Australia’s Federal Treasurer, Scott Morrison seems to have achieved this feat in a Budget which may attract the attention of his New Zealand counterpart in the lead up to the 25 May Budget and the September 2017 election. Michael Croker, the Tax Leader, Australia at Chartered Accountants Australia and New Zealand said a key issue would be whether New Zealand follows the slow glide path that will eventually see the Australian “small” company tax rate down to 25%.
“The deal done with the Australian Senate will see a 27.5% company rate apply for the current 2016-17 year where turnover is below $10 million. New Zealand is at 28% and in recent times has adopted a rate which is a couple of percentage points below Australia.”
Mr Croker also noted the housing affordability issues confronting both countries.
“Treasurer Morrison has withdrawn the welcome mat for foreign investors in Australian residential real estate. Tougher capital gains tax hurdles, a 50% cap on foreign ownership in new developments and a national “ghost house” tax for unoccupied properties or those not genuinely available for rent send a pretty clear signal.”
Using superannuation to help people into the housing market and encourage them to downsize when they approach old age also has merit, and New Zealanders may want to compare how the Australian model compares with the KiwiSaver HomeStart grant.
But the Treasurer’s big rabbit out of the hat is undoubtedly the big bank levy.
Australia’s five biggest banks will, from 1 July 2017, pay a quarterly levy of 0.015% of liabilities (an annualised rate of 0.06%). The expected revenue haul is $6.2 billion over the four year forward estimates period. “Recent bad press about the big banks means the levy is likely to enjoy bi-partisan political support, but the design features will be many: ascertaining which liabilities are in scope, territorial issues, quarterly reporting obligations, competition issues vis-à-vis other financial institutions, and importantly, who actually bears the burden of the tax.
No doubt New Zealand officials will be tasked to review the Budget and prepare a report for relevant Ministers.
Mr Croker said: “New Zealand’s Broad Base Low Rate tax settings are always held up as a model by Australian Treasury officials but just now and again, a good tax policy idea may flow east over the Tasman.”
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