Any tax cuts, or changes to the tax thresholds were vetoed in Budget 2023 as this was viewed as worsening inflation.
The big news was an increase to the trustee tax rate: In 2021, with a new 39% top tax rate for those earning over $180k a year, experts predicted some taxpayers would use trust entities (with a 33% tax rate) to minimise tax. The release of Inland Revenue’s recent High Wealth Individuals research was referred to where it stated income subject to the trustee rate spiked from $11.4b in the 2020 tax year to $17.1b in the 2021 year.
This budget raises the 33% trustee tax rate to 39% from 1 April 2024. Beneficiary income derived by certain private companies will also be taxed as trustee income, to ensure the new rate for trustee income cannot be sidestepped by distributing trust income to companies taxed at 28%.
Deceased estates and trusts for disabled persons will not be subject to the 39% rate.
Rollover relief: Tax relief is available in the form of rollover relief on depreciation recovery income or income on revenue account assets arising from insurance proceeds or compensation on business assets destroyed by North Island flooding events, from 2022-23 till the 2027-28 income year. Taxpayers need to elect to apply the rollover relief provisions, notifying the Commissioner of the election.
Rebate for gaming sector: There’s a new 20% tax rebate for video game development, for eligible game development studios with a minimum annual $250k expenditure. Studios can receive up to $3m per year, backdated to 1 April 2023.
Taxing multinationals: Following the OECD’s direction on international taxation, multinationals operating in New Zealand may be subject to additional New Zealand tax where the enterprise’s worldwide income bears an effective tax rate of less than 15%. In addition, the Government look to be following the OECD’s lead on an internationally coordinated approach to addressing taxes on digital services but if such a solution is not worked through by December 2023 the Government may introduce its own digital services tax. We’ll see.
Disclaimer: This blog has been carefully prepared, but it has been written in general terms only. The blog should not be relied upon to provide specific information without also obtaining appropriate professional advice after detailed examination of your particular situation.
