Budget 2015

As usual on Budget Day, it’s all ears on the live stream at Elevate CA as Bill English reads Budget 2015.  Here are our first impressions and some initial comment around the tax and business related aspects of Budget 2015 …

2:08pm

Mr English is telling us of a more confident and resilient country than the one we lived in seven years ago.  There’s a bit of political and economic spin going on for a few minutes as one expects at the lead in to a budget delivery.

2:12pm

Mr English is glossing over that wafer thin surplus he spoke about this time last year.  Now he is budgeting for a deficit of $684m – and a surplus next year.  The rationale we’re hearing is that spending allowances are being maintained rather than chasing a surplus in this coming year.

Yes, this resonates with me.  The ideological return-to-surplus-on-a-tight-timeframe-because-that’s-what-we-promised didn’t sit well

2:16pm

The Budget provides up to $25 million over three years to support establishment of Regional Research Institutes for regional areas outside of Auckland, Wellington and Christchurch.  As announced previously, there is provision for R&D growth grants for innovative businesses which will contribute 20 per cent of their R&D costs.

Yes.  This is a no brainer.  The free market can’t compete with government assisted innovation in countries like the USA.  We need to take a lesson from them in supporting our best and brightest – and this is a step in the right direction.

2:17pm

Further ACC Levy cuts of $375m across businesses, workers and vehicle owners

This has been well flagged over the last few months.

2:19pm

As announced by Mr Key on Sunday, some measures to clarify tax rules for those buying and selling properties.  Foreign buyers and Kiwis who are buying and selling properties that are not their main home will now have to provide an IRD number when they buy or sell.

This will no doubt make the job of the IRD Property Compliance Unit a little easier in the future.  The idea of regularly buying and selling property without paying tax on the profits is rightfully a thing of the distant past.

2:19pm

Also, as Mr Key announced earlier, if someone sells a residential property within two years of purchase they will now have to pay income tax on any profit they make from the sale.

This will likely catch very few people who should not already have been paying tax on the proceeds of their sales – but this new bright line test does send a clear message.  Of course sales of properties that were purchased with the intention of resale will still be taxable regardless of the two year bright line – just as they always have been.

2:20pm

The Budget also contains a funding boost of $74 million over five years for extra tax compliance and enforcement, of which $29 million is focused on property investment.

No surprises here.  A dollar spent by the Property Compliance Team returns significantly more than that dollar spent, so we have come to expect a little something extra for them in every budget.

2:21pm

The rhetoric has been strong in recent months about Auckland’s housing shortage.  The Government is also a major owner of under-utilised land in Auckland – and Budget 2015 sets aside $52 million to facilitate housing development on Crown owned land.

Also a no brainer.  The idea of government land sitting idle in Auckland seems daft at a time of significant shortage of land for residential housing.

2:22pm

We’re hearing about an additional $210 million for additional investment to bring UltraFast Broadband to 80 per cent of New Zealanders – and $150 million for improvements in rural broadband.

We need to be wired with the rest of the world.  Bring it on.

2:23pm

As previously announced, the Budget also provides $97 million in capital for regional  highways and $40 million for urban cycleways.

Urban cycleways are a no brainer.  Think Amsterdam or Copenhagen.  The savings in fuel, the increases in well-being and the reduction in healthcare costs by leaving the car at home and cycling would seem to make this an excellent long term investment.

2:24pm

Another $37 million to push along the Government’s resource management reforms.

Mr Key’s pet project, so no surprises here.

2:25pm

Mr English is explaining an additional $32 million over four years to increase the number of  labour inspectors and strengthen enforcement of employment law.

Seems like a political response to Pike River and the anecdotal mass exploitation of migrant workers.  So no surprises at all here.

2:26pm

The $1,000 KiwiSaver kick-start payment is axed as of 26 minutes ago at 2:00pm today.

Surprise, surprise

2:30pm

There will be a new Border Clearance Levy from 1 January 2016 so it will cost $16 to enter the country and $6 to leave.

So an exit tax from New Zealand?  “It’ll cost you $16 to get in – and $6 to leave”.  I don’t know why I find that funny.

2:34pm

Here is the thrust of the government’s plan to end child poverty:  From 1 April next year, sole parent beneficiaries will have to be available for part-time work when their youngest child turns three, rather than five as it is now.

I’m sure this point will form the basis of much negative commentary on the budget over the next 24 hours.

2:38pm

So on 1 April next year Working for Families will increase for working families earning $36,350 or less a year – and it will decrease for families earning more than $88,000 a year.

2:39pm

Finally, the health, education and law enforcement announcements:  DHBs will have around $320 million available next year for extra services and to help meet cost pressures and population growth – and an extra $76 million is in the pot for hospices and 60 new palliative care nurse specialists.  An extra $63 million over four years will better assist children with special education  needs including funding for teacher aide support for 1,500 additional  students with special needs.  As well, additional funding for around 240  classrooms around the country.  And $164 million over four years for the Police and $8 million over four years for the Serious Fraud Office.

 All in all, rather predicable, right?  But that’s the budget ethos these days – no surprises on Budget Day.