Labour's tax changes - what you need to know
3458POSTED:
GRA Blogs
Articles by John Rowe
With the Labour Party winning the 2020 election, they now are expected to implement their proposed higher individual tax bracket of 39% for income over $180k. This is anticipated to come into effect in 2021/2022 income year.
This imminent change makes it an opportune time to ensure your affairs are structured in the best possible way for both asset protection and tax – because if you don’t address this now, you may end up paying a lot more tax than is necessary.
It makes good sense to legally maximise the deductions you are entitled to and to periodically review your structures to ensure they are appropriate for your current circumstances and the prevailing tax environment. If you set up your structures several years ago, they will almost certainly need to be updated – structures need to change as the times and legislation change. The impending new tax bracket is the perfect trigger to do this.
For example, if you hold investments/shares in your personal name, or have entities with historical profits that haven’t yet been distributed via dividends, it is likely you will be in a less than optimal position from a tax perspective once Labour’s new tax increase comes in. Currently, the difference between the company tax rate and the top individual tax rate is just 5%. With the change, it is expected to move to 11%, which for many people will be a significant increase. Therefore, it is prudent to look at alternatives. Additionally, holding wealth in your personal name or a trading entity puts it at risk, so is generally not ideal from an asset protection perspective.
However – and this is very important – any changes you make must be dealt with extremely carefully in order to stay clear of anything that could be construed as tax avoidance. You should seek specialist advice around this. It is also worth noting that although Labour have said the tax increase will only apply to individuals, it would not surprise us to see it extended to trusts at some point. At the same time, we believe it is highly unlikely that Labour would ever change the company tax rate. These are factors to consider when discussing your options with your tax adviser.
If you have any questions or would like a review of your structure, contact your GRA Client Services Manager. Or, or if you are not a GRA client, book a meeting with one of our senior consultants to see how we can help. (The first meeting is free if you are new to our practice.) Ph +64 9 522 7955 or info@gra.co.nz.
John Rowe
Director
Business Accounting Services
© Gilligan Rowe & Associates LP
Did you like this article? Subscribe to our newsletter to receive tips, updates and useful information to help you protect your assets and grow your net worth. We're expert accountants providing expert advice to clients in NZ and around the world.
Did you like this article? Subscribe to our newsletter to receive tips, updates and useful information to help you protect your assets and grow your net worth. We're expert accountants providing expert advice to clients in NZ and around the world.
Disclaimer: This article is intended to provide only a summary of the issues associated with the topics covered. It does not purport to be comprehensive nor to provide specific advice. No person should act in reliance on any statement contained within this article without first obtaining specific professional advice. If you require any further information or advice on any matter covered within this article, please contact the author.
Comments
Testimonials
Property School showed me the potential of what can be achieved, different strategies and how to develop a plan. I really enjoyed the energy of the group and presenters. - Rohan, April 2019
Gilligan Rowe and Associates is a chartered accounting firm specialising in property, asset planning, legal structures, taxation and compliance.
We help new, small and medium property investors become long-term successful investors through our education programmes and property portfolio planning advice. With our deep knowledge and experience, we have assisted hundreds of clients build wealth through property investment.
Learn More
Free Resources, Tools & Downloads
