A new Government is now certain, exactly what it looks like is not. Whether we have a National & Act coalition, or a three party coalition with NZ First included, there is a big job ahead.
But what does the change of Government mean for you and your business? Here’s the lowdown on the key issues:
- National, Act & NZ First are aligned with the belief that tax needs lowering. National have proposed a $14.6 billion tax cut policy 4.6 billion tax cut policy.
- National would like to see inflationary changes on increasing the income threshold within each income tax band. The $14,000 threshold will rise to $15,600; the $48,000 threshold will rise to $53,500 and the $70,000 threshold will rise to $78,100. This should see some tax savings for majority of our clients through the tax on their shareholder salaries.
- Someone with a shareholder salary of $60,000 will get an extra $50 a fortnight. A household on $120,000 without children would get $100 a fortnight and an average income household with children would get $250 a fortnight.
- A superannuitant couple would get $26 a fortnight.
- Act would like to see, if you earn under $70k then you get huge tax relief, with a flat tax rate of 17.5%, (unless you earn under $14,000 then you will have a tax increase).
- If the coalition includes NZ First, they want to inflationary alter the income thresholds, so high probability aligned with Nationals proposal.
- The independent tax credit will be raised as well, giving another $10 a week with its income threshold lifted from $48,000 to $70,000, a reduced amount by 13% from $66,000.
- Working for Families, with the in-work tax credit increasing from $72.50 a week to $97.50.
- Removal of the depreciation tax write-offs from commercial buildings, introduced during the Covid-19 pandemic response, this will push your tax up.
- There’s agreement on no wealth tax , no land tax, no changes to existing GST or the company tax rate.
- The bright-line test would be returned to two years (down from the current 10 years) by July 2024, restoring the bright-line (National & Act in agreement).
Other repeals proposed are app, ute & fuel taxes.
- National (Act in agreement) proposes to restore that interest deductibility on a “phased in” basis with 50% interest deductibility kept from April 2024 (rather than being reduced to 25% in line with the current interest limitation rules); 75% interest deductibility from April 2025; and 100% interest deductibility from April 2026.
- Fair Pay agreements will be abolished by both Act & National.
- National would abolish median wage requirements for work visas, saying they have made it harder for tourism and hospitality operators affected by worker shortages. They would also raise the upper age limit to apply for a working holiday visa from 30 to 35 and would allow people to apply for a second or third working holiday visa if they worked in areas with worker shortages, such as tourism. National would also relax rules for employers in the Recognised Seasonal Employer (RSE) scheme, so that employers would not have to pay a minimum of 30 hours a week, but instead an average of 30 hours a week for the contracted period. It would also allow workers to consider other accommodation options.
Regulation & Compliance
- National would simplify verification protocols for businesses that need to comply with anti-money laundering requirements, saying too much regulation is making it hard for businesses to grow. National would repeal the Conduct of Financial Institutions Act, which is meant to manage financial misconduct, but they say it imposes additional burdens on lenders. They would also reverse changes to the Credit Contracts and Consumer Finance Act, which were intended to control predatory lenders, but they say this has made it more difficult to access credit.
- National would require DOC to make concession decisions for businesses within one year and grant them for a minimum period of five years with a right of renewal. They say the concessions system for tourism is cumbersome, and creates uncertainty for tourism operators.
- National would reduce duplication of information requests from government to primary industries, which would apply to farmers and forestry, and would limit the ability to convert farmland to exotic forestry, saying it’s resulting in the loss of valuable agricultural land.
Some policies Act would like to see that have not been discussed by National are:
- The Act Party would end tax exemptions for charity-owned companies that do not solely exist for charitable purposes.
- Act would end various business support programmes including the Provincial Growth Fund, Callaghan Innovation, domestic and international film subsidies, growth and development spending and Industry Transformation Plans. Act would halt government contributions to the Venture Capital Fund, which invests in firms that support early-stage tech companies.
- Act would remove the January 2 public holiday to “help small business absorb the cost of Matariki”. They would abolish fair pay agreements.
- Act would abolish the significant natural areas policy, which it says undermines private property rights and the efforts of farmers. They would abolish tariffs on imports, saying these reduce competition.
- Winston Peters said the party would assist businesses to add value and assist them to uptake IT to help with productivity issues.
- Lowering business tax, raising wages and rapidly doubling gross national product were among other policies announced by NZ First.
Where are we at today?
At this stage we have the preliminary results, which show National and ACT with 61 seats in a 121 seat parliament. But with special votes still to come in, that could yet change.
The final vote and therefore the official election results won’t be announced until November 3 meaning National will need to wait to determine if NZ First will be forming part of the coalition. Until then, Labour remains the caretaker government until a formal transition of power can take place
So what do I think is going to happen?
In our opinion, it is likely that the national deficit will be harder to correct than expected. The Government spent $8 billion more than it received as income for the year, as at 30th June 2023. The gross government debt on that same date was $141 billion. That’s like loans we pay interest on – of which I’m sure the Government will be paying interest on this.
If National & Act (and perhaps NZ First) take action on the policies they promoted then that would be a start in the right direction.
But we need to start thinking bigger and differently, rather than just changing around how we spend from the income that comes in. That’s just reshuffling numbers.
How can we start thinking and doing things differently, creating a bigger picture, from a place we haven’t thought of before?
In our opinion, Parliament needs to get you all together, the business owners, the thought leaders – after all you are always solving the big problems within your business. And this just happens to be the biggest business in New Zealand.
Together as business owners we have a lot to contribute as to how we can run at a surplus, improve our environment, build better infrastructure, law and order, health and the education system and look after our people’s social needs.