Overview of New Zealand Budget 2010

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By Bernard Hickey

1. Personal tax cuts from October 1, 2010:
NZ$0-$14,000, currently on 12.5%, will be on 10.5%
NZ$14,001-$48,000: currently on 21%, will be on 17.5%
NZ$48,001-$70,000: currently on 33%, will be on 30%
NZ$70,001 and over: currently on 38%, will be on 33%

Work out your personal tax saving here

2. The company tax rate will be lowered from 30% to 28% on April 1, 2011

3. Depreciation:
No depreciation deductions will be allowed for buildings with an estimated useful life value of 50 years or more (such as rental and office buildings).
Businesses will no longer be able to claim 20% accelerated depreciation on new plant and equipment. This change will apply to assets purchased after budget day. The old rules will continue to apply for assets purchased before this date.

4. 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 April 1, 2011.
New rules will also end the automatic CPI indexation of the abatement threshold to stop higher-income recipients getting bigger increases than those on lower incomes.

5. More to come on PIE
Further changes, covering areas such as distributions from trusts and income from cash PIEs will follow after the budget. Officials will release a paper setting out the issues and proposed solutions later this year for implementation from April 1, 2011.

6. GST raised to 15% from October 1,2010
Currently at 12.5%, GST will be raised to 15% from October 1, 2010.
Government will accompany this rise with a compensatory 2.02% rise for those receiving:

  • NZ Superannuation or a Veterans Pension.
  • All main benefits, suchas the Unemployment Benefit, the Sicknes benefit, the Invalid’s benefit and the Domestic Purposes benefit.
  • The maximum rates of the Disability Allowance, Child Disability Allowance and childcare subsidies paid through Work and Income.
  • The Family Tax Credit and Minimum Family Tax Credit, which are part of the WFF scheme.
  • Student allowances
  • CPI-adjusted payments from the Government Superannuation Fund or National Provident Fund.

7. Domestic Debt Programme
The New Zealand Debt Management Office intends to issue N$12.5 billion of bonds in 2010/11.
Total issuance over the forecast period is NZ$2 billion lower than previously announced in the December 2009 half-year update.
Budget 2010 includes forecast bond programmes of NZ$10.5 billion in 2011/12, NZ$10 billion in 2012/13 and NZ$6 billion in 2013/14.

8. Inflation Indexed bonds.
The New Zealand Debt Management Office is actively considering reintroducing inflation-indexed bonds. Issuance of these bonds during 2010/11 would form part of the NZ$12.5 billion debt programme.

9. LAQC’s
LAQC and QC rules will be tightened from income years starting on or after April, 2011 to prevent people choosing to have losses deducted at their marginal personal tax rates but profits taxed at the lower company tax rate.

10. The thin capitalisation “safe harbour” threshold for inward investment will reduce to 60%. This is to bolster the internationally recognised principal that income should be taxed in the juristiction in which it is generated (in this case New Zealand)