Government Budget 2024: Tax changes now move from speculation to practical issues
The Government’s tax package delivered on its “Back Pocket Boost” with the average worker set to be $25 better off per week
Wellington, 30 May 2024 – As part of today’s Budget 2024 announcements, the new Coalition Government has kept its promise from the campaign trail with a tax package that is consistent with the “Back Pocket Boost” package that the National Party campaigned on. Who gets how much will vary based on their level of income, and other circumstances (such as number of children) with middle-income earners being the biggest benefactors of the tax changes.
While the tax relief is modest, it will be welcomed by taxpayers who have been feeling the effects of bracket creep since the last tax threshold changes in 2010. Perhaps to the relief of businesses still grappling with previous tax changes from the 2023 “mini-Budget”, the 2024 Budget has seen no substantial business-tax changes.
“It came as no surprise to see personal tax threshold changes as the centrepiece of Budget 2024. The Minister of Finance, Hon Nicola Willis, had been adamant that promises of tax cuts would not be broken, and she has kept this promise,” says Deloitte partner, Robyn Walker.
We’ve seen a movement of the tax threshold bands rather than changes to tax rates, with these changes cited as helping correct the “bracket creep” that has arisen from wage inflation pushing workers into higher tax brackets since the rates were last substantively changed in 2010.
These new thresholds will apply from Wednesday 31 July 2024, so the countdown now begins for employers and payroll software developers to ready themselves for this change.
“The difference of most significance from the election campaign is the start date for change which has moved from 1 July 2024 to 31 July 2024. This wasn’t done to cut costs, but to recognise the reality that lead-time is required for employers, and more importantly, payroll providers to implement the necessary changes,” said Walker.
It’s important for employers to be aware that changes to personal tax thresholds will result in changes to not just PAYE calculations, but there will be flow on consequences for all aspects of tax which touch individuals – some of which will need to be adjusted in the coming weeks, and some of which will become more relevant later in the tax year.
Budget legislation has been tabled in Parliament which:
- Introduces composite thresholds for the 2024/25 income year (this results in there being 8 tax thresholds in the current tax year)
- Introduce new thresholds for the 2025/26 income year
- Change PAYE M and ML and secondary tax codes from 31 July 2024
- Change extra pay rate thresholds from 1 April 2025
- Amend the manner that FBT attributions are calculated from the 2024/25 and to change FBT rate thresholds from 1 April 2025
- Change thresholds for employer superannuation contribution tax (ESCT) from 1 April 2025
- Change thresholds for prescribed investor rates (PIRs) for investors in portfolio investment entities (PIEs) from 1 April 2025
- Change resident withholding tax (RWT) thresholds from 31 July 2024.
For Deloitte’s full Budget commentary visit: Budget 2024: Home economics | Deloitte New Zealand
ENDS
For spokesperson comments please contact Deloitte Tax Partner, Robyn Walker:
M: +64 211315413
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