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How will the latest Budget affect your business and your household?

Here are some of the changes most likely to have an impact on Kiwi business owners.

Higher trustee tax rate

The trustee tax rate is now aligned with the tax rate for the highest income bracket, at 39%, up from its previous rate of 33%.

Those clients who have family trusts may be unhappy to learn about the increase in tax rate from 33% to 39% which will take effect from 1st April 2024.  This move follows last year’s introduction of significant disclosure requirements that affected all our clients who had actively trading trusts.   It was clearly announced last year that if high income earners were circumventing the rate through use of trusts the government would move to address this issue.  There was an increase in income going through taxes and so to most accountants this new tax is not a surprise.

What this means for you if you have a trust – is that the trustees will often choose to  distribute the trust’s  annual income to beneficiaries in order to access their lower tax rates, this is in fact what we have been in the habit of doing for years as long as the trust deed does allow this and there is a tax advantage gained.

Extended free childcare hours

If you have young children, or your team members do, the extension of the ECE subsidy to include two-year-olds will be welcome news. This should make it easier for some parents or grandparents to re-enter the work force. Businesses in this sector will also feel the benefits.

Fuel tax is reinstated, more EV infrastructure

The 25c per litre fuel excise duty was reduced last year, but it will be reinstated on 30 June. This is likely to have an immediate effect on petrol and diesel prices, which may increase your personal and business transport costs. For EV owners the news is more positive; a $120 million investment in EV charging infrastructure will make it easier to charge up as you drive around New Zealand. The government has also announced that public transport will be free for children under 13 years old and half price for under 25s.

Boost for construction and peripheral industries

The extended Warmer Kiwi Homes programme will help make more homes warm and dry, and provide a workstream for businesses in this sector. Those in building and construction will also welcome the investment into 3,000 new homes and new infrastructure.

Extended free apprenticeship scheme

The Apprenticeship Boost programme will enable around 30,000 apprentices to keep receiving support. If your business can participate, this may help you find young workers and help them train.

Investment in tourism, horticulture and the digital sector

For businesses involved in one of these sectors, there is investment designed to support economic resilience. Industry Transformation Plans will include training in digital skills and accreditation for tourism employers. There is a 20% rebate for the game-development sector to help grow and protect New Zealand’s domestic game-development sector. This will be available for eligible businesses who spend a minimum of $250,000 each year.

Free prescriptions

All Kiwis can now get free prescriptions – and that $5 saving all adds up for you and your employees.

No longer forecasting a recession

Treasury is now forecasting slight growth in the economy for the first quarter of 2023, an improved outlook compared to the previous recessionary forecast. That’s no guarantee, but avoiding a recession would give consumers and businesses more confidence heading into winter.

Questions about how this could impact you?

If you want to read the full budget summary you can find it here. You might wondering about how the new trust tax rate, or the Apprenticeship Boost scheme, or anything else in the Budget, will affect your business or finances.

If you have any questions, do get in touch – drop us a note or give us a call and we’ll be happy to advise you.