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23 Nov 2017
It is expected that any new Government will bring with it a flurry of policy changes, but Jacinda Ardern has set out a particularly ambitious 100-day plan which will almost certainly include significant changes to New Zealand’s tax system that will affect the lives and pockets of all New Zealanders.
The first change will be the reversal of the previously legislated tax-cuts that were going to apply from 1 April 2018. Instead, there will be a targeted Families Package from 1 July 2018 which will include increases to Working for Families and Paid Parental Leave along with other specific benefits.
The area of greatest contention is likely to be the Government’s approach of using the tax system as a way of cooling the housing market. Along with the changes already announced to the Overseas Investment Act to limit foreign ownership of land, the existing bright-line test which taxes any capital gain on residential land (other than your “main home”) is set to move from two years to five years. In addition, there is a commitment to eliminate negative gearing by “ring fencing” rental property losses on a property-by-property approach over the next five years. What this means in practice is that any losses incurred on one rental property, would not be available to offset profits on another rental property even if they are owned by the same entity.
There are bound to be other tax changes following the formation, and ultimately the recommendations, of the much talked about “Tax Working Group”. This group will be given a blank sheet of paper to come up with ideas that improve the efficiency and fairness of our tax system with any changes to be passed before, but to apply, after the 2020 election. It is at this time, we the public, will have our say on the future direction of our tax system and the wider impact on our country.
Some minor changes indicated will be welcome news to everyone’s ears. There will be no more secondary tax for the 75,000 Kiwis with more than one job, which will mean higher take-home pays without the need to file a tax return each year. There will also be the return of the R&D tax credit to encourage innovation and investment in new and exciting ventures.
There are traditionally a greater number of changes to our tax system under a Labour-led Government, so now more than ever we look forward to working proactively with all of our clients to ensure opportunities are maximised and any potential costs are minimised. Watch this space!
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