Back pocket boost - Introduction
In a bold move aiming to alleviate the financial pressure on the middle class, the National Party
has unveiled their 'Back Pocket Boost' Election Tax Plan.
With a focus on tax relief and strategic revenue measures, this $14.6 billion tax cut policy is set to bring substantial changes to New Zealand's economic landscape.
Tax reform and relief
At the heart of the 'Back Pocket Boost' plan lies a dual approach: approximately $8.4 billion in cuts and $6.2 billion in revenue increases.
The key ambition is to reduce Government expenditure while also streamlining contractor and consultant spending.
Rental properties and property transactions
A pivotal change proposed by the National Party revolves around rental properties.
The plan seeks to fully restore interest deductibility for these properties, with a comprehensive implementation expected by April 2026.
Additionally, the Brightline test, which assesses capital gains tax on rental properties, will undergo a significant transformation. The existing ten-year rule will be shortened to just two years by July 2024.
This alteration implies that properties acquired before July 2022 will be exempt from the Brightline test upon sale.
However, the plan also entails the removal of the depreciation tax break for commercial buildings, previously introduced in response to the post-Covid landscape.
Foreign buyer tax and climate dividend
National's plan includes an assertive approach towards foreign property buyers.
A 15% foreign buyer tax will be introduced for home purchases valued at $2 million or more, excluding individuals without a resident class visa.
To respect the existing agreements with Australia and Singapore, citizens from these nations will be exempted from this new tax rule.
The introduction of a Climate Dividend is another standout feature. Revenue generated from the Emissions Trading Scheme will be earmarked to provide tax relief to individuals, pivoting away from subsidizing large corporations.
Similarly, revenue from the Climate Emergency Response Fund will be directed toward this endeavor.
Regulatory landscape and tax bracket adjustments
National is also committed to a proactive regulatory environment. They intend to establish a regulatory framework for online casino gambling to ensure offshore operators comply with tax regulations.
Tax bracket adjustments form a crucial facet of the plan. Changes to threshold amounts for marginal tax rates will facilitate tax relief for the middle class.
While there will be alterations to the middle-class threshold rates, National has confirmed that the 39% top tax rate on income exceeding $180,000 will remain unchanged in their first term.
Tax credit expansion
The National Party envisions enhancing after-tax income through a series of tax credit expansions:
- The Independent Earner Tax Credit's upper eligibility limit will be elevated from $48,000 to $70,000.
- The Working for Families tax credit will experience a $25 weekly increase.
- The FamilyBoost childcare tax credit will provide a 25% rebate for childcare costs (capped at $300 a week) for families earning up to $180,000 a year. This rebate will taper for families with incomes exceeding $140,000 a year.
Repealing Tax Mechanisms
The plan includes the repeal of several tax mechanisms, including the controversial "App Tax," the Auckland Regional Fuel Tax, and the Ute Tax, indicating a commitment to simplify and refine the existing tax structure.
Visa Processing Reforms
In a bid to align with global practices, National intends to implement a 'user pays' visa processing model, effective from 1 July 2024.
While this will result in increased visa processing fees for most applicants, Pacific Island origin applications will remain exempt. A priority processing fee will also be introduced to expedite applications.
The National Party's 'Back Pocket Boost' Election Tax Plan is poised to reshape the tax landscape of New Zealand.
By addressing the needs of the middle class through tax relief, credit expansions, and strategic revenue measures, the plan endeavors to foster economic growth while easing the financial burden on individuals and families.
As the election approaches, the implications of these proposed changes on the nation's economic future will undoubtedly take centre stage.
If you have any queries about the so-called back pocket boost, or New Zealand tax matters in general, then please get in touch.
The content of this article is provided for educational and information purposes only. It is not intended, and should not be construed, as tax or legal advice. We recommend you seek formal tax and legal advice before taking, or refraining from, any action based on the contents of this article