The Budget announced on Thursday 24 May displayed the ‘responsible management’ approach this government is promoting to build towards the vaunted ‘return to surplus’ predictions for 2014/2015.
For the small business owner there is little to celebrate – the increased compliance funding to the Inland Revenue, being an additional $78.4 million over the next 4 years, is targeting the hidden economy, debt collection and unfiled returns with an anticipated tax revenue increase of $345.4 million over the same period. The IRD are also planning to review the FBT exemptions for carparks and childcare on employer premises and the trading of salary for allowances that are not subject to tax.
Automatic enrolment in Kiwisaver has been delayed to 2014/15 and will be subject to public consultation at that time; however the employer and employee contributions will both increase as per last year, to 3% from 1 April 2013.
Student loans repayment details have been tightened with the removal of the voluntary repayment bonus and the loan repayment rate for borrowers earning over the repayment threshold will be increased to 12 cents in the dollar – both changes from 1 April 2013. They also plan to match information between IRD and NZ Customs Service to identify borrowers in serious default.
For the property owner, using a high-value asset for part private, part business (rental) use, the budget is restricting the tax deductions. Until now, owners could deduct costs for the full year except when the asset was used for private purposes. Under the new rule, the actual period of use will apply and the ‘available for rent’ period is removed from the calculation.
Repeal of tax credits:
The budget has removed with immediate effect, the low income rebate (income under $9880), and the tax credit for active income for children– no longer can a tax return be filed for children to receive tax deducted at source. Income of $2,340 or less is exempt.
The childcare and housekeeper tax credits are also repealed for 2012/2013. These provided a credit of 33% for these categories under specific circumstances up to $310 a year. The removal of the childcare tax credit is due to only 11% of claims coming from the bottom 30% of households – it is considered Working for Families and 20 hours subsidized childcare are of more assistance than this tax credit.
Other changes include those to livestock valuation schemes and the increase in the tobacco exise (10% in addition to the CPI over the next 4 years).
Most of the changes appear to assist the IRD to increase enforcement, tidy up outdated tax credits and narrow some loopholes.