Budget 2021
The 2021 Budget had little in the way of tax announcements given that the property tax changes were released in March.
We have learned recently that the all important definitional work on defining “ New Builds” will be released for discussion in approximately two weeks. This will be followed by a five week consultation period with the new definition set to be legislated in August.
However, the Government’s Budget 2021 document refers to an initiative to “collect” information on the level of tax paid by high-wealth individuals and their related entities. This information will be used to develop basic research to understand the overall distribution of income and wealth.”
This may signal a threat to review the trust tax rate to align with the new top personal rate threshold of 39% for income above $180000 if the government sees evidence of restructuring of business arrangements designed to reduce personal exposure to the new tax rate.
Specific announcements that affect the business community are:
Industry Transformation Plans across 7 areas of the economy — advanced manufacturing, agri-tech, food and beverage, digital, construction, tourism, forestry and wood processing.
Infrastructure spending of $57.3 billion from 2021 to 2025 (including $10 billion for roads and public transport projects and $810 million on rail)
Extending the Training Incentive Allowance for employment-related training.
Funding for a digital skills training programme for up to 60,000 small businesses, with supporting advisory services to help 30,000 businesses create digital business action plans.
$200 million to drive recovery in the tourism sector, with particular focus on Kaikoura, Mackenzie District, Queenstown Lakes, Fiordland and South Westland.
$15 million to support Māori tourism operators.
As part of the Government’s plan to reduce child poverty, there will be increases to benefits:
All benefit rates will increase by $20 a week from 1 July 2021.
A second increase will occur on 1 April 2022, with main benefits lifted in line with Welfare Expert Advisory Group (WEAG) recommendations.
Families and whānau with children will also receive a further $15 per adult per week from 1 April 2022.
The Government has signaled it will review the Working for Families tax credits in line with WEAG recommendations.
The government has also signaled it will work on the introduction of an employment insurance scheme that could replace 80% of a worker’s salary who has lost their job. This may be established through a scheme like ACC and would help the government avoid significant costs like the wage subsidy in future. It is not clear how the scheme would be funded or for how long the salary would be covered.
