National's Tax Plan Highlights
On 30th August 2023 National announced its tax plan ahead of the upcoming election labelled “Back Pocket Boost – Tax Relief for the Squeezed Middle”.
As in the name, the focus is on middle New Zealanders, aiming at putting cash back in their pockets. The plan is to provide $14.6b income tax relief over the next four years and will not require any borrowing.
Income tax bracket adjustments
The existing income tax brackets have been in place since 2011
Inflation has seen the average New Zealand income rise significantly over this period resulting in many individuals being taxed at higher marginal tax rates
The proposed changes in the table below result in less tax being paid on the dollar for all earnings under $78,100 (even for individuals who receive a higher total income than this)
Independent Earner Tax Credit (IETC) threshold increase
Currently this provides up to $520 in tax credits for earners on less than $48,000 per year (and over $24,000)
The eligibility for this credit will be lifted to those earning up to $70,000, which is estimated to benefit 380,000 working New Zealanders
Other assistance for individuals and families
Increasing the value of the in-work credit by $25 a week from 1 April 2024
Introducing a FamilyBoost childcare tax credit worth up to $150 per fortnight for families with young children
Increasing Working for Families tax credits for working families from 1 July 2024
Increasing NZ Super payments every year they are in office
Brightline period on residential property
National will reduce the Brightline period from 10 years to two years
The rules are to take affect from July 2024
Currently any gain on the sale of a property purchased from 27 March 2021 onwards can be subject to tax up to ten years from sale (five years for qualifying new builds)
Interest deductibility for rental properties
Restoration of the interest deductibility for rental properties
This measure will be phased in with deductibility kept at 50% from April 2024, 75% from April 2025 and fully restoration from April 2026
Commercial building depreciation
Depreciation on commercial buildings will be scrapped
This measure was re-introduced by Labour in response to COVID-19 following its previous removal from the 2012 income year onwards
Labour have also confirmed they would cease this policy to fund other tax measures so it is all but certain to be removed
Foreign buyer tax
Introduction of a 15% foreign buyer tax for purchases of homes of $2m or more by people who do not hold a resident class visa in NZ
The foreign buyer ban will remain for homes worth less than $2m
It is assumed that Australian and Singapore citizens will not be affected by this tax as they not currently affected by the foreign buyer ban