Yesterday Minister of Finance Bill English announced the 2016 Budget with the four main areas of focus being science and innovation, public infrastructure, social investment for the vulnerable and healthcare. Many feel it is a case of “steady as she goes” with an election next year.
On the tax front, there were no surprise announcements similar to last year when the changes to the taxation of residential property investment were announced on the Sunday before Budget day.
This year, once again, the more substantive tax matters were announced in advance of the Budget, with the new tax measures for small to medium businesses having been released last month.
Those include the proposals to allow small businesses to pay provisional tax using their accounting software as they earn income, eliminating or reducing interest costs on tax underpayments, removing certain monthly penalties for late payment of tax and allowing contractors to elect their own tax withholding rate. Those changes are intended to reduce compliance costs and simplify tax for small businesses and generally apply with effect from April 1 next year.
At the other end of the spectrum, the tax rules applying to multi-national enterprises doing business in New Zealand received only a passing mention on Budget day with the minister noting New Zealand’s continued work with the OECD to address tax avoidance. There was no substantive announcement along the lines of the new “diverted profits tax” included in the Australian Budget. That tax will apply to multinationals using artificial or contrived arrangements to reduce Australian tax by diverting profits offshore. In other areas, some had been predicting some bold moves around the Auckland housing market.
Instead, to address housing supply, it was noted that $100 million would be allocated to the freeing-up and utilisation of Crown land in Auckland. There was no mention of any new land tax, whether in a form that targets non-residents, investors or the Auckland real estate market.
For more information regarding this topic please contact your Findex tax adviser.