Reading through the various documents that were released
yesterday during Budget 2016, nothing particularly new jumps out to
surprise me.
We have a Public Infrastructure package of $2.1b where $857m of
that is allocated to replacing Inland Revenue's tax administration
system. In 2013 the Government had already signed off a spend
in the vicinity of $1b on a new tax administration system.
This funding is therefore nothing new. The package does
however also include a significant spend, $883m, on new schools and
classrooms that are clearly needed to cope with the continuing
growth of the population and inbound migration.
Education gets a further boost of $397m funding for early
childhood, and funding for high needs students of $42m.
Anyone with children at school will know there has historically
been a lack of funding in this area and schools have often found it
hard to resource this.
Health is also a big benefactor of the Budget with $2.2b
allocated towards various health initiatives including more funding
for elective surgery and a new National bowel screening
programme.
Given the amount of recent media interest in the property market
and lack of housing, there is relatively little set aside to assist
in bringing this back into line. There are however a lot of
things that influence this and in reality it is not a quick fix
situation. Social and emergency housing has been allocated
$258m which again seems to be in response to recent media scrutiny
of the plight of some people. Will the $100m to free up
underutilised Crown land in Auckland help? A cynic would say this
is unlikely given the influx of new migrants.
As with most Budgets, high on taxpayers' priorities is the area
of Justice; $356m has been given to Corrections to reduce
reoffending (again perhaps as a result of recent high profile
cases!), $299m to Policing, and $208m to Justice and the Courts to
ensure the justice system better caters for victims of
crime. Unfortunately, it is often the victims that end
up the forgotten part of the equation and hopefully this funding
will be put to good use.
Little "new" changes have been announced in relation to
tax. As part of the Government's support for businesses they
have again announced a $187m SME-friendly tax package. These
include:
- A reform of provisional tax, with a new pay-as-you-go option
allowing small businesses to pay tax as they earn income.
- Use-of-money interest will be eliminated or reduced for the
vast majority of taxpayers.
- Contractors will be able to choose a withholding tax rate that
suits their own circumstances.
- The ongoing 1 per cent monthly late-payment penalty will be
scrapped from 1 April 2017 for new debt - although immediate
penalties and interest charges will continue.
These tax friendly measures are a welcome relief for businesses
and will hopefully go some way to help reduce compliance costs.
Overall, under the current helm, the Government has continued
down the pathway of previous Budgets with some restraint and the
overall desire to reduce net debt.
The question will be, will there be room for tax cuts next year,
just in time for the next Election?...
Phil Barlow
Tax Director
T +64 9 414 5444
E phil.barlow@hayesknight.co.nz
