The government has introduced a new tax bill on 2 December 2020. As taxpayers, you may be affected by the following changes:
From 1 April 2021, the new highest tax rate of 39% will apply if an individual’s income exceeds $180,000.
The Inland Revenue is also demanding more details to be disclosed for trusts.
The bill also includes changes to increase the Minimum Family Tax Credit threshold for the 2020–21 tax year and to clarify that Inland Revenue can request information solely for tax policy development purposes.
For more information, please visit the Inland Revenue website here.
The Current Rates
NZ individual income tax is using progressive rates. This means the tax rate increases as the taxable value goes up.
Currently, individual income tax rates are as follows:
For Each Dollar of Income
Up to $14,000
Over $14,000 and up to $48,000
Over $48,000 and up to $70,000
Remaining income over $70,000
Other NZ income tax rates are not changed:
Most companies and corporates are taxed at a flat rate of 28%.
For any income the trust earns, the tax rate is 33%.
Who Will Be Affected By The New Tax Rate?
From the year beginning 1 April 2021, for each $100 earned above $180,000, individual taxpayers will pay an additional $6, compared to under the current tax rates.
“It is also about keeping a lid on debt while ensuring we can maintain our investment in health and education. For 98 per cent of earners there won’t be any change.”
–Finance Minister Grant Robertson
What Is Included In “Individual Taxable Income”?
Taxable income can include income from:
working including salary, wages or self-employed income
benefits and student allowances
assets and investments including Kiwisaver and rental income
You may need to pay income tax for any of the above type of income you earn. You might have more than one type of income.
If you sell a residential property you have owned for less than 5 years, you may have to pay income tax as well. This rule also applies to New Zealand tax residents who buy overseas residential properties.
The government is also requesting more information from taxpayers to make sure people pay their correct share of tax.
According to Revenue Minister David Parker, the new tax bill includes powers to collect information from trustees to test compliance and the effective operation of the 39% tax rate and to further understand what trustees do with trust assets and income.
Contact one of our tax advisory team by emailing email@example.com or simply call 09 281 8885 to discuss your situation today!