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