Budget 2015 tax announcements
The Government’s 2015 Budget contains a range of tax-related measures, including a change to KiwiSaver, proposals to address child poverty, social housing and improving property compliance.
KiwiSaver
The Government has announced its intention to repeal the $1,000 kick start payment for new enrollees. The change is expected to come into effect from 2pm on 21 May 2015.
Media statement – KiwiSaver $1,000 kick-start payment to cease
Child support
Two measures were proposed today to address child support debt. These aim to encourage liable parents to re-engage with their child support obligations and strengthen Inland Revenue’s ability to work with parents to help control and manage their child support debts:
- extending the write-off of monthly incremental penalties to more parents. This will apply from 1 April 2016; and
- an amendment to the penalty write-off tests to adopt a more pragmatic “fair and reasonable” test. The “fair and reasonable” test is proposed to apply on a discretionary, case-by-case basis from 1 April 2016.
Media statement - Forgiving debt to encourage child support payments
Children in hardship
A proposed amendment was announced to increase the rate of the in-work tax credit and increase the Working for Families tax credits abatement rate from 1 April 2016. This is part of wider changes proposed by the Government and more information on this can be found on the Budget 2015 website.
Social housing
A proposed amendment was announced to clarify that payments made by the Ministry of Social Development to social housing providers to the extent the payments relate to the provision of social housing are GST-exempt. This is consistent with payments for residential accommodation more generally. This is part of a wider package on social housing initiatives and more information on this can be found on the Budget 2015 website.
Property
To help ensure that a fair amount of tax is paid by all, the Government has announced three tax-related proposals aimed at improving compliance in the property investment sector.
- A New Zealand IRD number will be required as part of the land transfer process.
- As part of the land transfer process, non-resident buyers and sellers must also provide their tax identification number from their home country.
- Non-residents will also need a New Zealand bank account before they can get an IRD number in order to buy a property.
- Gains from residential property sold within two years of purchase will be taxed, unless the property is the seller’s main home, inherited from a deceased estate or transferred as part of a relationship property settlement.
- An extra Budget allocation to Inland Revenue for investigating aggressive tax planning, property compliance and hidden economy initiatives.
Media statement - Extra property tax measures
Fact sheet – Property tax measures
Full coverage of all Budget 2015 announcements can be found at http://www.treasury.govt.nz/budget/2015
Hon Bill English
Minister of Finance
21 May 2015
Media statement
KiwiSaver $1,000 kick-start payment to cease
People enrolling in KiwiSaver from 2pm today will no longer receive a $1,000 kick-start payment, Finance Minister Bill English says. The change does not affect existing KiwiSaver members.
“KiwiSaver has been successful in attracting members, with 2.5 million New Zealanders having a KiwiSaver account and together receiving $2.5 billion in kick-start payments since the scheme started in 2007,” Mr English says.
“However, it also has considerable costs for taxpayers. The Government will spend more than $850 million this year on two subsidies – the ongoing government subsidy of up to $521 a year per member and the $1,000 kick-start.
“Because of these costs, the Government has decided to remove the $1,000 kick-start payment from today.”
Contributing KiwiSaver members aged 18 or over or under 65 will continue to receive an annual Member Tax Credit from the Government of up to $521.
Employers in general are still required to contribute at least 3 per cent of an employee’s gross wage or salary and employees will continue to make their own contributions.
“Removing the kick-start payment for future enrolments will save over $500 million over the next four years,” Mr English says. “This money is being reinvested in this Budget into priority public services.”
In 2015/16, the Government is forecast to spend $705 million on the KiwiSaver Member Tax Credit plus $12.3 billion on New Zealand Superannuation.
“Auto-enrolment when starting a new job, the 3 per cent employer contribution and the member tax credit of up to $521 each year means people still have an incentive to sign-up to KiwiSaver and to keep saving for their retirement.
An in-depth evaluation of KiwiSaver is available at www.ird.govt.nz *
Media contact: Cameron Burrows 021 937 401
[* Update added on 29 June 2016. KiwiSaver reports are now ony available on request. They are available on the New Zealand National Library's 10 November 2015 web 'harvest' of the IRD site. To access this:
- Go to https://natlib.govt.nz/
- Search for ird.
- Use the filter (on the left hand side for a desktop browser) to limit results to Websites.
- Select the result labelled 'Inland Revenue [electronic resource] = Te Tari Taake'.
- Click on 'See this item online'.
- Select a 'harvest', for example 10-11-2015.
- The reports are under (from the menu at the top of the page) About us > Our publications then Reports > Research and evaluation reports > then scroll down to KiwiSaver reports.]
Hon Todd McClay
Minister of Revenue
21 May 2015
Media statement
Forgiving debt to encourage child support payments
Budget 2015 includes changes to tackle child support debt and to encourage parents to pay what they owe for children for whom they are responsible, Revenue Minister Todd McClay says.
Over the next four years, the Government will forgive around $1.7 billion of penalties owed by parents to encourage more support to reach children.
“Child Support debt is currently $3.2 billion and rising, and only around $700 million is actual child support,” Mr McClay says.
“The rest is debt from penalties. This is the legacy of a penalty system that was overly punitive and which is now being changed.
“We need to get parents to start paying so that children, many of whom are in hardship, are better off. Liable parents are facing paralysing levels of debt from penalties, and as a result are not attempting to pay their outstanding amount, nor are they meeting their current obligations.
“Many have chosen to leave New Zealand. Some $827 million of the total debt, of which most is penalties, is owed by people living in Australia.
”A further $778 million, of which 84 per cent is penalty debt, is owed by those living outside New Zealand and Australia.
“This is in no one’s interests. We want child support paid so it goes directly to the children who need it, or back to the taxpayers who are paying it by default in the form of a benefit to that child’s family.”
Many people receiving or paying child support are on low incomes. Almost 54,000 of the 120,000 people with child support debt earn less than $30,000 annually.
And those low earners owe more than $700 million of the total $3.2 billion in debt.
“We want liable parents to pay what they owe,” Mr McClay says. “To make that happen, Inland Revenue will adopt a ‘fair and reasonable’ test to consider applying penalty relief where it makes sense to do so.
“In addition, mandatory write-offs of monthly incremental penalties will apply to those liable parents who are paying by compulsory deduction and meeting their payment requirements.”
If maximum discretion is applied, this will result in $1.7 billion of penalties being forgiven over four years.
More than $1.6 billion of this is already reflected as an impairment in the Government’s books. The measures will result in a net estimated decrease in Crown operating revenue of $47.1 million over the next four years. This is the value of the penalties currently in the Government’s books, less the expected increase in child support payments to the Crown.
In future, the growth of child support debt will be slowed by changes made in the recent child support reforms, including;
- Replacing the penalty rates from 10 per cent for late payment with a two-stage penalty, (2 per cent if a payment is not made by the due date, and a further 8 per cent if the amount remains unpaid after seven days).
- Reducing monthly incremental penalties from 2 per cent to 1 per cent.
“These measures should not be seen as a soft option,” Mr McClay says. “We remain focused on liable parents meeting the obligations to their children and will have no tolerance for parents who deliberately avoid responsibility.
“We intend to use every measure available to us to collect debt from those who do not make arrangements for payment even though they are able, including arrest at the border for people who have consistently refused to pay.
“Improving the rate of child support collected means more money going to low-income New Zealand families who rely on it to help cover the cost of raising children,” Mr McClay says.
All changes are expected to take effect from 1 April 2016.
Media contact: Lesley Hamilton 027 490 1345