- The 2023 New Zealand Budget is focused on alleviating the high cost of living, and on long-term improvements to national infrastructure, health care and education.
- While these measures will help individuals, there is little in the Budget specifically benefitting businesses.
- Winners include the electronic gaming industry and horticulture technology. Meanwhile, trustees will be taxed at 39% aligned with the top personal tax rate from April 2024.
The 2023 New Zealand Budget is a mixed bag of measures, but Chartered Accountants Australia and New Zealand members have welcomed the various initiatives related to cyclone recovery, the environment and investment in technology. Sarah Walker FCA from Epplett & Co, chief executive officer Caroline Plowman FCA from National Mini Storage and John Schol FCA, principal at Malloch McClean found few surprises in what the New Zealand Government dubbed a ‘no-frills’ Budget, which is clearly focused on the country’s cost-of-living crisis.
Epplett & Co is located in Hawke’s Bay, an area that was severely affected by Cyclone Gabrielle in February 2023. Walker says people were taking much longer than before to get around the area in the aftermath of the cyclone and that the Budget funding to help flood-affected areas is welcome.
Plowman’s company has three sites that were damaged by natural disasters and she also welcomes the Budget’s recovery funding. It includes NZ$6 billion for a long-term National Resilience Plan to shore up national infrastructure, NZ$800 million for emergency response work, as well as NZ$30 million to address immediate health and safety, and animal welfare needs in rural communities.
Walker warns that the government funding may not go as far as people think. People may need to be creative in how the funds are used to help the regions still dealing with the aftermath of the floods. She highlights past concerns about the way in which funding was administered in the aftermath of the 2011 Christchurch earthquakes and that she is “hoping there is more prudence in how it might operate”.
Located in Invercargill, Schol told Acuity that he’s particularly interested in the aspects of the Budget that cover new energy sources, and the investment in science and research. He says that these projects, which include a NZ$100 million investment in the green hydrogen economy, and investments in science and technology, will take the country forward.
“If New Zealand is to grow as a nation, we need to get ahead of the curve and not play catch-up in these areas,” he says.
Walker is also a fan of the government’s move to boost electric vehicle charging infrastructure, so people who own an electric vehicle or are looking to buy, have the required charging facilities.
The Budget sets aside NZ$120 million over four years to get more charging stations in place.
A measure that caught Walker’s eye in the Budget is the funding that the New Zealand Government is injecting into the technology sector. There are talented people working in the development of electronic games locally, and Walker notes the additional NZ$160 million in funding might keep that talent in New Zealand.
Plowman says some of the funding or incentives for the development of certain sectors is interesting but she feels the government “could have provided broader funding for research and development”.
Sectors that benefited from targeted funding – aside from the gaming developers – included a total of NZ$451 million for scientific research centres, NZ$38 million for the development of international research partnerships and a NZ$75 million allocation to address the digital skills shortage, boost horticulture technology development and grow jobs in the tourism and hospitality sector.
A cost-of-living Budget
Much of the New Zealand Budget spend is geared to help individuals with the current high cost of living. For example, public transport will continue to be free for those under 13 and at a reduced cost for under 25s, and the government is doing away with the NZ$5 co-payment on prescriptions. There’s also significant investment in two of the basics: health care and education.
Plowman was surprised by some of the cost-of-living measures, such as the additional childcare spend, which will help employees of her company. However, she feels that there is not much in the Budget for businesses overall.
One of the measures Schol notes that will impact the clients of his firm is the increase in taxation of trustees that he says will result in a NZ$350 million-per-year injection into the government’s coffers. Schol says the measure was no surprise and that clients will “take it in their stride” but that there are consequences to this measure that may impact the economy over time.
One of the concerns Walker has is the fact that the government has made changes to the taxation of trusts that people have for valid reasons, and that a majority of people who use trusts are not doing so for the avoidance of taxation.
“It does ultimately impact beneficiaries of these trusts and inhibits the amount of reinvestment made by these trusts into the local economy,” says Schol.
The change to the taxation of trustees is not part of a greater raft of tax changes in this year’s Budget, however – and that will have to be addressed down the track. The government promised there would be no change in tax thresholds, Schol says, but “scope creep” is affecting those on lower incomes and the government is raising more money while people are struggling.
“This does need to be addressed at some point in time when inflation allows,” he says.
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