New Zealand's latest Taxation (Budget Measures) Act 2024 brings significant changes aimed at supporting families and businesses. Here's a breakdown of what you need to know about these updates and how they could impact you.
Increased Support for Working Families
In-Work Tax Credit (IWTC)
Base Rate Increase: The IWTC base rate has been boosted by $25 per week, raising the annual amount from $3,770 to $5,070.
Maximum Weekly Entitlement: Families with up to three children will see their maximum weekly entitlement increase from $72.50 to $97.50.
Effective Date: These changes take effect from 31 July 2024, with part-year amendments allowing the old and new rates to apply for different periods in the 2024–25 tax year.
Minimum Family Tax Credit (MFTC)
Threshold Adjustment: The MFTC threshold is now $35,316 after tax, ensuring recipients benefit from the IWTC increase and personal income tax changes.
Effective Date: These changes apply from 31 July 2024, with part-year adjustments from 1 April 2024.
Changes to Personal Income Tax Thresholds
The new personal income tax thresholds are designed to provide more equitable tax rates across different income levels. Starting from 31 July 2024, the thresholds are as follows:
Gross Income | Tax Rate | |
|---|---|---|
$0 – $15,600 | 10.5% | |
$15,601 – $53,500 | 17.5% | |
$53,501 – $78,100 | 30% | |
$78,101 – $180,000 | 33% | |
$180,001+ | 39% |
Effective Dates:
1 April 2024: Composite personal income tax rates and thresholds, and the formula for calculating fringe benefit tax (FBT).
31 July 2024: Resident withholding tax (RWT), certain tax codes and rates, and reporting of income information by individuals.
Independent Earner Tax Credit (IETC)
New Settings:
Abatement Thresholds: The IETC will now begin abating at $66,000 and fully abate at $70,000.
Effective Date: These changes will take effect from 31 July 2024.
Research and Development Tax Incentive (RDTI) Amendment
Businesses involved in research and development should take note of the new amendment regarding filing under an incorrect entity name. The Commissioner of Inland Revenue can now amend approvals if an incorrect entity name was used.
Key Points:
Approval Amendment: Businesses can apply to amend the name of an entity in an RDTI approval if an incorrect entity was named within the same wholly-owned group.
Effective Date: These changes apply from the 2021–22 tax year.
What This Means for You
These legislative changes reflect the government's commitment to supporting families and businesses by making tax incentives and credits more accessible and equitable. It’s essential to understand these updates and how they might affect your financial planning and tax obligations.
For more detailed information and personalised advice, please get in touch.