What we can expect from the new government

New Government is now formed with coalition of National, ACT and New Zealand First. What does it mean for tax policy?

1. Increase in tax threshold adjustments (most likely should take effect from 01 July 2024)

The FamilyBoost childcare rebate, worth up to $150 per fortnight, for families with young children will also be implemented with effect from 1 July 2024. This rebate pays up to 25% of childcare costs up to $300 a week.  The rebate will be paid directly to parents as part of their take-home pay and applies to all families with childcare costs who earn up to a maximum income of $180,000.

The proposed maximum rebate per fortnight under FamilyBoost is as follows:

Other changes to tax include extending the income eligibility threshold for the Independent Earner Tax Credit to $70,000 (up from $48,000), with abatement starting from $66,000 and increases to Working for Families.

Interest deductibility for rental properties will be restored.  This change will be phased in at an accelerated level as follows:

• 60% deductible in the 2023/2024 income year;
• 80% deductible in the 2024/2025 income year; and
• 100% deductible from the 2025/2026 income year.

The brightline test for residential property will be reduced back to two years with retrospective effect from July 2024. This means that properties acquired before July 2022 should no longer be subject to the brightline test at sale.

The Ute Tax will be removed by 31 December 2023.

We expect that the increase in the trust tax rate to 39% will proceed as proposed in the legislation introduced by the Labour Government prior to the election.

It is also likely that the expansion of GST to Airbnbs, food delivery services and ride-shares as introduced by the Labour Government will remain.

While not expressly mentioned in the coalition agreements, it is likely the following will be repealed or removed:

• Depreciation on commercial buildings; and
• The Auckland Regional Fuel Tax.