Minister of Finance, Nicola Willis, delivered her first budget on 30 May. Her stated objective is getting the books back to surplus and a confirmation of tax relief for ‘the average New Zealander’. There had also been a number of budget related announcements prior to this date.
Unashamedly, tax relief was the central platform. This is the first adjustment of tax brackets for 14 years so is well overdue. These personal tax income thresholds have been adjusted and the top marginal rate for a median worker is back to 30%. The new tax rates will become effective 31 July 2024 so there will be a composite tax rate for the 2025 year.
The Independent Earners Tax Credit and Working for Families In-Work Tax Credit have both been increased and a new Family Boost assisting with the cost of early childhood education has also been introduced.
The government remains focused in its goal to return to surplus by the 2027-2028 fiscal year, but a weak economic outlook and subsequent projected reduced tax take means this will not be easy. A key element of this has been the planned 6% reduction in Government Agency operational spend which has resulted in a significant reduction in staff numbers.
There has also been a redirection of funds saved from back-office functions to more front-line focus. This will be particularly apparent in education, transport, health and law and order. Special emphasis seems to be placed on improving health and education outcomes. Regional development also benefited.
Other initiatives include removal of depreciation on commercial buildings (which is discussed separately in this newsletter), overseas student loan interest, and a significant increase to the levy charged to arriving tourists. Somewhat controversially, the First Home Buyers grant has also been withdrawn.
Capital gains tax was not mentioned. However, it is worth also noting that there has been an additional $29 million investment in the Inland Revenue Department to enable investigation in noncompliance and debt collection.
This was a ‘No Frills’ budget and only time will tell if the policies announced will indeed bring inflation down and ease the cost of living.
