Tax changes at a glance
While nowhere near a ‘tax budget’, Budget 2013 still provides a number of tax changes. The most significant tax change is a signalled $1 billion reduction in ACC levies for businesses and households. The main tax changes are covered below.
Business and household ACC reductions
The Government has signalled continuing improvements in ACC which will provide opportunity for significant levy reductions for both businesses and households while ensuring the system remains sustainable. The Government is allowing for a $300 million reduction in levies in 2014/15 and expects this will increase to $1 billion by 2015/16.
Business research and development concessions
The Government wants to encourage small innovative businesses to invest in R&D. Small innovative businesses are set to benefit from proposed tax changes which will allow them to claim tax losses on R&D up to a certain limit. This will benefit R&D intensive start-ups. A public consultation paper will be released in June 2013.
Business black hole expenditure
The budget will also provide tax relief for six areas of black hole expenditure:
- Immediate deductibility for capitalised legal and administrative fees for patent applications where no depreciable asset is recognised for tax purposes.
- Making certain fixed life resource consents granted under the RMA depreciable for tax purposes.
- Making certain abandoned resource consent applications immediately deductible, irrespective of lodgement of the application.
- Immediate deductibility for all direct costs associated with the payment of dividends.
- Immediate deductibility of annual stock exchange listing fees.
- Specifying that annual shareholder meeting costs are immediately deductible.
Multinational investor thin capitalisation restrictions
Previously signalled changes to the thin capitalisation rules for inbound multinationals will be made and will lead to some multinationals paying more tax in New Zealand as a result of excessive interest deductions becoming non-deductible for New Zealand tax purposes. Some technical issues are still to be resolved including, the ‘acting together’ test to ensure the resulting legislation is workable in practice.
The Government remains very satisfied with the work the Inland Revenue (IRD) has done in the property area over the past few years. The IRD will be allocated a small level of additional funding to further pursue property investment tax compliance. This will see a further $6.65million increase in IRD funding with an anticipated $45 million per annum return to the tax base.
Collaborative funding of $2.9 million will be used between eight Government departments, including the IRD, which will see improvements in the public’s interaction with Government in a digital environment. Against this ‘nominal’ level of investment it appears that the wider funding issues facing the IRD’s FIRST system will need to be addressed within current allocations.
Personal tax changes – overseas based student loan borrowers
Aside from the ACC levy reductions, there are targeted changes in the student loan rules for overseas-based borrowers. The Government will ‘up the ante’ in a range of ways including:
- Changes to repayment thresholds to reduce the repayment timeframe
- Changes to the child support border arrest system to include non-compliant overseas-based borrowers
- Information sharing between the IRD and Internal Affairs.
In terms of the tax impact, the highlight in Budget 2013 will be the ACC levy reductions which no doubt will be well received across all levels of the business community.