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

Gordon Campbell: On The New Pike River Agency (And The Air Strike Wing)

Much of the sympathy the public still feels for the families of the Pike River miners has been sustained by the sense that the previous government – let alone the mining company and the processes of receivership and litigation – has never dealt honestly, or fairly, with them.

Finally, yesterday’s announcement by the Ardern government that a new state agency will be set up to assess and plan the manned re-entry to the mine (on a set timetable) goes a long way to meeting the families’ remaining request: that they be enabled, if at all possible, to bury their loved ones. More>>


Not Going Swimmingly: Contractor Cut, New Dates For Christchurch Sports Centre

“As an incoming Minister, I have been conducting a thorough review of progress on the Anchor projects and to learn of a $75 million budget blowout on this project was very disappointing..." More>>


Foreign Affairs: Patrick Gower Interviews Jacinda Ardern

Prime Minister Jacinda Ardern says discussions have already begun on how to bring climate change refugees into New Zealand under a Pacific seasonal employment plan... More>>


Gordon Campbell: On The Centre Right’s Love Of ‘Nanny State’

You’d almost think it was 2005 again. That was a time when the rugged individualists of the centre-right were being beset by government regulations on the nature of light-bulbs, the size of shower heads, the junk food available at school tuck shops and other such essentials... More>>

Speaking Of Transport: Public Engagement On Wellington Scenarios

“Our work on possible solutions for Wellington’s transport future is ongoing, but has progressed to the stage where we’re ready to share our ideas with the public and seek their feedback to help guide our next steps...” More>>


Parental Leave: National's Time-Sharing Change Fails

National has proposed a change to the Parental Leave and Employment Protection Amendment Bill that would allow both parents to take paid parental leave at the same time, if that is what suits them best. More>>





Featured InfoPages

Opening the Election