Tax Blog - Budget Special 31 May 2024

31/05/2024

Budget 2024

The Hon Nicola Willis presented her first budget on 30 May 2024. As has been the tradition in recent years many of the announcements had worked their way into the public arena before budget day.

In the tax space as expected we saw tax thresholds increase but tax rates remaining unchanged. These new thresholds will come into force on 31 July 2024, partly to give software providers time to provide updates. With the increased thresholds someone earning $78,100 per annum will pay $1042 less tax per year than they do at present. This equates to a little over $20 a week.

We will leave readers to work out for themselves whether the tax relief is fully funded as suggested by National or is as the Labour leader suggests funded from borrowings.

The list of how National say tax relief will be funded is of interest in particular

$150 million of it is funded through an investment in tax compliance activity (ie more IRD audits producing revenue),
$580 million through the removal of commercial building depreciation,
$50 million from taxing online casino operators,
$130 million from increased immigration levies; and
$220 million from replacing first year free fees.

In addition to the changes to tax thresholds we also see;

An increase in the eligibility for what's called the Independent Earner Tax Credit which will provide a tax credit for people earning up to $70,000 a year who do not receive other forms of government assistance,
An increase in the In Work Tax Credit,
A small increase to the Minimum Family Tax Credit; and
Family boost which allows families earning under $180,000 per annum to claim back 25% of their early childhood fees

The other point in the budget that Nicola Willis was at pains to point out is this budget is what she describes as a fiscally responsible budget projecting returning the Government’s books to surplus in 2027/2028. But given the very modest operating allowance the Government will need to maintain a tight grip on expenditure to achieve this.

For many the debate in this year's budget will be, given a significant portion of the tax savings are baseline savings from government department, is the government better at spending money or are they better to reduce your tax and let you make the decision on how the money is spent. For many struggling with the increased cost of living (food, rent, rates, insurance and interest to name but a few) they are likely to appreciate a little more money in their pockets.

Polson Higgs Tax team.

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