The past three months has taken New Zealand on a political roller coaster with the result being a new minority government with a new policy and social agenda for the next three years. In our view, it was always a strong possibility that New Zealand First would go with Labour, and the exclusion of the Greens from the government is political suicide as they sit once again outside of the government and will have little to show for the same level of support that New Zealand First gives to Labour.
Labour identified a number of priorities it would be addressing in its first 100 days and is set to wind back much of the deregulation National introduced. Change is coming and what is going to be interesting is what does this change mean for you as typically a business owner in the context of the post-election New Zealand.
- The promised tax cuts will not occur.
- We would expect the top marginal individual rate and the top trust rate to increase to at least 36% and be aligned.
- The Brightline test for residential property will extend from 2 to 5 years. What will be interesting is which properties this applies to, ie existing own properties or those bought after the law change is made.
- A tax working group will be put together and involved in public consultation. Its report back will affect taxes from 2021 on. It will focus on no increases in taxes, and no inheritance tax or other taxes on the family home. That still does leave the door open for inheritance tax or other taxes on other assets and investments. We think capital gains is unlikely as a tax, but time will tell.
- A 12.5% tax back incentive for research and development.
- Continued focus on multi-nationals. Nothing changes from the old government here and the BEPs programme will continue.
- A key one will be the removing of the ability to use negative gearing losses. The question is exactly who this will apply to, ie company groups or just individuals claiming the losses in their tax returns?
- An Auckland regional fuel tax for the Auckland Council and is expected to be implemented within 6 months.
- Foreign ownership of land is to be subject to greater restrictions and greater involvement of the OIO. The concern here is the OIO is already significantly overloaded and has to date been largely a rubber-stamping exercise anyway.
- A rent to own scheme for low-income workers to assist them to buy their first home.
- Expect labour law reforms. Now is a good time to get rid of underperforming staff while you are still able to.
- The 90-day trial periods, introduced by National in March 09, will be replaced with new trial periods and will require reasons for dismissal and justification.
- Reinstatement will be the primary remedy for employment grievances.
- The increase in the minimum wage to $16.50 from 1 April 18 and expectations for it to be moved to over $20 within the next 3 years.
- Changes to paid parental leave increasing to 26 weeks per year, taking effect from 1 July 18.
- Immigration restrictions targeting students and low skilled workers.
- Superannuation to remain at age 65. With the Government resuming contributions to the New Zealand Superannuation Fund to help safeguard Universal Superannuation at 65.
- Buy Kiwi made preference by the government.
- Focus on regional development and rail networks, both within Auckland and in the wider sense.
- A review of the reserve bank with an aim to lowing the New Zealand dollar.
- Expect inflation to increase with particularly the increase in costs as a result of some of these and the added burden of the increase in the minimum wage. It can only push inflation up.
On the whole however, there is much for business and our clients to be happy with and excited by in terms of what Labour and New Zealand First have promising. It creates opportunities in itself and you need to quickly focus on these to understand where they will be.
If we couple this with the trust law reform, which will still come into effect next year, even under a Labour government, it is going to be a busy year or two as we all get used to significant change in our existing environment.
As always, the Covisory team is happy to talk to you about your needs, now and going forward. If there is anything we can do to help, please call us.
Please note that the information in this article is for informative purposes only and should not be relied on as legal advice.