Budget 2010

From 1 October 2010, personal taxes will be reduced, GST will rise to 15 percent and NZ Superannuation, Working for Families and benefit payments will increase - The aim of this is lifting incomes, keeping skilled Kiwis in New Zealand and helping families get ahead.
From 1 October 2010, the tax rates for most PIEs and bank interest will fall. The tax rate on investment vehicles will fall to 28 per cent from 1April 2011 - encouraging savings.
From 1 April 2011, tighter rules around the taxation of investment property will take effect - making the tax system fairer.
From the 2011/12 income year, the company tax rate will fall to 28 percent - encouraging productive investment and lifting competitiveness.

Across the board personal tax cuts worth $14.3 billion over four years.

Income

Current Rates

New rates

$0 - $14,000

12.5%

10.5%

$14,001 - $48,000

21.0%

17.5%

$48,001 - $70,000

33.0%

30.0%

Over $70,000

38.0%

33.0%

Increasing the rate of GST from 12.5 per cent to 15 per cent.
Tax cuts on NZ Super and a 2.02 per cent increase in payments to recipients of NZ Super, main working-age benefits and Working for Families - reflecting Statistics New Zealand's calculation of the effect on prices of the rise in GST - worth $2.2 billion over four years.
A cut in the top tax rate for most PIEs from 30 per cent to 28 per cent.

A cut in the company tax rate from 30 per cent to 28 per cent.

A cut in the tax rate faced by unit trusts, life insurance policyholders and some other savings vehicles from 30 per cent to 28 per cent.
Ending landlords' and businesses' ability to claim depreciation on buildings with an estimated useful life of 50 years or more.
Tightening the rules for loss attributing qualifying companies (LAQCs) and qualifying companies (QCs) so shareholders cannot deduct losses at their marginal tax rate and pay tax on profits at the lower company rate.
Changes to the thin capitalisation tax rules to limit the scope for foreign multinationals to reduce their New Zealand tax liability.
Tightening the definition of income for Working for Families eligibility. The new rules will exclude investment and rental losses and end the automatic CPI indexation of the abatement threshold to stop higher-income recipients getting bigger increases than those on lower incomes.
Increasing IRD audit and compliance activity to improve the integrity of the tax system.

Removing the 20 per cent accelerated depreciation loading for new plant and equipment purchased after Budget day (20 May 2010).

Fact sheet - Building depreciation

Depreciation deductions will no longer be allowed for buildings with an estimated useful life of 50 years or more, such as rental houses and offices.
These rules will change for all such buildings from the 2011/12 income year. For most businesses they will be effective from 1 April 2011.

Data indicates that, on average, New Zealand buildings do not drop in value over time. The current depreciation allowances therefore give a tax preference to owning property.
The new rules will better reflect how buildings actually change in value and make the tax treatment of property fairer compared to other forms of investments. This will encourage productive investment in the economy.

These changes will affect landlords, property investors, property investment companies and some business owners, who can currently claim depreciation at 3 per cent (by the diminishing value method) or 2 per cent (by the straight line method) of the purchase price of their building.
Building owners will still be able to claim deductions for repairs and maintenance, to maintain the condition and value of their properties. They will also still be able to claim depreciation deductions for "fit outs" not considered part of the building. The Government intends to review the treatment of commercial "fit out" and, if necessary, amend the rules prior to 1 April 2011 to address any uncertainty in this area.
Building owners will be able to apply to Inland Revenue for a provisional depreciation rate if they consider a class of buildings, has an estimated useful life of less than 50 years.
These changes will raise $685 million in 2011/12, rising to $690 million in 2013/14.

Qualifying companies (QCs) and loss attributing qualifying companies (LAQCs) will become flow-through entities for tax purposes - similar to limited partnerships.
Inland Revenue and Treasury are releasing an issues paper today on the implementation of the new rules.
Changes will take effect from income years starting on or after 1 April 2011. Legislation implementing these changes will be enacted later this year.

Under the current rules, people can choose to deduct losses at their marginal tax rate - as high as 38 per cent - but have their profits taxed at the lower company rate (currently 30 per cent).
Changing the rules will improve the integrity and fairness of the tax system.

The changes will affect only shareholders of QCs and LAQCs.
In recent years, LAQCs have become more popular and they are a common structure used by property investors. Between 2003 and 2007 - during the housing boom - the number of active LAQCs doubled and the average tax loss claimed by investors increased by almost 50 per cent.
The changes are expected to generate additional revenue of $70 million in 2011/12, falling to $55 million a year by 2013/14.