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Tax Tips Alert: April 2022
39% tax rate integrity measures
On Wednesday 16 March, the Government released a discussion document for consultation, with significant proposals that will impact thousands of taxpayers across New Zealand, including shareholders in companies and any individuals who operate small service businesses. The discussion document states that the motivation of the proposals is to ensure the 39% personal tax rate increase is effective in raising additional tax revenue, by reducing the circumstances where a taxpayer is able to avoid the new 39% personal income tax rate by diverting income through entities that are taxed at a lower rate.
The Government has made a commitment not to introduce a capital gains tax. As a result of closing out that option, it finds itself continually trying to push back the traditional capital boundary and entity based taxation in order to work towards its objective of improving the progressivity of the tax system. Our key concern with this latest round of proposed changes, when combined with the other recently enacted tax changes, is the impact on the coherence of New Zealand’s tax system.
In this Tax Tips Alert we discuss:
- a summary of the proposals;
- why the Government is proposing these changes;
- our views on the proposals; and
- what’s next?
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