Government makes an investment in a more productive and competitive New Zealand.
By Bryce Prosser
Today’s release of the New Zealand Budget by the Minister of Finance Bill English, his seventh, focuses on responsible government, reducing hardship for vulnerable families, investing in public services and creating a more productive and competitive economy.
A number of key initiaves that support innovation and development have been welcomed by CPA Australia as has the leaderhips shown by the Key Governmet in investing in New Zealand’s future.
One of the key anouncements has been changes to the tax rules on residential property which will come into effect on 1 October 2015 and have been introduced to address both tax avoidance and the current residential property price bubble and the associated systemic risk this represents for the New Zealand economy.
According to the Budget papers, the New Zealand economy is forecast to grow, on average, by 2.8 percent over the next four years with unemplyment expected to fall below 5 percent in 2016.
Given the current low inflation environment in New Zealand, it is likely that Government revenue will also remain subdued over coming years, despite postive economic growth. As such, a Budget deficit of $NZ684 is expected in 2014/15 with a small surplus ($NZ176 million) expected in 2015/16.
Both employment and average wages are both expected to increase over the next four years.
Investing in a more productive and competitive economy
As part of the 2015 Budget the Key Government has outlined a plan to invest in innovation, R&D capital infrastructure.
As part of the New Zealand Government’s Business Growth Agenda a number of new initiatives have been announced including:
- $NZ80million for research and development growth grants
- $NZ25 million to establish Regional Research Institutes for scientific research.
- $NZ113 million for New Zealand’s higher education system
- $NZ58 million to manage increased demand for border services
Vital capital investment have also been announced which will fund priority infrastructure investments including:
- $NZ210 million for the extension of Ultra-Fast Broadband
- $NZ210 million for rail and $NZ137 million for regional roads
- $NZ100 million to bebuild Lincoln University’s science facilities.
Cut to KiwiSaver and a new border levy
Today the Government has announced the removal of the $NZ1000 KiwiSaver kick-start payment for new members. This payment was designed to boost membership in the scheme when it started in 2007. The scheme now has over 2.5 million members.
A new border clearance levy to fund passenger-related biosecurity and customs activities at New Zealand borders is expected to take effect from 1 January 2016. Subject to consultation, the levy is expected to be around $NZ16 for arriving passengers and $NZ6 for departing passengers.
New and strengthened rules for residential property
The Government has announced today measures designed to bolster and enforce the tax rules on New Zealand property. These changes will come into force on 1 October 2015.
The new rules are:
- All non-residents and New Zealanders buying and selling any property other than their main home must provide a New Zealand IRD number
- All non-resident buyers and sellers must provide their tax identification number from their home country, along with current identification requirements such as a passport.’
- To ensure that current anti-money laundering rules apply to non-residents before they buy a property, non-residents must have a New Zealand bank account before they can get a New Zealand IRD number
- A new ‘bright line’ test will be introduced for non-residents and New Zealanders buying residential property to supplement current rules taxing the disposal of investment property. Under this rule, gains from residential property sold within two years of purchase will be taxed, unless the property is the seller’s main home, inherited from a deceased estate or sold as part of a relationship property settlement.
The Government will also investigate introducing a withholding tax for non-residents selling residential property with a possible introduction in mid-2016.
Investing in public services
An additional $NZ1.7billion has been allocated to boost New Zealand’s public health services including $NZ1.3billion for extra services to accomodate rising cost pressures in the health system and population growth and $NZ76million for hospices and 60 new palliative care nurses.
Over $NZ680million has been provided for early childhood, primary and secondary education including $NZ244million for new schools and classrooms, additional funds to boost school operational grants, and teh provision of teacher aide support for studnets with special needs.
Reducing hardship among children
One of the key initiatives announced in the Budget is a $NZ790million package to support low-income families with children and ensure there is a strong incentive for parents to move from welfare to work.
These changes will come into effect on 1 April 2016 and include increasing the work obligations for beneficiary parents, increasing the benefit rates for families, increasing the Working for Families payments and increasing Childcare Assistance.
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