Today Grant Robertson announced Labour’s tax policy. That involves re-introducing a top personal tax rate of 39% for individuals earning over $180,000 from 1 April 2021.
Many will remember under the Helen Clark government a 39% rate was introduced on income over $60,000 in 2000, this was eventually fully repealed in 2011.
There is no proposed change to the Trust tax rate (currently at 33%). Between 2000 and 2010 we saw a lot of planning around avoiding the 39% tax rate, particularly through the use of trusts, and while we now have more certain Case law and legislation around what is appropriate this proposal will undoubtedly lead to more planning in this space.
Labour do, however, emphasise that in 2000 the 39% rate was imposed on income over $60,000, whereas this proposal to tax only income over $180,000 at 39% will impact on only 2% of New Zealanders which may lessen the planning in this area.
For some, depending on how you think the election will go, there is now potentially a 7 month window to address some tax planning issues and ensure that income (particularly historic company income) is only taxed at 33%.
Labour have pledged not to introduce any other new taxes and not to further increase existing taxes.