2016 Budget a yawn for some

Moore Stephens Markhams tax specialist and business advisor, Belinda Canton outlines the impact for business from this year’s Budget.  View her presentation, or read our full report below.

2016 BUDGET – A YAWN FOR SOME?
With the announcement of Bill English’s eighth budget, there were no surprises, as expected.

As has been the stance over the past few years, some of the major items contained in the budget have been drip fed to us over the past few weeks.   This has been a deliberate ploy to take the expectation and excitement out of the actual Budget Day.

So while no surprises, we suspect a lot of the smokers instantly lit a fag to take the sting out of the news that the cost of purchasing their most treasured puff is going to increase annually over the next four years, to a whopping $30 a packet by 2020.

Also, if you were expecting to see some more money in your pocket through tax cuts then you will be sorely disappointed.  Mr English made it quite clear that there are no tax cuts in this year’s budget but has signalled that they are still on the cards, dependent on the stars aligning and a stable economy.

Our view is that if there is room for anything, then the big announcement will be made in the 2017 Election Year Budget – and even then any cuts are likely to be brought in over a period of time.

At the beginning of his speech, Mr English announced – “This is a budget that invests in a growing economy”.

Overall this budget has been largely about keeping up with growth in population and the added pressures that this brings.

 

Inland Revenue pushing business to cloud technology

The only focus in the tax area announced yesterday, related to the investment of $850million over the next four years for the Inland Revenue as operating funding and a new tax administration system.  This investment is to provide a modern, simplified tax administration system that is aimed at reducing compliance costs for businesses and helps people to get their obligations and entitlement right first time.

The intention is to provide a sophisticated system that will enable New Zealanders greater flexibility to manage their tax affairs online.  These benefits are intended to be delivered through the increased use of digital technology – through the development of IR’s new system.

This initiative is in addition to the ‘friendly tax package’ announced in April.  This package aims to enable taxpayers to calculate their provisional tax obligations on an as-you-go system – but is only available to businesses with turnover of less than $5m (too low in our opinion).

Under this package there is a push for businesses to use online accounting software – thus a measure to move as many businesses onto the cloud as possible – which will make the next step for IR an easier one.

Other additional measures to simplify various taxes were part of the package announced in April.

 

So who were the big winners on the day?

As a result of population growth, infrastructure was one of the key themes in the budget.  Extra money for schools, hospitals, housing and roading to meet demands of the growing population.

Healthcare has romped home this year, securing a whopping $2.2billion over the next four years.  Although a sizeable allocation, this is purely in order to relieve the pressures faced by our systems on the back of strong population growth – so actually only just enough to keep up with demand.

Education has been allocated an additional $124m to fund nine new schools, and 480 classrooms will be built in response to the increased number of children turning up to school.  Additional funds for teacher aids and special needs learning.  The early childcare sector also benefits.

Housing Funding to free up land in Auckland for housing developments has been doubled to $100m, which could produce up to 2000 new houses, some of which will have to sell for less than $550,000.  A boost in social housing investment will also create 750 additional homes for families on state housing waiting lists.

Social investment $652 million for a social investment package to drive changes that will help improve the lives of our most vulnerable people.  The largest part of this funding will go towards the previously announced Child, Youth and Family reforms.

Police Nearly $300 million for Police as we continue our drive to reduce crime – total crime has dropped by 16 percent over the past five years – that’s 53,000 fewer crimes.

Overall an uneventful budget day for most, with the biggest surprise occurring outside of Parliament where a security threat closed the streets outside the Beehive and delayed the Budget speech.

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