What will the new tax changes mean to me?

This article has been written and researched by Judi Galpin from DecisionMakers in Palmerston North.

The May budget outlined a number of tax changes to come into effect on 1 October this year.

There have been complaints that the tax changes will not ‘give me anything extra’.  In many cases this may be the case, but the intention of the changes was not to give hand-outs.  It was to stimulate the economy, improve productivity and reward those who add to New Zealand’s long-term well-being.

Keeping tax neutrality for the most vulnerable sectors was important, however.  Following the recent global credit crisis where the people of some nations have had to accept decreased incomes, a neutral tax package must be seen as a bonus.

Moving New Zealand to a more productive economy in the long-term is definitely to everyone’s advantage, allaying the common fear of our welfare system becoming overwhelmed by the lack of genuine wealth in the community.  If the tax changes can start us on this road to wealth, eventually, we will all benefit.

Comments like the ‘rich will get richer’ are not helpful as we look to these earners to employ more, invest more and produce more.  Having lost any encouragement to do so previously, we now look to these individuals to own businesses and employ others.

There has been much comment on how the new taxes will affect different sectors of the community. Now that emotional comment has quietened, DecisionMakers has completed calculations to determine the facts.  In all cases we have assumed the worst scenario whereby all income is spent on expenses which have GST included.

GST will rise from 12.5% to 15% and personal taxes will decrease.  There will be advantages for companies and high producers.

DecisionMakers was pleased to find that, assuming the same expenses, income earners below $20,000, beneficiaries and superannuitants, will be around $2 per week better off.  These sectors are amongst the most vulnerable so it was reassuring that, providing vendors do not use 1 October to increase their charges, they will be virtually unaffected by the new tax regime.

In none of our calculations did we find that individuals would be worse off unless they were currently employing tax loop-holes (such as write-offs for rental properties).

For a calculation of how tax changes after 1 October will affect you, please contact your DecisionMakers adviser.