Investing in a growing economy
New Zealand Finance Minister Bill English has delivered Budget 2016 to the nation. His eighth Budget confirms the government’s books are in relatively good shape – at least for now. But a combination of factors, including our ageing population, will impose huge fiscal pressure on the country in the coming decades.
How does Budget 2016 position New Zealand’s economy for success in the long term?
The Treasury forecasts economic growth of around 2.8 per cent over the next five years. This is expected to reduce the unemployment rate to below 5 per cent in 2018. Inflation is currently low but is forecast to reach 2 per cent in 2017.
With issues such as healthcare, cybersecurity, Christchurch's ongoing earthquake recovery and the debate on multinational tax avoidance the government will have its hands full. For now, there are a number of tax pronouncements which we've summarised below. The Treasury have also compiled their Budget at a Glance if you wish to get across the key issues quickly.
- A number of initiatives to simplify the calculation and payment of provisional tax, and a narrowing down of the circumstances where use of money interest needs to be paid on a short-paid provisional tax.
- An extension of the withholding tax rules, requiring labour-hire firms to withhold tax from contractors.
- Adding flexibility into the withholding tax rules to allow contractors to modify their withholding tax rate to a rate which suits their tax obligations.
- Increasing the threshold from $500 to $1,000 for taxpayers to self-correct errors.
- Removing the requirement to renew resident withholding tax (RWT) certificates of exemption annually.
- Getting rid of incremental late payment penalties for certain tax types.
- Introducing some more information sharing with credit rating agencies and the Companies Office.
- Increasing the threshold to allow more taxpayers to pay fringe benefit tax (FBT) annually rather than quarterly.
- Simplifying FBT for close companies who provide motor vehicles to shareholder-employees.
- Simplifying the process for businesses claiming deductions for use of motor vehicles and home office space.
At Alliott NZ looking after your tax is not just about helping you to pay less tax – although we do make sure you’re not paying too much. We’re here to help you with any aspect of tax from compliance to complex structures so call us in Auckland on 09 520 9200.
Sources: http://www.budget.govt.nz/; http://www.treasury.govt.nz/budget/2016/at-a-glance/b16-at-a-glance.pdf; Deloitte NZ