WHK Queenstown’s senior tax specialist Wendy Duncan, who has previously worked in Treasury, sheds some light on Budget 2011 for Queenstowners
After the usual pre-budget comments, our expectations for an interesting 2011 budget were not high, and we were not disappointed. Despite the fact the election year budgets are traditionally a “lolly scramble”, the 2011 budget lived up to its billing of fiscal prudence.
For Queenstown, the two critical areas of the budget were undoubtedly the signalled changes to Kiwisaver and Working For Families.
The Kiwisaver Regime on first brush seemed to get off lightly with both the expected scrapping of the $20 per week contribution being softened to a reduction to $10 (from July 1, 2011), and the maintenance of the $1000 kick-start.
However, the removal of the Employer Superannuation Contribution Tax exemption for the minimum contributions (currently two per cent) from April 1, 2012 means that not all of your employer contributions will arrive in your Kiwisaver accounts. Rather, some will be diverted as tax, the degree depending on your marginal tax rate (up to 33 per cent). This means the two per cent employer contribution could become as low as 1.34 per cent in reality. The expected increase in the minimum contribution rate to three per cent has been deferred until 2013.
Changes to Working for Families Tax Credits were in line with expectations – a very minor change in the threshold (now $35,000) and a quicker abatement rate (25 per cent, rather than 20 per cent, for every dollar of income), meaning that higher income persons will receive either less, or no, WFFTC.
Finally, pre-budget there was some urban-driven chatter around farmers, their level of tax payments and tax avoidance. This was, in my opinion, a lot of hot air over nothing, although Peter Dunne did indicate today that there would be a review of some tax matters affecting farmers such as livestock valuation schemes and the taxation of mix-use (private/business) assets. This will happen over the next year.
All in all, not a lot to get excited about. Bring on the Rugby World Cup.