TAX TIDBITS
Issue Thirty Nine, May 2010

In this months issue:

Budget 2010 

BUDGET 2010 - tax changes at a glance

The 2010 Budget was released yesterday afternoon with big reform around our current tax system including personal tax reductions across the board for all tax brackets and a cut to the company tax rate, along with an increase in GST. Below we have summarised the main tax changes that may affect you.

The tax package comprises:

All personal income tax rates will be cut from 1 October 2010.

  • After-tax earned incomes at all levels of taxable income will rise by more than the increase in GST.
 Income

Current Rates 

New Rates

 Composite Rates
(2010/2011) 
 $0 - $14,000

12.5% 

10.5% 

11.5% 
 $14,001 - $48,000

21.0% 

17.5% 

19.25% 
 $48,001 - $70,000 

33.0% 

30.0% 

31.5% 
 Over $70,000 

38.0% 

33.0% 

35.5% 

An increase in GST
  • GST will be increased from 12.5 per cent to 15 per cent from 1 October 2010.
  • Income support and other payments will be increased by 2.02 per cent from 1 October 2010, to compensate for this increase.  These payments include:
    • All main benefits, Student Allowances and a number of supplementary benefits.
    • NZ Superannuation, Veterans Pension and CPI-adjusted Government Superannuation Fund and National Provident Fund payments.
    • Working for Families (Family Tax Credit and Minimum Family Tax Credit).
  • From 1 April 2011, transactions between registered persons involving the transfer of land will be zero rates for GST purposes.


Reductions in tax for companies and savings vehicles

  • The company tax rate will fall from 30 per cent to 28 per cent from the 2011/12 income year. 
  • There will be a two year transition period to allow tax paid at 30 per cent to be imputed to dividends at a rate of 30 per cent.
  • The top tax rate for most portfolio investment entities (PIEs) will fall from 30 per cent to 28 per cent, while the other PIE rates drop to align with the new personal tax rates, from 1 October 2010.

Changes to depreciation rules

  • No depreciation deductions will be allowed for buildings with an estimated useful life of 50 years or more (such as rental housing and office buildings) from the 2011/12 income year.
  • The current 20 per cent depreciation loading on new plant and equipment will be removed, for assets purchased after Budget day.
  • Repairs and maintenance expenditure by building owners will remain deductible for income tax purposes, while depreciation deductions will remain for “fit out” items not considered to be a part of the taxpayer’s building.

Changes to loss attributing qualifying company (LAQC) and qualifying company (QC) rules

  • LAQC and QC rules will be tightened from income years starting on or after 1 April 2011 to prevent people choosing to have losses deducted at their marginal personal tax rate but profits taxed at the lower company tax rate.
  • All qualifying companies will be become “flow through” entities for tax purposes, much like a partnership i.e. both income and expenditure will flow through to the shareholders ensuring shareholders are taxed at their marginal tax rate on profits.
  • Shareholders of qualifying companies are restricted to offset attributed tax losses to the extent of their investment in the qualifying company.

Working for Families

  • People will no longer be able to use investment losses, including from rental properties, to reduce their income and become eligible for Working for Families, from 1 April 2011.
  • One part of the formula that adjusts Working for Families payments for inflation will be amended because it currently gives higher-income families a greater proportional increase than lower-income families.

Capital Contributions

  • Capital contributions (typically made by a landlord as an inducement payment) to fund the purchase of capital assets are no longer capital receipts - this change applies from 20 May 2010.

    If you have any queries or concerns regarding the budget please contact us.

    Disclaimer     Information contained within this document is of a general nature and does not constitute advice. Readers are cautioned not to act or reply on it without first seeking professional advice. The material and contents provided in this publication are informative in nature only. It is not intended to be advice and you should not act specifically on the basis of this information alone. If expert assistance is required, professional advice should be obtained.



 





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