Budget 2024

New Zealand’s 2024 Budget has been called the “balancing” budget due to the need to balance current cost of living and inflation conditions against fiscal responsibility to bring the country back into surplus in a reasonable timeframe.  

The current economic conditions continue to be a challenge with New Zealand experiencing two technical recessions in the past year. There are some positive signs coming through now though, such as falling inflation expectations and milder GDP contractions than forecast. However, the full impact of high interest rates is still unfolding as households face higher mortgage rates and declining confidence. 

So what does it mean for you? 

Tax Relief

Tax cuts have been provided through increasing the tax rate thresholds from 31 July 2024. The government has also updated the Fringe Benefit Tax (FBT), Resident Withholding Tax (RWT) and Portfolio Investor Rates (PIR) to align with the new thresholds.  

Revised Personal Income Tax Brackets

The new thresholds for personal income tax:

• The lowest tax rate of 10.5% will now apply to income up to $15,600, an increase from the previous $14,000.
• The 17.5% rate will cover incomes from $15,601 to $53,500, up from the previous range of $14,001 to $48,000.
• A 30% tax rate will be applied to incomes between $53,501 and $78,100, expanded from the former range of $48,001 to $70,000.
• The 33% rate will now be levied on incomes from $78,101 to $180,000, adjusted from the previous threshold of $70,001 to $180,000.
• The top tax rate of 39% remains unchanged for incomes over $180,001.

These updates, initially scheduled to take effect on 1 July 2024, have been postponed to 31 July 2024. The delay provides payroll providers additional time to transition and update their systems.

The implementation date does not align with the 31 March balance date and so a transitional tax rate which combines both the old and the new rates, will be used for this first year. Check out this calculator to work out what the estimated tax cut will be for you Tax Calculator - Budget 2024 - 30 May 2024 

Introduction of the FamilyBoost Program

A significant new measure, the FamilyBoost program, aims to assist households earning up to $180,000 with childcare costs. Families can claim up to 25% of their weekly childcare fees, capped at $75 per week or $975 every three months. The rebate amount decreases for households with incomes between $140,000 and $180,000. Applications for the FamilyBoost can be submitted at the end of each quarter, starting with the first eligible period from 1 July 2024 to 30 September 2024.

Property Owners 

There were also wins for property dealers and developers with the governments decision to return the Brightline test back to 2 years with effect 1 July 2024. Property investors will also be happy to hear that interest deductibility is being phased back in, with 80% of interest deductible from 1 April 2024 and 100% from 1 April 2025.  

Enhanced tax Credits

In-Work Tax Credit (IWTC)  

The In-work tax credit (IWTC) for a family of up to three children will increase from $3,770 per annum ($72.50 a week) to $5,070 per annum ($97.50) a week.  This change is also effective from 31 July 2024.

Minimum family tax credit (MFTC)  

For the minimum family tax credit (MFTC) the current after-tax threshold will increase from $35,204 to $35,316 on 31 July 2024. 

Independent Earner Tax Credit 

The upper limit for the Independent earner Tax Credit (IETC) has been increased to $70,000 per annum, which will increase eligibility for an estimated 420,000 individuals, offering individuals up to $10 per week,

While the tax cuts will undoubtedly be of assistance to many tax payers, it has come at a cost, with more targeted public funding and a cost reduction program across government agencies. 

IR tax compliance focus

The government is increasing funding for the Inland Revenue department to strengthen their audit capacity to improve their oversight of tax compliance in New Zealand. An additional $29 million per year over the next four years (totaling $116 million) has been allocated to enhance tax compliance activities. Key focus areas are the hidden economy such as trades businesses, FBT, GST refunds, nil filers and tax debt. 

There's also a target on overseas-based student loan borrowers. From 1 April 2025, the interest rate on student loans for these borrowers will increase by 1%, as will the late payment interest rate on overdue amounts.

Conclusion

While the 2024 Budget may not have introduced groundbreaking changes, the adjustments to tax brackets, enhancements to tax credits, and new relief programs are poised to offer meaningful support to middle-income households.

Need help?

• If you are struggling to meet your IR tax payments, contact us now and get on top of it! IR are putting a huge focus on this, so it will not go away. We may be able to help you with a Repayment Plan or Tax Management NZ
• If you think you might get 'reviewed or audited' from IR, contact us about Audit Shield. They can help pay for the time it takes for us to work with you to prepare the correct documents.