Tax predictions for Budget 2024

The National Party included tax as a major component of the 2023 election campaign, and it's no surprise that expectations are high that Budget 2024 will contain changes to personal taxes as a major feature. The National-Act and National-New Zealand First Coalition Agreements provide us with hints about what might also be included in the Budget.

Personal Taxes

The Minister of Finance, Hon Nicola Willis, has been clear that Budget 2024 will contain “meaningful tax reductions to provide cost of living relief to New Zealanders.” But what does this actually mean? National has a policy of amending tax thresholds (not rates) to reflect inflation and there have been no changes to personal taxes since 2010 (except for the addition of the 39% tax rate from 1 April 2021). However, the Coalition Agreement with the ACT Party also specifies to “[e]nsure the concepts of ACT’s income tax policy are considered as a pathway to delivering National’s promised tax relief, subject to no earner being worse off than they would be under National’s plan,” so it's possible that the tax changes may be different from what National campaigned on. ACT’s tax policy broadly seeks to flatten tax rates and reduce the number of tax thresholds. 

Of note, is that the Minister of Finance has consistently referenced tax cuts applying from 1 July 2024. As this is a quarter of the way through the tax year, in the 2024/25 tax year there would need to be “composite” tax thresholds for the current tax year to average how the threshold changes across the year. For example, if the $14,000 threshold was increased to $18,000 (a $4,000 difference), based on a 1 July 2024 application date, the 2024/25 tax year threshold would actually be $17,000, before moving to $18,000 for the 2025/26 tax year.

When any personal tax rates or thresholds change, this has ripple effects across all taxes applying to individuals, so FBT, ESCT, RWT and PIR thresholds will also change.

Family Boost

The Government has already released some of the details about Family Boost to allow time for consultation on some final details ahead of the 1 July start date. The process will allow families to be reimbursed for a portion of childcare costs. The scheme will be administered by Inland Revenue. 

Audit funding

While Inland Revenue has been subject to the expectation of public sector cost reductions, it is also expected that more funding will be received in Budget 2024 to increase audit capability. This is based on the National–New Zealand First Coalition Agreement which specifies “[t]he Coalition Government will increase funding for IRD tax audits to urgently expand the IRD tax audit capacity, minimise taxation losses due to insufficient IRD oversight, and to ensure greater integrity and fairness in our tax system.”

Revenue strategy

In each Budget, the Government sets out a “revenue strategy,” which sets the scene for what the Government is seeking to achieve through the tax system. Based on statements made by the Minister of Revenue, this is likely to emphasise seeking to reduce compliance costs, increasing compliance with tax laws (for all taxpayers), increased digitalisation and a commitment to following the Generic Tax Policy Process and the tax philosophy of “broad base low rate”. 

Digital services tax 

In the final days of the last Labour Government, a Digital Services Tax Bill was tabled in Parliament. The process of tabling legislation meant that the anticipated revenue was “booked” into the Government finances. While the Bill has not progressed under the new Government, we will see in Budget 2024 what the intention is in this space – either with the revenue staying or being removed.

New Zealand’s DST was expected to raise NZ$222 million in revenue over the four-year forecast period, with an intended commencement date of 1 January 2025.

Whether all or some of these items are included in Budget 2024, will be revealed on 30 May. You can sign up to receive our Budget 2024 updates here.