPS) Budget 2018 together with their 100 Day Plan.
This mini-budget did not include any major tax changes. Surprisingly there was no comment on the reintroduction of the R&D Tax Credit or a the extension of the bright-line test from 2 to 5 years on residential property sale which had previously been mooted.
The BPS confirmed the cancellation of the previous Government’s proposed personal tax cuts and amendments to the Working for Families (WFF) Tax Credit, which were due to come into effect on 1 April 2018.
The BPS is set out within the framework of the Budget Responsibility Rules and it is pleasing to see the commitment to maintaining budget surpluses and repaying debt on the back of continued economic growth.
The Budget has a focus on a Families Package which is aimed at assisting low and middle-income families with children. The reforms include:
- An increase in the WFF Tax Credits and the Working for Families abatement thresholds.
- The introduction of a Best Start tax credit of up to $3120 per year per child to help families with costs in the first years of a child’s life. The credit reduces gradually in the second and third years. It applies to babies born after 1 July 2018 or if born before, had a due date after 1 July 2018.
- The introduction of a Winter Energy Payment of $450 a year for a single person and $700 for a couple will paid to the elderly during the winter months. In 2018 it will be paid from 1 July 2018 and will last for 13 weeks. In 2019 the weekly payment will run from 1 May for 22 weeks. It will be paid to those who are largely resident in New Zealand during the winter months and who receive New Zealand Superannuation or a Veteran’s Pension.
- Paid Parental Leave is to be extended to 26 weeks.
- The Independent Earner Tax Credit which was being cancelled as part of the proposed personal tax cuts is being reinstated.
- The Accommodation Supplement and Accommodation Benefits provided to help with the cost of housing are being increased.
These reforms will be introduced with effect from 1 July 2018.
New Zealand Superannuation Fund
Government contributions to the New Zealand Superannuation Fund are to be resumed; increasing progressively over the next five years.
Contributions to the New Zealand Superannuation Fund were suspended following the global financial crisis in 2007.
The 2017/18 education year will be “fees-free” for one year of post-secondary education and training and the student allowance and student loans for weekly living costs is expected to increase by $50 to all.
Property Restrictions imposed on non-residents
Further details on the proposed restriction on non-residents being able to buy land in New Zealand were released with the introduction of the Overseas Investment Amendment Bill. The changes included in the Bill are expected to take effect from the 10th day after the law receives Royal assent, which could be early 2018.
The Bill includes residential land as a new category of sensitive land requiring OIO approval. Non-residents will still be able to buy residential land provided they pass one of the following tests:
- a commitment to reside in New Zealand test
- a new housing supply test
- a benefit to New Zealand test
New migrants with a residence visa may be able to buy sensitive land provided they have lived in New Zealand for 12 months. Migrants who have applied under the investor categories are not required to have lived in New Zealand for 12 months.
Tax Working Group
The Terms of Reference for the Tax Working Group formed under the chair of Sir Michael Cullen have been set. The Tax Working Group has been tasked with considering tax changes which would “improve the structure, fairness and balance of the tax system” and which can contribute to “positive environmental outcomes”. The makeup of the group is expected to be announced prior to Christmas with a reporting deadline of February 2019.