Announced in the Government's 2023 Budget this afternoon
$4.8bn of new operating spending in the 2023/24 budget, an increase of around 3% on the 2022/23 budget expenditure, resulting in a forecast deficit of $7.1bn. The Government books are not expected to return to surplus until 2025/26, two years later than forecast last year. Net Government debt is forecast to be $134bn by 30 June 2023, increasing to $175bn by 30 June 2026.
Despite the Governments comments, the additional spending is likely to further stoke inflation, with the bond markets already having increased by 0.2% post the budget announcements. This potentially means yet higher interest rates for lending.
No new taxes for businesses or individuals, but 39% tax rate for Trusts (6% increase). Unfortunately, not a lot for business either, other than the extension of the Apprenticeship Boost scheme (to 31 Dec 2024) and R&D credits for the virtual gaming industry.
The headline budget item is the $1.2bn for the extension of the 20 hours of free ECE support for 2 year-olds, starting 1 March 2024 and the free/discounted public transport for those under 25 years of age ($327m).
Around $10.7bn has been identified for infrastructure projects, across cyclone rebuild, new public housing, new schools, the resilience of the rail network, hospitals and a science & innovation hub in Wellington.
Below is a summary of the key budget announcements in more detail:
New Taxes
Trust Tax rate increasing from 33% to 39% from 1 April 2024 - Stay tuned for our recommendations around the best options around family asset structuring over the coming months.
An exemption will be available to estates that distribute within 12 months, where the tax would decrease to the beneficiary’s marginal rates, rather than 39%
Cyclone Recovery
Education
Extension of ECE 20 hours of free support ($1.2bn)
New classrooms and schools ($400m)
Commencement of pay parity for ECE teachers ($339m)
Cost adjustment for ECE services providing an average 5.3% increase ($260m)
Extension of the Apprenticeship Boost Scheme to 31 December ($77m)
Increased Tertiary Funding – 5% year-on-year increase over the next 4 years ($521m)
Additional Funding for increased student numbers ($181m)
Teacher education enrolment and overseas teacher incentives ($24m)
Reinstatement of Training Incentive Allowance & other programmes ($190m)
- Continuation of free lunches in schools ($323m)
Health
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Boosting staff pay and nursing numbers by 500 ($1bn)
- Removal of the $5 co-payment for medical prescriptions ($619m)
Infrastructure
Warmer Kiwi Homes Scheme for insulation and heating ($403m)
Construction of 3,000 public housing places ($3.1bn capital & $465m operating)
Rail infrastructure improvement ($566m)
Government contribution to nationwide EV charging stations ($120m)
Local authority assistance with flood prevention ($100m)
Transport
- Free public transport for children aged 5 to 12 and permanent half-price public transport for those aged under 25 ($327m)
Other Areas
20% rebate for the game-development sector ($160m)
New Science and Innovation Hub in Wellington ($400m Capital & $51m Operating)
Continuation of the 15% Research & Development tax credit
The government will pay a Kiwisaver employer contribution to those receiving paid parental leave
If you wish to discuss how any of the budget announcements might impact your business or yourself, please contact any of the team at All Accounted For, advice@aafl.nz or 04-970-1182.
