Individual tax cuts 

The individual tax cuts promised by National in the election campaign and agreed to in the coalition agreements between National, New Zealand First and ACT will proceed. However, this will be delayed by one month with the tax cuts taking effect from 31 July 2024. The brackets will be:

This represents the first change in individual income taxes since 2010 and the first change in tax brackets since 2009, and addresses bracket creep occurring since 2017. In addition, the Independent Earner Tax Credit, In-Work Tax Credit and new FamilyBoost payment will provide extra cash for eligible individuals, particularly young families. 

The government has provided a useful calculator, which can be found here. 

Extra Inland Revenue audit funding 

Hidden among the details is a 50% increase in spending on, “services to protect the integrity of the tax system and functions the Commissioner administers” (that is, investigation, audit and litigation activities) from $106 million in the year ended 30 June 2024 to $165 million in the year ended 30 June 2025. 

The coalition agreement promised extra funds for Inland Revenue audits and so this comes as no surprise. Extra focus is also being placed on ensuring student loan overseas-based borrowers are making repayments. This extra funding, along with Inland Revenue’s relatively new START system and access to a much broader range of data, means that it will be much easier for Inland Revenue to identify errant taxpayers. If you have any concern about your tax affairs, we recommend contacting your Baker Tilly Staples Rodway advisor. 

Infrastructure 

The Government has announced a significant increase in spending on infrastructure as part of the budget. Among key items are: 

• $1 billion extra on land transport projects
• $939 million to repair roads damaged by last year’s weather events
• $200 million on maintenance and renewals on the rail network
• $1.2 billion on the new Regional Infrastructure Fund

This is one of the few areas in which the Government is willing to spend and indicates its eagerness to resolve the country’s long-standing infrastructure deficit. Businesses involved in the infrastructure space, particularly in the regions, will undoubtedly benefit from this government largesse. Unfortunately, there is an indication that spending on infrastructure is set to settle toward the end of the decade. 

Economic conditions 

Treasury is expecting that when all is said and done, New Zealand would have experienced negative GDP growth in the year ended 30 June 2024, with this anticipated to head back toward 2% growth in the year ended 30 June 2025.

In addition, inflation is expected to be 3.4% for the year ended 30 June 2024, with this decreasing to 2.2% for the year ended 30 June 2025. This will be music to the Reserve Bank’s ears and if this eventuates, then it should see interest rates starting to move downward – thus reducing pressure on businesses and households.

Unemployment is expected to peak at 5.2% in the year ended 30 June 2025. While unfortunately representing many thousands out of work, this peak is lower than 2008 and in line with the 2020 peak.

The Government is expecting to be back in surplus by the 2027/28 year, while tax revenue is expected to be 32% of GDP over the coming years, up from the 29% of GDP during the term of the fifth National Government.

Comment

This has been a particularly ho-hum budget. After many years of beating the bracket creep drum, we welcome the tax relief package, which will see many households finally get some relief, but the lack of vision for the country has been noticeable. 

While New Zealand is going through tough economic times, Treasury is forecasting that the dawn is about to arrive with inflation finally coming under control and unemployment likely to peak at a relatively low level.

We hope that once New Zealand turns the economic corner, the 2025 and 2026 budgets will see measures to further address bracket creep, broaden the tax base and ensure businesses have a strong foundation for success.

If you have any questions about Budget 2024 and its impact on your business, please contact your Baker Tilly Staples Rodway advisor.