Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 

BUDGET 2012: Govt hits bach rent tax rort, disappoints kids

BUDGET 2012: Govt hits bach rent tax rort, disappoints kids for tax gains

By Pattrick Smellie

May 24 (BusinessDesk) - The government has hit both the wealthiest and the piddliest taxpayers by tightening tax breaks for private bach, boat and aeroplane owners while axing childrens' ability to claim tax refunds when tax has already been paid on their behalf.

People who both rent private assets and use them personally will no longer be able to claim up to 90 percent deductions on running costs and instead will have to apportion such deductions according to the amount of rental versus private use.

That change alone is estimated to be worth around $25 million a year, or $109 million over the next four fiscal years, according to Budget documents.

The Budget also does away with a tax credit to help pay for home childcare and housekeepers, which has existed in one form or another for 79 years, but is now said to be outdated and used largely by higher income families rather than the low income households they were originally intended to cover. That will save the government $117 million over the next four years, when combined with the raid on childrens' tax refund eligibility.

Dunne justified the childrens' tax refund move on the basis that the requirement to declare "cash in the hand" jobs like lawn-mowing and baby-sitting as taxable income would be repealed.

The rule allowing children to file tax returns had originally been intended to save paperwork, but had since ended up adding to the tax department's workload.

The new rule "will not allow a child to claim a refund of tax that has already been paid, such as PAYE and resident withholding tax," Dunne said.

Previously announced changes to livestock taxation rules will save some $184 million over the next four years by preventing farmers from switching between herd valuation methods to gain unintended tax windfalls.

The tax credit relating to housekeepers and childcare was part of the 1986 tax package which saw the introduction of GST and a raft of personal income tax cuts, and had been intended to ensure low income households weren't disadvantaged.

"It has largely been superseded by other policies, such as early childhood education … and Working for Families," said Dunne. "The credit is also poorly targeted. Wealthy families who may not need any help meeting the costs of childcare are just as able to claim the credit as poorer ones."

Only 11 percent of the credit was being claimed by the bottom 30 percent of households.

In total, these changes are expected to claw back a little over $100 million a year over the next four years, with another $78.4 million allocated over the same four year period for the Inland Revenue Department to chase better compliance by taxpayers.

That investment is forecast to reap an additional $345.4 million over four years, and comes on top of a similar boost to compliance resources of $119.4 million for the tax department in last year's Budget.

The department would "focus on those people undermining the tax administration and its systems through fraudulent activity."

By far the largest tax grab, however, is the imposition of even higher excises on tobacco, which will rise by 10 percent a year for the next four years to raise a total of $1.4 billion over the next four years, while also continuing to cut the rate of smoking.

By 2016, a packet of 20 cigarettes will cost $20, or $1 per cigarette.

(BusinessDesk)

© Scoop Media

 
 
 
Business Headlines | Sci-Tech Headlines

 

"Broad-Based Growth": GDP Rises 1 Percent In June Quarter

Gross domestic product (GDP) rose 1.0 percent in the June 2018 quarter, up from 0.5 percent last quarter, Stats NZ said today. This is the largest quarterly rise in two years. More>>

ALSO:

Judicial Review: China Steel Tarrif Rethink Ordered

On 5 July 2017 the Minister determined not to impose duties on Chinese galvanised steel coil imports. NZ Steel applied for judicial review of the Minister’s decision. More>>

Debt: NZ Banks Accelerate Lending In June Quarter

New Zealand's nine major lenders boosted lending at the fastest quarterly pace in almost two years as fears over bad debts subsided. More>>

ALSO:

Balance Of Trade: Annual Current Account Deficit Widens To $9.5 Billion

New Zealand’s current account deficit for the year ended June 2018 widened to $9.5 billion, 3.3 percent of GDP, Stats NZ said today. More>>

ALSO: