Key Issues and Outcomes

The following areas are likely to be of particular interest to the retail community, all involving changes to the tax system.

Personal Tax Reform

Personal Tax Rates

Table 1 below outlines the changes to personal tax rates from 1 October onwards.  Across the board personal tax cuts are estimated to cost $14.3 billion over four years.

Table 1: Tax Rate Changes

Business Tax Reform

Company Tax Rate

The Budget bolter involved the company tax rate, which will fall from 30% to 28% from the 2011/12 income year.  The Government will allow dividends issued after the new rate takes effect to be imputed at the existing 30% rate for two years if company tax has been paid at the 30% rate.

GST

As widely expected, the GST rate will increase from 12.5% to 15% from 1 October onwards as one of the two major tradeoffs in terms of making the overall tax package revenue neutral.  There will obviously be compliance cost issues to deal with leading up to the 1 October date, along with an expected heavy level purchasing of major items in September to avoid the GST rise.

Building Depreciation

Depreciation deductions will no longer be allowed for buildings with an estimated useful life of 50 years or more, such as rental houses and offices.  These rules will change for all such buildings from the 2011/12 income year.  For most businesses they will be effective from 1 April 2011.

Building owners will be able to apply to IRD for a provisional depreciation rate if they consider a class of buildings has an estimated useful life of less than 50 years.

Building owners will still be able to claim deductions for repairs and maintenance, to maintain the condition and value of their properties.