Monday, April 22, 2024

Passage of major tax Bill welcomed

The passing of legislation giving effect to coalition Government tax commitments has been welcomed by Finance Minister Nicola Willis. 

Ms Willis says the Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Bill will help place New Zealand on a more secure economic footing, improve outcomes for New Zealanders, and make the tax system fairer.

The Bill, which passed its third reading today, restores interest deductibility for residential investment property, reduces the bright-line test for residential property to two years and removes depreciation deductions for commercial and industrial buildings that were reinstated by the previous government as part of the economic response to COVID-19. 

It also provides for parents to receive government contributions to KiwiSaver contributions while they are on paid parental leave so long as they continue to make contributions themselves. 

“I am particularly delighted by this measure because it will ensure people’s KiwiSaver accounts to continue to grow while they are on parental leave and will benefit women who typically retire with smaller savings nest eggs than men,” Minister Willis says. 

She said high rents were a source of budgeting pressure for many households. 

“Making investment in residential property more attractive will put downward pressure on rents by providing renters more options to choose from.”

“Returning the rules for commercial and industrial buildings to the way they were between 2010 and 2020 is expected to save $2.31 billion over the next four years.”

Revenue Minister, Simon Watts (pictured) says the Bill also adjusts the tax treatment of trading stock disposed of by businesses, imposes gaming duty on offshore online casino operators and introduces a transitional provision for the new GST rules for short term accommodation. 

“This will make it easier for businesses to donate surplus stock to charities, close a loophole that enables offshore online casino operators to pay less tax than New Zealand operators, and ensure short-term rental accommodation hosts and marketplace operators are not unfairly disadvantaged by timing issues associated with changes to the GST rules for short term accommodation,” he said.

Mr Watts says the Bill also aligns the trustee tax rate with the top personal tax rate of 39%.

“Aligning the trustee tax rate with the top personal rate will ensure that people pay the same rate of tax regardless of whether they earn income directly or through a trust.”

“To avoid the over-taxation of lower-income trusts, a $10,000 de minimis has been introduced that means only around 13 percent of trusts in New Zealand are likely to be impacted by the change to the top rate.”

The Bill also makes a number of other changes to the tax system, including enacting an OECD-led global tax initiative aimed at ensuring large multinationals pay a minimum tax rate of 15 per cent in participating countries and making adjustments to the tax treatment of back-dated lump sum payments from ACC and MSD to ensure they are taxed fairly.

The Bill is expected to pass into law before 1 April 2024.

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