The formation of the new National-led coalition government remains uncertain, but prior to the election National made significant tax-related promises that aim to boost New Zealander’s after-tax income. Here are some potential changes that might impact you.
Adjustments to tax brackets
National aims to modify tax brackets to account for inflation and increase incomes. Here’s how the proposed changes look:
|Tax rate||Current income tax bracket||National’s proposed tax bracket|
|10.50%||Up to $14K||Up to $15.6K|
Return of interest deductibility on rentals and shorter bright line test
For rental investment properties, National plans to gradually reinstate 100% interest deductibility over the next three years. The bright line test, currently at 10 years, would be reduced to two years.
FamilyBoost and Working for Families
National’s FamilyBoost is a new initiative offering a rebate for childcare costs, up to $150 per fortnight, with reductions for higher incomes.
National also proposes an increase in the Working for Families in-work tax credit.
Combining these changes with the new tax brackets, a couple with young children and a $120,000 household income could see up to an extra $250 per fortnight.
End of clean car discounts
National intends to eliminate the clean car rebate and feebate system by the end of 2023. Instead, the party plans to support the shift to electric vehicles by expanding the public charger network, adding 10,000 extra charging stations by 2030.
Potential influence of coalition partners
ACT has its own tax plan with a two-bracket income tax system, and the party is expected to play a role in determining final decisions on tax brackets and rates. And, with NZ First in the mix, it suggests that the negotiation table might see even more conversations and compromises on tax-related matters.
It’s a dynamic political landscape with multiple parties contributing to the decision-making process. It’ll be interesting to see how the discussions unfold and what updates emerge regarding tax changes. Stay tuned for updates on major tax changes affecting small business owners and investors.