2018 Budget - Thoughts from our Tax Team
Not too many surprises in Labour’s first budget. Key focus is clearly on ‘under-funded’ services, with a social rather than economic focus.
The budget delivers a surplus of $3.1 billion in 2017/18, rising in 2018/19 to $3.7 billion, allowing the reduction of debt, and committing to keep government expenditure below 30% of GDP
Key Features announced:
- $3.2 billion for Health, an increase of $2.3 billion for District Health Boards and $750 million of new capital health projects.
- More funding for Education and Pre-schools and early childhood education
- More funding $234.4 for community housing providers and housing NZ for state housing
- A Families package targeting child poverty, and other changes.
- Focus on infrastructure with a boost for Auckland transport congestion, and Christchurch rebuild.
- An increase in funding for MPI, the sustainable farming fund and Provincial Growth Fund.
- Independent Climate Commission established and further investment in conservation initiatives
- More funding to the Police to increase the force by an additional 1800 police officers
There wasn’t too much else for tax, as most key changes have already been announced with the new Bright-line extension, ring-fencing rental losses and the new “Amazon” tax.
- Inland Revenue to get more funding to target “tax dodgers”
- 1 billion over four years to finance R&D tax incentive
- “e-invoicing” introduced for small businesses.
Based on information released by IRD Policy, additional funding will be put towards improving compliance in unfiled company tax returns and to identify opportunities to improve target industries through third-party reporting and withholding taxes.
The “e-invoices” is still a bit of a mystery to us but they will be committing money to launching an e-invoicing framework, (used by Australia) which they believe will deliver large efficiencies for business. We will wait to hear more detail on this initiative.
Also included in the budget, were some changes to allow tax deductions for the costs of a horse acquired for the intention of breeding, previously being limited to established breeding businesses only. This is clearly as a result of Winston Peter’s influence.
The opposition party were quick to raise the broken promises with the introduction of the above taxes along with the regional fuel and excise taxes, and some funding promises not being met.
Overall businesses are likely to be “ho hum” about the budget, and negative about more involvement of government through the less “hands off” approach adopted by Labour.