19 May 2023

The following is a brief summary of some of the key items. Please contact your Bentleys advisor if you require any additional information.

Recession
It is forecast that a recession has been averted due to the cyclone recovery and that inflation will drop to 3% by September 2024. GDP is forecast at 3.2% this year dropping to 1% next year. A return to a budget surplus is forecast for the 2025/26 year.

Increase in trustee tax rate
The main tax change in the 2023 budget is the increase in the trustee tax rate from 33% to 39% from 1 April 2024. This will obviously increase the tax payable by trusts on income retained in trusts rather than distributed to benficiaires. It is likely to result in the following:

    • Increase in distributions of income to beneficiaries with annual incomes under $180,000. This results in the income earned by a trust being taxed at the beneficiary’s lower marginal tax rate which will be less than 39% if their annual income is under $180,000. To qualify for the lower rate the beneficiary must be 16 or older. However, trustees should also be aware of the consequences of allocating income to beneficiaries as those funds will then be absolutely owned by the beneficiary and retention of the funds under the trust umbrella will require the ongoing agreement of the beneficiary. The allocated funds may also be exposed to the beneficiary’s creditors and relationship property claims.

    • Increase in dividend payments to trusts by 31 March 2024 from companies owned by trusts. Company profits are generally taxed at 28%. When a company owned by a trust pays a dividend to the trust, a top up tax of 5% is generally paid so that the total tax paid on the profits equals the trustee rate of 33%. This top up tax will increase to 11% from 1 April 2024. There will therefore be an incentive for such companies to pay out larger than usual dividends by 31 March 2024 so as to avoid the additional 6% tax that would apply if company profits are retained and paid out after 31 March 2024.

Game Development Studios
A 20% rebate will be introduced allowing a rebate of up to $3 million per annum.

Public transport subsidy
    • Free public transport for 5-12 year olds
    • Half price public transport for 13-25 year olds.

Subsidised 20 hours early childhood education
Extended to include 2 years olds, so will apply to 2-5 year olds.

Prescription charges
The current $5 charge to be abolished.

Housing
Increase in heating and insulation installations and public housing places.

Other increases
Other spending increases announced including on health, post cyclone infrastructure and the Te Matatini festival.
Of course, a lot of this will depend on the current government remaining in power or a new government not reversing the measures.

Please contact your Bentleys advisor if you require any additional information.

Talk to us

Roger Thompson
Email: roger.thompson@bentleysnz.com
Phone: +64 9 600 3902

Stay in touch. Please do not hesitate to contact your client advisor.