Have you got your Affairs in order before you Travel Overseas?

Although travel insurance is top of mind when travelling overseas, the importance is ensuring your personal affairs are in order is often overlooked. We asked Nigel Smith of Covisory Partners for his thoughts on Estate Planning best practice before you travel.

It never ceases to amaze me just how many people decide that they need to update their Will, Trust or letter of wishes a few days before a major overseas trip. Often these documents have sat hidden in a dark place gathering dust for years despite frequent reminders from lawyers and accountants that you need to check they are still appropriate. Then all of a sudden, a few days before you board the plane for that lengthy overseas holiday, a sudden panic takes over and you have to recheck them.

We generally recommend you at least read and check your Wills and letters of wishes, plus any powers of attorney, every 2 years. Usually, no major changes are required, with only minor tweaks which can be easily done via a codicil, a secondary document which amends rather than replacing or redoing a Will.

The reality is that you are often more likely to die while in a car going to the airport than on the trip itself. However, people do die on holidays so none the less it is better to check these than not. A few years back a NZ family of 4 were all killed when a light plane crashed while on a sightseeing flight in the islands. A family friend who was the executor spent 1 year sorting out the Will but more importantly the business which the family-owned.

So, what do you need to think about? Firstly, a Will is a legal document and it is very fixed and inflexible. It needs to be done properly by someone who is appropriately qualified. It should cover:

  • Who is your executor? This is the person who administers the Will.
  • Bury or cremate.
  • For those with children under 18, who will become their guardian?
    • This is very important as there are a lot of factors to consider in reaching this decision like:
      • Who?
      • Their ages.
      • How busy they are.
      • Do they have kids themselves?
      • Will your kids fit into their family?
      • Financial support – what if one of them needs to give up work to look after your kids?
      • Back up/secondary guardians.
      • Use of your house or beach house.
      • Where they live – same school zones or city etc.
  • Today most valuable assets are owned in trusts and not part of a Will, but personal property and effects are still owned personally. There may be some valuable items in this, but there will always be more fights over sentimental items than those of value. Making a list of specific valuable or sentimental items and who they are to go to is very helpful, as are pictures.
  • Whether your executor can charge for their time.
  • Any replacement trustees or who the power to appoint and remove trustees goes to.

This is not a comprehensive list but it is a start. By comparison, a letter of wishes to your continuing trustees is an informal, non-binding document. It can be a simple letter from you. It needs to spell out who gets what and when. It can also cover various “options” or different eventualities, eg if my child does drugs, they get nothing.

While non-binding trustees will usually follow it and courts will look at it to decipher a settlor’s intention. Again, this is a document that does need to be thought and talked about.

Finally, there are Powers of Attorney (POA). These fall into 2 distinct categories:

  • Health and Welfare which apply when you are sick or injured and unable to act for yourself; and
  • Enduring or general powers which allow someone to act for you and a company while you are away or otherwise can’t.

There are specific forms for both which sadly have become far more complicated in recent times. However, we recommend that you look at having both.

So, these are all matters that do require some clear and deep thinking. While the urge may be there to do this quickly before you get on a plane etc, if you do then make sure you do a full and proper job when you get safely back.

Nigel Smith is a director of Covisory Partners Limited a chartered accounting, trustee and advisory practice dedicated to looking after families, their businesses and investments.

Make ‘The Talk’ about Money with your Kids

In our practice, one of the more challenging aspects of family planning is settlors of a trust not trusting their children to manage his or her own money, let alone significant funds tied up in trusts after the settlors have died. 

There is a reluctance to involve children in decision-making aspects of family structures mainly due to trust issues the parents have with their children, and sometimes spouses of the children.  These are genuine concerns, and we continue to work with clients in this area to help smooth the transition.  The last thing anyone wants is the next generation to have no idea about money and then for the substantial assets built up over time to be wasted.

So, what can be done?  There are a few things that can be considered as standalone techniques or combining several different techniques, and I am not talking about having an Agee jar on the kitchen windowsill to encourage saving. This might work for a five-year-old, but not someone in their mid-20’s.  However, it is essential to ensure the ages of children are considered in any strategy as it believed that a lot of money habits formed by children are entrenched by the time they are 7 years old.  Regardless of what age children are, we have found that allowing children into a decision-making process is very important for their financial education, otherwise they are disengaged and lack the skills to manage theirs and potentially the family money later in life.

Some techniques to consider:

  1. For those who have children who are teenagers, it is essential that they learn about budgeting at this age.  This can be achieved through bank account and allowance control and using a budget spreadsheet to keep within.  It is important to discuss wants versus needs at this stage.  Another option is incorporating children into family budget discussions.
  2. For those children who show an interest in investments at this age, playing a game to invest in stocks or other investments and then track performance over a period is helpful.
  3. Teaching a child about philanthropy is becoming more and more necessary.  The concept of giving, either through donations of money or time through volunteering for charities, is becoming a priority in today’s modern society. 
  4. For those with older children who have either left home or are increasingly independent to ensure they learn about family businesses or investments, they can be added as advisors to boards to sit in on meetings and learn about the family financial holdings.  Eventually, this may lead to proper directorships or trusteeships.
  5. We have also seen some families set aside some funds for the children to manage themselves along with professional advisors.  This separate fund can also include a charitable object as well, so not all funds go to the child, but they are forced to provide benefit to others.  Having a professional advisor involved in the structure can also help a child find his or her own way without too much interference from the parents.

Regardless of what path is chosen, and we emphasise that every family will have different considerations, it is important not to be overly secretive about family finances, especially as children get older.  In our experience, those families who have parents that are secretive are the ones that end up in arguments later.  Changes to the Trustee Act scheduled for later in 2019 will make this information available to all beneficiaries but be open and honest will help limit any family squabbles going forward.

There will also be children who will not be interested financial matters.  The concern here is the parents continue to financially support those children until well after they should be financially independent.  This becomes a habit for both the parents and the children, and it is hard to break the longer it goes.  Parents do support children in several different ways, financial assistance being one of them, but the last thing any party would want is for financial support to carry on indefinitely.  Often from a parent’s perspective, the hardest thing will be is to say no.

For those with substantial family assets children should be educated on the ramifications of entering a long-term relationship without adequate protection.  This can be a challenging conversation, but a necessary one in today’s environment for sorting our property when a relationship splits.

It is clear there is no right answer here.  All we can recommend is to start talking to children about money as soon as you can and involve children in financial decision making as much as possible. 

Are you ready for the Changes to NZ’s Trust Laws?

If you are a trustee or a beneficiary of a NZ trust it is worth doing your homework.

In late 2017 the new Trusts Bill was introduced to the New Zealand Parliament.  It is expected to become law later in 2019 and it will have some major implications for trustees.  The law changes will have a major impact on how trusts are administered in the future and new trust deeds will need to be carefully considered by any settlor, rather than rely on a template deed that has been in use for twenty years.

So, what are the major changes:

  1. Trustee Duties: the new law differentiates between mandatory duties and default duties.  Mandatory duties cannot be modified (such as duty to know the terms of the trust, duty to act in accordance with the trust terms etc) but the default duties can be excluded by the deed of trust.  This includes duties such as duty to have a general duty of care, duty to invest prudently etc.  It will be very important for any new trust being put in place that before the document is signed a good conversation occurs between the professional drafting the document and the settlor about what should and should not be excluded.
  2. Beneficiaries: under the new rules all trustees must inform every beneficiary they are a beneficiary of the Trust.  They must be informed of the names and contact details of the trustees, whether there are any changes to the trustees, and of their rights to request trust information.  This is a significant change and it must be emphasised that the trustees have a positive duty to do this.
  3. Disclosure of Trust Information: this is defined as information regarding the terms of the Trust (i.e. the deed of trust and all amendments), the administration of the trust and the trust property but does not include trustee decisions.  There is a presumption towards disclosure to beneficiaries unless there is exceptional circumstances and this is following modern common law principles.   
  4. Increase to the Trust Period: currently New Zealand Trusts have a trust period of 80 years.  The law changes revoke the Perpetuities Act and increase the trust period to 125 years.   

What are the practical implications you need to think about?

  1. New Trusts:
    1. As a settlor wanting to put a new trust in place, you need to carefully think about:
      – whether any of the default trustee duties can be excluded
      – who will be the beneficiaries of the Trust, especially when more information will be supplied to beneficiaries in the future
      – where are the trust documents to be kept?
  2. Existing Trusts:
    1. For existing trusts, the deed of trust and trust structure should be comprehensively reviewed, and varied if necessary, for the following:
      – Trustee duties
      – Class of beneficiaries and whether this should be limited going forward as the trustees will need to inform all beneficiaries, they are a beneficiary of the Trust.  A lot of older style deeds have a ‘kitchen sink’ class of beneficiaries to include nieces, nephews, spouses etc.  Clearly this has some major issues going forward. In some older trust deeds there may be no power to remove or appoint new beneficiaries.
      – What information should be provided to beneficiaries once any changes to the beneficial class are complete and the implications of providing that information.  For example, a beneficiary may have a beneficiary current account in their favour which is repayable on demand.  We believe that due to the presumption of disclosure in the new rules, trustees will need to provide to ALL beneficiaries a copy of the deed of trust and the annual financial statements for the trust.  This point alone will result in some significant changes to beneficial classes of trusts in New Zealand.
  3. Can the deed of trust be amended to take advantage of the increased time period for a Trust? It is likely this will not be possible in some older deeds, but more modern deed may have some flexibility to allow this.
  4. Do you really need a trust?  We suspect there are a lot of trusts in New Zealand that are not required and the changes to New Zealand’s trust law is likely to be the catalyst for trusts to be unwound.

We recommend the first step is to thoroughly review the deed of trust as the first step.  Covisory can help you with this so please contact us (+64 9 307 1777) to arrange a time.

What’s going on in our Family Businesses?

Why do a large percentage of family businesses fail when transferring to the next generation?

BMW, Samsung, Fisher and Paykel, Michael Hill International, Smith & Caughey and Walmart are examples of highly successful multigenerational family businesses. Although around 75% of businesses in New Zealand are family-run, the statistics paint a sombre picture for the success of these family businesses surviving into the next generation. What makes these businesses so susceptible to failure?

Although the reasons are varied, you will find several common themes.

Lack of involvement and business education of the younger generations

How can you expect your successor to take over and run your business successfully if you haven’t spent time training him or her?

  1. The failure to actively educate the younger generations around finances and business concepts have resulted in many children being ill-prepared to manage money or to step into a business management role in their parents or grandparent’s business.
    1. By not nurturing a sense of responsibility, history and core family values the next generation lack the understanding of why.
    2. With no education in the Family Business, it is more likely they will have poor decision-making skills. The result is that the family’s capital can be put at significant risk and ultimately the business could fail.
    3. Planning to move the family business between generations will have a greater chance of success if you work for a year or two with your successor(s) before you hand over the reins.
    4. There are excellent benefits for a family business if your children are encouraged to experience working in other unrelated companies, where their abilities can be grown away from the family.

Families who continue to promote unqualified or under qualified relatives into positions of power just because they are members of the founding family are also on a fast-track to failure.

  1. Rather than making your own decisions on who will run the business and then announcing it to the family, a technique we have found to be one of the surest ways to sow family discord, it would be wiser to look at your family realistically and plan accordingly.
    1. Examine the strengths of all possible successors as objectively as possible and think about what’s best for the business.
    2. Do your children or nieces or nephews have the business skills or even the interest to do it?
    3. Consider what happens if there are no family members capable of continuing the business. If this is the case, then your plan needs to focus on the sale of the business at a future point or at least an independent CEO reporting to a board which also contains independent, experienced directors.
    4. The moral of the lesson is to involve your family in business planning and succession discussions.
Case Study 1

One family business we were working alongside was in the process of transferring the management between generations. There was an open dialogue between the generations to ensure that the “child” wanted to acquire the business and understood the financial ramifications.  It was vital that it was the child’s wish to purchase the business and not that of their parents which were forced upon them or imputed to them.

In this case, the child’s principal concern was financial, i.e. what happens if they could not maintain the business and as a result not be able to service the repayment of the debt to the parents?  This can be handled so that perhaps the debt is limited recourse, but the negative is that then removes a valuable asset for the other children.

Typically, the family business represents a very high percentage of the wealth of Mum and Dad when we come to look at succession issues.  If they want to transfer it to some but not all of their children, then it is important that equality between the children is considered.

A lack of family governance structure

Governance issues are avoided by many families because it forces them to confront the possible need for significant changes in how they manage their business. Without a robust framework, family business are easy victims to internal discord and ownership issues down the track.

  1. Governance structures formalise precisely who does what and how.
    1. Having a structure provides a distinct line between family and business, separating family control from the daily management of the business.
    2. Independent, experienced directors and advisers need to be part of this to provide an independent, removed and unbiased perspective.
Failure to start business succession planning early.

By delaying retirement and avoiding putting in a succession plan in place can be further exacerbated by an unexpected illness or sudden death which provides real risk to the business and the family’s financial health.

  1. Planning long term is good. The longer you get to spend on succession planning, the smoother the transition process is likely to be. Consider five or ten years in advance at a minimum.
    1. Proper succession planning can take years whether you bring in outside managers or train up an internal successor.
    2. Succession must look at both planned and unplanned scenarios, the later including situations where a parent or senior family member meets an unexpected and untimely death or disability long before their planned retirement.
Trying to be fair to all 

Get over the idea that everyone must have an equal share or even an equal say. Just because you are a family member doesn’t mean you will get a top job in the company unless you are qualified and competent to do it.

  1. In any business, management and ownership are not necessarily the same thing. For example, you may decide to transfer management of your business to just one of your children but transfer equal shares in the business to all of your children, whether they’re actively involved in operating the business or not.
    1. But trying to be “fair” is a nice idea in theory, but it may not be in the best interests of your business. It may be fairer for the successor(s) you have chosen to run the business to have a larger share of business ownership than family members not active in the business. Alternatively, it may be better to transfer both management and ownership to your chosen successor and make other financial arrangements to benefit your other children.
    2. Another option would be to bring in professional managers to run the business while retaining ownership in the family as a whole. Many successful multigenerational family firms do this as it allows them to focus on diversifying and managing their wealth as well as making it easier to navigate generational transitions.
Case Study 2

In this example, the family business was a farm where the “child” that worked the land had got into the ear of Mum and Dad’s independent trustee who also happened to be his chartered accountant.  The parents, owners of the land and farm operation, were convinced to sell it to the child at a low price with extremely concessional repayment provisions including that no repayment of the principal was to be made for ten years.  While there was interest to be charged, again it was concessional.

A large part of the value of the farm was being transferred to a child without equal consideration for the other children.

At the last minute, Mum and Dad did realise there could be an issue and arranged a family conference where the whole exercise was sprung upon the other three unsuspecting children who, to say the least, were somewhat gobsmacked.

Epilogue….In a similar situation, we came across recently a “child” had been sold the family farm at a significant concessionary value. Two years later that child then turned around and sold the farm at an exorbitant profit. The sale and the significant profit made on the sale fractured the family as the first sale had no clawback provisions for subsequent sale profits built into the agreement as the expectation of the parents and the stated intention of the child was to farm for life

When you are dealing with children and potentially transferring an asset to one of them and not the others, the critical concern is to ensure that there is a perception of equality and fairness.  Even if there is to be some benefit for the child, in recognition of past service, endeavour or the like, it is essential that this is discussed openly and in a proper forum within the family or it has the potential to divide the family and poison relationships for the future.

Succession will continue to be one of the principal issues for families owning businesses.  With many baby boomers reaching retirement age, what they do with their business is increasingly weighing upon their minds.  Do they sell the business to third parties?  Do they transfer it to the next generation?  What should they do with it?

For most, there is never one single right answer to this but what is important is to work through a process so the family can see the options and understand the implications of each. 

As always, we are here to assist.

The Working Tax Groups Final Report

What form Capital Gains Tax takes is pure speculation until April 19

21st February 19 saw the release of The Working Tax Groups final report. It was no surprise that the media had a field day with predictions of dire consequences to all areas of the economy. We need to take a step back and look at this logically. Although yesterday’s report is a comprehensive look at taxes in New Zealand, it is at its core, a recommendation only.

We note that the Finance Minister, Grant Robinson and Revenue Minister, Stuart Nash, signalled that the government were not looking to do a major overhaul of the tax system but that there was room for improvement.  The government is not bound to accept all the recommendations and they acknowledged that it is highly unlikely that all the recommendations will be implemented.

This is a classic let’s look at an ideological perfect tax system and then wind it back to something that will be more palatable to the majority of the voters. Therefore, in April 19 when the government releases its response to the report, we will then be able to comment on the implications the new proposed legislation will have. Until the Governments response is released, it is all speculation.

One factor will be NZ First’s support base and their response if Winston Peters and NZ First choose to support the governments response. How aggressive Labour goes will be highly dependent on how the polls are looking leading into April.

As the government signalled, they will not pass any legislation arising from the report before the end of the current Parliamentary term and that no policy measure would come into force before 1 April 2021. Therefore, it will come down to the voter, those who turn up on the 2020 Election day as to what form the Capital Gains Tax, if any, will take.

This leaves us plenty of time to work through the implications of the potential Capital Gains Tax for you and your businesses.

Is Capital Gains a Step Closer

On Thursday 20th September 2018 the Tax Working Group issued a progress report on its review of the New Zealand tax system. We have provided links below to the report and its supporting data for your information.

Future of Tax: Interim Report

Charts and Data – Future of Tax: Interim Report


The following press release was issued along with the report.

Press Release



Avoiding issues with Property Transactions

GST issues relating to Partial Use

We commonly come across errors around accounting for GST on property transactions and their financial impact can be significant for the parties involved. Following on from our discussion around whether there is GST or not on property transactions let us now look at the GST impact around partial use when purchasing property.

By law, GST is charged on all land sales and claimed on all land purchases. Exceptions being when that property is used for making non-taxable supplies such as Residential accommodation or the transaction is compulsory zero-rated.

From 1st April 2011 new apportionment rules were introduced requiring suppliers of land or supplies that include land to charge GST on the supply at the rate of zero percent where the purchaser intends to use the land to make taxable supplies.

However, what happens in the case of transactions where there is both a residential and economic activity component to the property transaction. Inland Revenue allows for the apportionment into two distinct supplies for GST Purposes. Each component must be valued separately and be considered independently to determine what GST is payable or receivable.

Let’s consider the following example:

Sarah purchases a new building for $5 million on 30th October 2017. Sarah has a balance date of 31st March. There is no GST included in the supply as it is subject to the zero-rating rules.

Where both the vendor and purchaser are registered for GST AND the purchaser declares on Schedule 2 of the ADLS/REINZ Sale and Purchase Agreement (S&PA) that they intend to use the building for making taxable supplies AND the purchaser does not intend at the time of settlement to use the property as a principal place of residence. Then under Clause 15 of the S&PA it will become compulsory for the transaction to be zero rated for GST purposes.

Sarah intends the building to be mixed use and to lease the ground and first floor of the building to commercial tenants, and the 2nd floor of the building will be leased to residential tenants.

On acquisition Sarah applies the rules in section 20(3I) of the GST Act 1985.

  1. Calculate the nominal tax component that would be chargeable on the value of the supply if subject to the standard rate of GST.

$5m x 15% = $750,000

2. Determine the extent to which the building will be used for making taxable supplies.

a.Sarah determines that the building will be used 66.7% for making taxable supplies (rent to commercial tenants) and 33.3% in making exempt supplies (rent to residential tenants).

3. Sarah now needs to account for the proportion of the nominal GST component that relates to the non-taxable use of the goods as output tax on the acquisition of the building.

a.$750,000 x 33.3% = $249,750

4. On the acquisition of the building, Sarah will need to account for output tax of $249,750.

The same principals would apply to transactions where there is both a residential and economic activity as in the case of Farms (Rural farms, lifestyle farms, and orchards), Vacant land where residential use is planned, land used for a Dairy, or hotels and motels where the owner or manager lives onsite.

The rules require the taxpayers to make a fair and reasonable estimate on the intended taxable and non-taxable components of the initial transaction. In subsequent periods after the initial tax deduction claimed the taxpayer may be required to make further adjustments if the actual taxable use of an asset was different to its intended taxable use.

The first adjustment period runs from the date of acquisition (30th October 2017) to the persons first balance date after acquisition or to the person’s first balance date that falls at least 12 months after the date of acquisition. In Sarah’s example, this would either be 31st March 2018 or 31st March 19. Subsequent adjustment periods would run annually from this point.

In our example, Sarah elects to go with option 1 the period 30th October 2017 to 31st March 2018. Her second adjustment period will run from 1st April 2018 to 31st March 2019. There is no limit to the number of adjustment periods in relation to land.

Using our example, Sarah would be required to keep records showing the usage for both the taxable and non-taxable portions. These logs form the basis to make an annual adjustment if the percentages differ or there is a change in use.

This document has been written as a general guide and should not be used or relied upon as a substitute for specific professional advice.


Are you avoiding issues with Property Transactions – What happens around GST?

Whether there is GST or not on property transactions gives rise to a lot of confusion. The implications if you do get it wrong can cause serious ramifications for both parties to the agreement – think 15% of the purchase price. We are talking hundreds of thousands if not millions of dollars.

The standard ADLS/REINZ Sale and Purchase Agreement for Real Estate in New Zealand (currently ninth edition 2012 (7)) has highlighted the need to ask questions around GST. The agreement does make things slightly easier as long as the form is filled in correctly. We have put together this basic overview as a starting point.

Let’s set out the basics firstly from the Vendors Point of View. To be able to register for GST the vendor is not using the land for their principal place of residence and instead is using the land for making “taxable supplies”. Examples could be:

Taxable Supply for GST purposes
Long Term residential letting NO
Short term letting where you receive a rate per night. For example – Airbnb YES
Commercial Lease of a building YES
Farming (but there are exceptions) YES

If the vendor does make a taxable supply and has registered for GST, then they need to show this on the Sale and Purchase Agreement by:

Respond YES to the question asking whether the Vendor is registered under the GST Act in respect of the transaction evidenced by the agreement and or will be so registered at settlement This question is located at the top of Page 1 of the Agreement
The purchase price must be shown as “plus GST (if any)” Located on Page 1 of the Agreement. This averts the possible problem if the purchaser nominates a non-GST registered entity after signing. Meaning the vendor would still need to account for 15% of the purchase price to the Inland Revenue, and ends up getting 15% less of the sale as a result of the Purchaser’s actions.
The Vendors GST registration number is to be entered in under Schedule 2 of the agreement.

If the vendor is not registered for GST, then they respond NO to the question asking whether the Vendor is registered under the GST Act in respect of the transaction evidenced by the agreement and or will be so registered at settlement and they do not have to fill out Schedule 2.

Secondly if the purchaser is GST registered then they need to state this in Schedule 2 answering all questions 3 to 11. If they are not registered, then they would answer questions 3 and 4of schedule 2 as NO.


Let’s look at some possible scenarios

Vendor GST Registered Purchaser GST Registered
NO NO 1.      No GST on the sale

2.      the Vendor must answer NO on the front page to confirm they are not GST registered.

3.      The price can be shown as either Plus GST (if any) or inclusive of GST (if any) or if neither is crossed out it automatically defaults to Inclusive of GST (if any). In reality it makes no difference.

YES NO 1.      The vendor must answer Yes on the front page to confirm they are GST registered.

2.      The price must be shown as Inclusive of GST (if any). This way the vendor can only be better off if the Purchaser Registers.

3.      Questions 1 and 2 must be answered on Schedule 2

NO YES 1.      the Vendor must answer NO on the front page to confirm they are not GST registered.

2.      The price to be shown as inclusive of GST (if any)

3.      The purchaser can claim the GST in their GST return as they pay for the property (irrespective of their actual GST registration basis).

YES YES 1.      Where both parties are GST registered AND the purchaser declares on Schedule 2 that they intend to use the property for making taxable supplies AND the purchaser does not intend at the time of settlement to use the property as a principal place of residence then under Clause 15 it will become compulsory for the transaction to be zero rated for GST purposes.

Yet, let’s consider what happens when the GST status of one of the parties to the transaction changes prior to the settlement date. If the purchasers GST status changes they are required under clause 14 to provide the vendor with no later than 2 days prior to settlement for the correct position to be recorded on the settlement statement. The relevant date for GST status is taken from the status of the parties at the date of settlement.

In the next edition of Covisory Connect we will address GST issues around partial use and change in use. As always, we would advise that you seek specialist legal and tax advice when faced with GST.

The Brave New World – What changes are likely from our Labour / New Zealand First Government

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.