MEDIA RELEASE (NZ)

The 2024 Budget indicates that the coalition Government is focused on halting the brain drain to Australia says Chartered Accountants Australia and New Zealand (CA ANZ) NZ Tax Leader John Cuthbertson FCA.

"The coalition Government has delivered a budget that largely sticks to their election promises, of using savings from Government cutbacks to put more in the pockets of low- and middle-income wage and salary earners," said Mr Cuthbertson.

"The stated objective is 'responsible tax relief for the squeezed middle', but we can't help but feel this is code for stemming the brain drain to Australia, which is ramping up to levels not seen since the global financial crisis.

“The tax relief is about as much as the country can afford at the current time, and the question is, will it have the desired impact of halting the plans of thousands who are moving to Australia? Because the cost of the relief is in the reduction of Government agency budgets and the services they provide.”

Provisional figures released by Statistics NZ in early May show a record net migration loss of 52,500 New Zealand citizens in the year ending March 2024 - with more than half of those migrations going to Australia.

Under the tax relief, average income families can benefit by up to $102 per fortnight, increasing to $252 per fortnight where eligible for the full Family Boost contribution. This fulfils the Government’s original pledge. For many taxpayers the benefit will be more modest – limited to the relief from increases in the personal income tax thresholds – up to $ 1,042.

“They’ve stuck to their guns on increasing the marginal tax brackets, in the face of significant pushback around concerns that it will exacerbate inflation.

“Additionally, we can see the Government’s strategy in the way they have extended eligibility for tax breaks like the Independent Earner Tax Credit (IETC). They’ve increased it right up to $70,000 at the maximum, which is much welcome and more than we predicted.

“We can also see it in the fact that there isn’t significant tax relief for businesses. The Government is clearly more concerned with retaining our future young blue- and white-collar workforce that are being drawn in by the wages and salaries Australia and further abroad offer.”

However, it appears that the coalition Government is banking on the Ministry for Regulation to deliver assistance to businesses, given its sizeable allocations.

“While every other agency has current and proposed cuts, the Ministry of Regulation’s allocations are set to grow by two million dollars each year for the forecast period. However – there is no indicated return on investment.

“The presumption is that the big investment into this new Ministry will reduce red tape, unleash innovation and growth, and ultimately deliver more tax revenue for the Government. Chartered Accountants ANZ, and the business community, will be keeping a close eye on this.

“As with every budget there are some interesting presumptions. For example, the Finance Minister has banked on receiving $320 million over three years from a Digital Services Tax, which is ambitious given that the draft legislation has been carried over from the previous parliament and is yet to have its first reading. Watch that one closely,” concluded Mr Cuthbertson.