March 20, 2023
Budget 2023 – Let’s Talk Tax
The 2023 Budget labelled by the Prime Minister as “no-frills”, for the most part, has significant borrowing. The upside of this borrowing is that it is to be spent on capital expenditure, which in turn creates spin off effects for the economy.
For those hoping for tax cuts, the Finance Minister has left you disappointed. Such an attempt would likely fuel inflation and is not something the Government needs, more so in an election year.
As accountants, naturally, the first point to contend in Budget 2023 is all things tax.
Trustee tax rate change to 39%
Subject to a select committee process, from 1 April 2024, the trustee tax rate will increase to 39% to align with the top personal tax rate. By 2027, it is expected that the revenue coffers will increase by over $1.1 billion from this change.
This change will have significant implications for a number of our clients. As the policy is further defined we will be in contact to discuss this further.
Core Crown tax revenue is to grow by almost $40 billion over the next four years to 2027, coming mostly from employment taxes and Goods and Services Tax. To achieve this, the Inland Revenue Board will be funded to undertake compliance and enforcement activities, including the collection of tax debt.
Game developers will be over the moon that New Zealand has taken a page from the Australian playbook and allocated $160 million to the gaming sector for a rebate mechanism for gaming developers.
All the other cool stuff in Budget 2023
Recession? Well, not today, as with the Cyclone recovery, Treasury is no longer forecasting a recession. Inflation is also forecasted to drop to 3% by quarter three next year, however with a flattish GDP growth forecasted over the forecasted period. The forecast for 2024 in Core Crown revenue is $134.5 billion and expenditure is $137 billion, resulting in a deficit.
Where is the money being spent?
Here is a summary of the key spending under Budget 2023:
- $4.9 billion toward education
- $71 billion on new and existing infrastructure investment over a 5-year period
- $6 billion to a National Resilience Plan for Infrastructure
- $3.56 billion for new public housing
- $2.57 billion in cost of living support initiatives with early childcare, removing prescription co-payment and free/reduced public transport
- $1 billion to flood and cyclone recovery package
There is not too much to be excited about in this “bread and butter” budget. In Chris Luxon’s speech as Leader of the Opposition, he said both bread and butter had gone up by over 30% in price, yet there are no real measures to tackle the cost of living crisis hitting most Kiwis. Putting the debate between both Chris’ aside, we believe that this budget has been developed to manage inflationary pressures, closing the massive gap in infrastructure deficit spend and leaving a little in the tank for the election campaign trail.
How can we help?
With the increase in trustee tax rate and further funding for the IRD to undertake compliance, enforcement and debt collection activities, it is not unreasonable to prepare for the inevitable.
Led by our Tax Director Serjit Singh, we are equipped to undertake a holistic tax review of your business and provide you with solutions.
Please feel free to reach out to Serjit for a chat.