17 Jun 2016 Budget Announcement
A couple of thoughts and general points from last week’s 2016 budget announcement
- This budget announces more money for health and science – got to be a good thing.
- There is $1.447 billion over 4 years on education, but this isn’t quite as great as it sounds – it will be swallowed up by increases in student rolls and the maintenance of school property.
- There’s no silver bullet for Auckland’s roading or housing issues – there is $200 million to boost the rent subsidy for social housing tenants and for redevelopment of social housing in Auckland, but with Auckland’s house and rental prices, that won’t go very far!
- Not a good time to be a smoker – the excise duty (fancy word for tax) on tobacco is going to increase 10% a year for the next 4 years.
- If you’re big into online shopping, purchases from offshore suppliers (think iTunes, Amazon etc) will be increasing in price as GST will be charged on them from 1st of October of this year. There will be specific rules for business purchases so that they don’t attract GST – we will let you know how they will work when they are finalised.
How the budget will affect what goes in your back pocket
For Provisional Tax Payers who use the uplift method, (the most common method) for calculating their provisional income tax, if it transpires that your Provisional Tax paid is too low, Use of Money Interest won’t apply to the first 2 payments as long as the 3rd payment is at the right level– this is a ‘good start’ for those who are provisional tax payers with fluctuating incomes, but could have gone further.
The removal of the 1% per month late payment penalty on future GST, income, provisional tax and working for families debt. This will start in April 2017 and apply to new debt. If you don’t pay your tax on time, you won’t get off scot free, there will still be interest charged.
If you are paid via scheduler payments (ie, you work on a contract basis but still get tax deducted ‘at source’ before you are paid) or paid via withholding payments, you will be able to elect your withholding rate subject limits set by IRD.
Use of the AIM method (Accounting Income Method) for calculating Provisional tax. In a nutshell, this is taking a portion of monthly income and paying it on a 2 monthly basis as provisional tax. A good idea in theory, but as of yet the technology doesn’t exist. What’s more, the boffins in Wellington can’t seem to help themselves from making it more complex, so in the real world it will quite possibly fall in the ‘too hard’ basket. There already exists something similar – the GST ratio method, but what should have been a simple system was made impractically complicated with far too many complex rules.
Our opinion: all in all, nothing to get too excited about. Auckland seems to miss out – there is nothing to address two of the city’s major issues: roading infrastructure at breaking point and a shortage of housing. Despite the pressing nature of both these issues, the response seems to be ‘head in the sand’.
