News

The 2010 Budget

The National Government delivered its much anticipated budget today. We summarise the key tax proposals below:

• Personal income tax rates will be cut from 1 October 2010 as follows:
  

  Income	Current Rates	New Rates
  $0 - $14,000	12.5%	10.5%
  $14,001 - $48,000	21.0%	17.5%
  $48,001 - $70,000	33.0%	30.0%
  Over $70,000	38.0%	33.0%

• The secondary tax and resident withholding tax rates will be reduced from 1 October 2010 to align with the new rates above.
• GST will increase from 12.5% to 15% from 1 October 2010.
• The company tax rate will reduce from 30% to 28% from the start of the 2012 income year.
• The top tax rate for PIEs will reduce from 30% to 28% from 1 October 2010. The other PIE rates will also fall to align with the new personal tax rates.
• No depreciation deduction will be allowed on commercial or residential buildings from the 2012 income year. However, a taxpayer is still able to apply to the Commissioner for a special depreciation rate as they can at present.
• The income tax treatment of fit-outs will be reviewed and the rules around the splitting of buildings from building components will be clarified.
• The current 20% loading on depreciation on new plant and equipment will be removed for assets purchased after today.
• From 1 April 2011 qualifying companies (QC) and loss attributing qualifying companies (LAQC) will be treated as flow through entities (similar to limited partnerships). Losses are still able to be offset against a shareholder's personal income tax, however, any taxable profits will also be taxed at the shareholder's personal income tax rate (rather than at only 30% as is the current situation).
• Stricter rules will be introduced for foreign owned companies funding their New Zealand operations through debt. The current safe harbour thin capitalisation threshold will be reduced from 75% to 60% from the 2012 income year.
• Inland Revenue will get a significant funding boost to increase its audit and compliance activity around debt collection, the hidden economy and property transactions.

If you have any queries regarding the Budget announcement, please contact your Staples Rodway advisor.

« Back To News