Gordon Campbell | Parliament TV | Parliament Today | Video | Questions Of the Day | Search


1 April tax changes positive for business

Hon Dr Michael Cullen
Minister of Finance

30 March 2006 Media Statement

1 April tax changes positive for business

From 1 April thousands of businesses will enjoy significant reductions in compliance costs and find it easier to recruit skilled labour from overseas, Finance Minister Dr Michael Cullen said today.

"This government wants to make sure tax policy is not a barrier to economic growth and these measures continue the progress we are making."

Many businesses see fringe benefit tax as complex and time-consuming especially in relation to motor vehicles.

To reflect the decline in real motoring costs over the past 20 years, the valuation rate on motor vehicle fringe benefits reduces from 24% to 20% of the vehicle’s cost price.

For example; a small company employing a couple of staff that provides its chief executive with a car for his unlimited private use in addition to his salary of $60,000. The car costs $40,000. Under the proposed change, the fringe benefit tax payable on the vehicle will be reduced from $6144 to $5120, a saving of over $1000 for the business.

Day-to-day work tools such as cell phones and laptops will be exempt from fringe benefit tax, provided they cost less than $5000 each and are to be primarily used for business.

"Overall, these and related changes will mean that fewer small businesses will need to file fringe benefit tax returns on minor benefits that are part of their day-to-day business activities. That means lower compliance costs and more time to spend on the business," said Dr Cullen.

The government is also improving access to highly skilled people by reducing the tax costs associated with international recruitment.

Tax on offshore income is an important issue for those in demand internationally. It is also an important issue for the New Zealand businesses that recruit them, which often end up bearing the tax costs themselves in the form of higher pay.

After 1 April new migrants and returning New Zealanders who have not been tax-resident for at least ten years will be exempted from tax for four years on foreign income such as dividends, interest, royalties and rental income.

The ten year requirement is designed to ensure that New Zealand residents do not leave the country just to become eligible for the exemption.

The changes are part of the Taxation (Depreciation, Payment Dates Alignment, FBT and Miscellaneous Provisions) Bill whose provisions usher in the most comprehensive business tax cuts since the late 1980s.

Together with significant changes to depreciation rules, the measures have a four year fiscal cost of $1.1 billion.

Depreciation rules have been changed so they better reflect how assets decline in value. There has also been an increase in the threshold for which assets must be accounted for. These measures will encourage a more productive use of capital and reduce compliance costs for businesses.

New rules to align GST payments with provisional tax payments have been delayed a year to allow more time for IRD and taxpayers to adjust their systems.

"These measures first signalled in Budget 2005 will help soften the burden of the tax system so businesses can spend more time improving their productivity and so help lift the performance of the economy," Dr Cullen concluded.


© Scoop Media

Parliament Headlines | Politics Headlines | Regional Headlines


Also, Loan Interest: Productivity Commission On Tertiary Education

Key recommendations include better quality control; making it easier for students to transfer between courses; abolishing University Entrance; enabling tertiary institutions to own and control their assets; making it easier for new providers to enter the system; and facilitating more and faster innovation by tertiary education providers... More>>


Scoop Images:
Dame Patsy Reddy Sworn In As Governor-General

This morning Dame Patsy Reddy was sworn in as the New Zealand Realm’s 21st Governor-General. The ceremony began with a pōwhiri to welcome Dame Patsy and her husband Sir David Gascoigne to Parliament. More>>


Ruataniwha: DOC, Hawke's Bay Council Developer Take Supreme Court Appeal

The Department of Conservation and Hawke's Bay Regional Investment Company (HBRIC) are appealing to the Supreme Court over a conservation land swap which the Court of Appeal halted. More>>


With NZ's Marama Davidson: Women’s Flotilla Leaves Sicily – Heading For Gaza

Women representing 13 countries spanning five continents began their journey yesterday on Zaytouna-Oliva to the shores of Gaza, which has been under blockade since 2007. On board are a Nobel Peace Laureate, three parliamentarians, a decorated US diplomat, journalists, an Olympic athlete, and a physician. A list of the women with their background can be found here. More>>

Gordon Campbell: On The Key Style Of Crisis Management

At Monday’s post Cabinet press conference Key was in his finest wide- eyed “Problem? What problem?” mode. No, there wasn’t really a problem that top MPI officials had been at odds with each other over the meaning of the fisheries policy and how that policy should be pursued... More>>


Mt Roskill: Greens Will Not Stand In Likely Post-Goff By-Election

“The Green Party’s priority is changing the Government in 2017, and as part of that we’ve decided that we won’t stand a candidate in the probable Mt Roskill by-election... This decision shows the Memorandum of Understanding between Labour and the Green Party is working." More>>


Wellington: Predator Free Capital Plan

Wellington City Council (WCC), the Greater Wellington Regional Council (GWRC) and NEXT Foundation, today announced a joint collaboration to make Wellington the first Predator Free capital city in the world. More>>


Gordon Campbell: On Judith Collins’ Efforts At Self Correction

Thousands of prisoners currently in prison may be entitled to an earlier release than expected – and compensation – because Corrections has incorrectly calculated their term of imprisonment. Unless of course, the government buries its mistakes by changing the law and retro-actively getting itself off the hook… More>>


More Justice & Corrections

Get More From Scoop



Search Scoop  
Powered by Vodafone
NZ independent news