The tax policies of the various political parties have been hitting the headlines in the lead up to October’s general election. Some parties are proposing radical changes to the tax system, while others are proposing more modest adjustments.

Regardless of the outcome of the election, commercial property owners can expect that they will lose the ability to claim depreciation on their buildings as both Labour and National have included this measure in their tax policies. Both have also pledged to increase the Working For Families tax credit and increase the abatement threshold for this tax credit. Therefore, households with children that are eligible for Working For Families can expect to have some extra income in their pockets regardless of the election outcome.

The trustee tax rate is set to increase from 33% to 39% to align with the current top personal tax rate from 1 April 2024. National has indicated that it will keep the 39% top personal rate (at least in the short-term) and remained silent on the increase in the trustee rate. So presumably, regardless of who is leading the next Government we can expect to see a continuance of the 39% top personal tax rate and the slated increase in the trustee rate.

On the left of the political spectrum, both the Greens and Te Pāti Māori are proposing an overhaul of the tax system. Both are proposing tax-free thresholds, the Greens set at $10,000 and Te Pāti Māori at $30,000. The tax-free threshold would be accompanied by changes in tax brackets and increases in the top personal tax rates, the Greens proposing a top rate of 45% and Te Pāti Māori 48%. Both Te Pāti Māori and the Greens want to increase the company tax rate to 33% and both favour the introduction of a wealth tax.

While Labour has not proposed changes to tax rates (beyond the change in trustee rate announced in the Budget) and has ruled out a wealth tax, the Budget 2023 Tax Initiatives Information Release show that it was considering both. This Information Release indicates that Labour was considering a $8,500 tax-free threshold with a 1.5% wealth tax on net assets over $5 million before ruling it out.

Te Pāti Māori want to remove GST from all kai and New Zealand First from “basic” foods, both of which go further than Labour’s proposal to remove GST from “fresh fruit and vegetables”. Perhaps coalition negotiations could see GST removed from a broader range of food products than Labour is proposing.

On the right of the political spectrum, National is proposing adjustments to the thresholds for the 17.5% and 30% personal tax rates, while ACT’s proposal is more radical involving the elimination of the 10.5%, 30%, 33% and 39% tax rates altogether and the introduction of a 28% rate. To compensate low-income earners for the removal of the 10.5% tax rate, ACT would introduce a Low-Middle-Income Tax Offset, effectively a tax credit to eligible taxpayers. New Zealand First also supports inflation adjusting the personal tax rate thresholds.

Both National and ACT proposed using funds generated from the Emissions Trading Scheme to pay a climate dividend or carbon tax refund to taxpayers. Therefore, taxpayers can expect to receive some sort of payment of this nature if the election results in a National/ACT government.

With a National/ACT government we can expect deductibility of interest in relation to residential properties to be reinstated and changes to the bright-line test that taxes residential land sales. With regards to interest deductibility National is proposing a phased re-introduction, whereas ACT wants full deductibility re-introduced immediately. National and ACT also differ on what changes should occur to the bright-line with National proposing to drop the bright-line period back to the original two years from the current ten years and ACT wanting to abolish the bright-line test altogether.

National is also proposing to remove or not progress some taxes but will introduce some new taxes of its own. National will not proceed with the increases in fuel tax and remove the Auckland regional fuel tax. It will also repeal the legislation introducing the so called “app tax” imposing GST on all services provided through apps such as Uber and Airbnb. National will introduce new taxes on overseas property purchases and overseas online gambling platforms. It will also increase immigration levies.

The exact mix of tax changes will obviously depend on which of the major parties is leading the government and how much clot their coalition partner(s) have in the coalition formation negotiations.

To learn more about the tax policies released by the leading political parties, some potential issues associated, and how they may impact you and your business join Stephen Richards, Findex Tax Advisory Partner, online on Wednesday 27 September.

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20 September 2023