The 2018 Budget was announced on 17th May 2018. RBA members UHY Haines Norton have provided commentary that will summarise the main tax areas affecting businesses.
This year’s Budget does not propose significant tax reform. However, the Budget makes reference to the Tax Working Group (TWG) which will be reporting back to Government in February 2019. The TWG will be making recommendations on how to improve the tax system’s fairness, balance and structure.
- Treasury forecasts economic growth of about 3% p.a. on average over the next four years.
- Wages are forecast to rise by an average of 3.1%.
- Unemployment is expected to fall to 4.1% in late 2019.
- Stronger than expected revenue being generated from economic and employment growth. Gives breathing space to properly consider any changes needed to the tax system.
- More funding to Inland Revenue (IRD) to crack down on tax evaders.
- IRD’s Budgeted Expenditures:
Proposed Benefits From The IRD Spend:
IRD Contingent Liabilities:
1. Reversed the previous government’s planned tax cuts.
2.Implementation of the Research and Development Tax Credit. Eligible businesses get 3.12.5% back on funds spent on eligible R&D. This is intended to encourage an increase in R&D spending by New Zealand businesses, to 2% of GDP within 10 years.
4.Improve tax compliance in specific industries through third-party reporting and withholding taxes.
5.A commitment to pass legislation to ring-fence rental losses so investors can’t offset tax losses from residential properties against their other income.
6.Offshore suppliers of low-value goods will be required to register for, collect and pay GST to IRD.
7.Changes to Bloodstock tax rules to allow tax deductions for costs of high-quality horses acquired with the intention to breed.