Finance Minister Bill English delivered his 2010 budget on the
20 May. As expected, the Budget has reduced personal tax rates and
increased GST from 1 October 2010, and the forewarned changes to
the rental property sector has materialised in a reduction in
depreciation rates for new assets and buildings with a useful life
of more than 50 years.
However, there were a few surprises in the budget;
the company tax rate is being reduced from 1 April 2011, two years
ahead of Australia's planned corporate tax rate reduction, and
LAQC's will be treated as limited partnerships for income years
starting on or after 1 April 2011.
Below is a brief overview of the 2010
budget.
Personal income tax rate cuts will reduce from 1 October
2010:
- 0 - $14,000 10.5%
- $14,001 - $48,000 17.5%
- $48,001 - $70,000 30%
- $70,000 and over 33%
The company tax rate will fall to 28% from the 2011-12 income
year. This rate will also apply to savings vehicles, such as unit
trusts, superannuation funds, life insurers and portfolio
investment entities (PIEs). A transitional period will allow
dividends to be imputed at 30% for a two-year period to the extent
company tax was previously paid at 30%.
The trustee tax rate remains at 33%.
GST will rise to 15% on 1 October 2010.
The majority of benefits and allowances (ie, superannuation,
working for families tax credits) will increase by 2% to compensate
for the increase in GST.
The 20% depreciation loading for new assets will be removed for
new assets purchased on or after 21 May 2010. The loading will
still apply to assets purchased prior to 21 May 2010.
Depreciation deductions will no longer be allowed for buildings
with an estimated useful life of more than 50 years. A 0%
depreciation rate will apply to all such buildings from the 2011-12
income year.
Loss attributing qualifying companies (LAQCs) will be treated as
Limited Partnership's from the 2011-12 income year.
Tax rates on savings will reduce to 28% from 1 October
2010. Those on low incomes can elect for a lower PIE
rate.
The thin capitalisation threshold will reduce to 60% from the
2011-12 income year.
Rental losses will no longer be taken into account when
calculating working for families eligibility and trust income will
need to be taken into account.
Due to these changes, in particular GST, businesses will need to
start planning for these changes leading up to 1 October.
Full details of the budget are available on the Policy Advice Division website
Taxpayers can also check their tax savings on www.taxguide.govt.nz.