Last week, the New Zealand National Party (“National”), ACT New Zealand (“ACT”) and New Zealand First (“NZF”) agreed the terms for a new coalition government.
These are the subject of separate agreements between National and ACT and National and NZF, which can be accessed here.
The new Prime Minister is Christopher Luxon (National) with the role of Deputy Prime Minister split between Winston Peters (NZF), until 30 May 2025, and David Seymour (ACT), from 31 May 2025.
The new Minister of Finance is Nicola Willis (National), while Simon Watts (National) is the new Minister of Revenue
Going into the election each party had their own tax policy priorities (which you can reference here).
As the major party in the new Government, we have set out below how National’s election tax policies have been impacted following the coalition negotiations:
KPMG in New Zealand
Email Darshana Elwela Foreign buyer taxNational’s foreign buyer tax proposal will no longer proceed, as part of National’s agreement with NZF.
Personal tax reductionsACT and NZF have agreed to support National’s personal tax reductions with effect from 1 July 2024.
It should be noted that:
ACT and National have agreed a faster phasing in of interest deductibility for grandparented loans (i.e., loans entered before 27 March 2021) and new loans, with deductions for:
[Note: we assume that during the phase-in period, “new builds” will continue to have full (100%) interest deductibility.]
Additional Inland Revenue (IRD) fundingNZF and National have agreed that the new Government will increase funding for…”IRD tax audits to urgently expand the IRD tax audit capacity, minimise taxation losses due to insufficient IRD oversight, and to ensure greater integrity and fairness in our tax system”.
The amount of additional funding for compliance activity is not disclosed in the coalition agreement.
Other tax-related policiesACT and National have agreed to ….”introduce financial incentives for councils to enable more housing, including considering sharing a portion of GST collected on new residential builds with councils”.
National’s tax policies that are unchangedAs they are not explicitly covered in the coalition agreements, we assume the following National election tax policies will proceed unchanged, but watch this space:
National opposed the following measures enacted by the previous Labour Government and indicated they would be reversed or repealed.
The previous Government introduced but did not enact the following key tax measures.
We understand, based on previous statements, that National supports an increase to the trustee tax rate, albeit it is not clear whether this will be the same measure as proposed by the previous Government. (In particular, we note that submissions on the 39% trustee tax rate change noted the potential for widespread over-taxation of beneficiaries on rates lower than the top personal rate.)
The position on the progress of the GloBE rules and DST is not clear, however, we note that National has previously supported BEPS measures.
The ACT and NZ First position on these measures is not clear.
More than a month after the October 14 general election, we have some clarity as to the make-up, ministerial roles and policy priorities of the new Government.
A key plank of National’s campaign was its personal tax cut package, through raising tax thresholds and increases to Working for Families tax credits. From the coalition agreements, that policy seems to have survived largely unchanged.
What has not survived is a key revenue raising measure to offset some of the cost, a 15% foreign buyer tax on properties with a valuation of more than NZ$2 million. The foreign buyer tax was estimated by National to raise around $740m annually to fund its tax cut package, albeit questions were raised on both the scope of the foreign buyer tax (given NZ’s tax treaties) and its ability to collect the estimated tax. We understand this revenue shortfall is intended to be made up through other policy changes and fiscal buffers. The detail of these other policy changes is unclear, although based on comments by the new Prime Minister it appears that the so-called “App Tax” will survive to plug some of the revenue gap from not proceeding with the foreign buyer tax.
From the coalition agreements, it appears that changes to the personal income tax thresholds will apply from July, rather than 1 April, 2024. This will have some practical implications.
For those tax policies not explicitly mentioned in the two coalition agreements (either to confirm their application or non-application), it will largely be a case of “wait and see”.
Some of these will also be time critical – such as moving the bright-line taxing period back to two years (from 10 currently) as this will impact decisions on when to transact. Therefore, clarity on the detail and exact timing, as soon as possible, will be important.
This also extends to the status of the previous Government’s enacted tax measures and measures contained in the Taxation (Annual Rates for 2023-24, Multinational Tax, and Remedial Matters) Bill and Digital Services Tax Bill. What will be reinstated, amended or simply discarded remains to be seen. We expect the more routine “remedial matters” to be reinstated.
While the new Government has an ambitious 100-day plan to implement a number of its key policies, including in the tax area, there will inevitably be complexity that will need time to work through.