Budget 2003: tax-related announcements
In his annual Budget address, Finance Minister Michael Cullen today made a number of tax policy announcements, including:
SSCWT - lower rate for low-income savers. From 1 April 2004 employers will be able to apply a lower, 21% tax rate to contributions they make to superannuation funds on behalf of employees earning under $38,000 a year. The necessary legislation will be introduced in the next taxation bill.
Family assistance - increase in income thresholds. From 1 April 2004, income thresholds for Family Support, Child Tax Credit and Parental Tax Credit are being raised in line with inflation. The current $20,000 threshold, at which abatement begins, will rise to $20,356. The $27,000 threshold, at which the rate of abatement changes from 18% to 30%, will rise to $27,481. The measure will be included in the next taxation bill.
Small businesses - further tax simplification. A government discussion document to be released later this year will outline further proposals for simplifying tax for small businesses. They include aligning the payment date for provisional tax with that for GST, at least for small and medium-sized businesses; basing provisional tax on a percentage of GST turnover, which will allow qualifying small businesses to match tax with cash flow more closely; the government covering the associated costs of the first five employees of small businesses that choose to use a commercial intermediary to help them meet their PAYE obligations; providing an incentive for new businesses to pay provisional tax in the first year of businesses; and simplifying the multi-rate FBT calculation.
International links. A tax priority for the government this year is to bring forward proposals to enable overseas venture capital to be invested in New Zealand in accordance with normal international tax rules. The government has also confirmed that it will consider measures to provide a temporary exemption for migrants from tax on foreign income, the cost of which, in many cases, must now be paid by New Zealand businesses that require the skills of those migrants.
Revenue base protection. The next taxation bill will include a measure aimed at schemes that are structured to offer high-income investors a return from tax deductions to the extent that the investors need not be concerned with the underlying economics of the arrangement.
All Budget material is available on line at www.treasury.govt.nz/budget2003.