In an effort to increase the ease with which student loan borrowers can access information in regards to their loans, and subsequently improve payment, the Government has proposed a number of changes to the Student Loan system.

The proposed changes are outlined in a discussion document published by the government. The comments are to be submitted via an online forum, and unlike typical submissions are expected to be informal comments by current borrowers.

Proposed changes include the removal of the traditional end of year annual assessment and migrating to a pay-period system, whereby student loans are paid depending on the earners pay period (be it weekly, fortnightly or monthly). The earnings threshold is calculated the same way.

The online discussion forum can be found here.
The discussion document can be found on the Inland Revenue Publication website, here.

As announced on the 16th of April, the Government is looking to implement new legislation in regards to Profit Distribution Plans (PDP). Specifically it aimed to deal with the situation under PDP schemes where shares which are given to shareholders by a company are immediately sold back to the company, which not currently covered by tax legislation.

The Government is seeking feed back on the new legislative paper, but with greater eagerness towards the technical aspects of the law change.

The proposal paper can be viewed on the Inland Revenue Department’s Tax Policy website, here.

Despite warnings earlier this year by credit rating agency Standard & Poor, John Key believes that New Zealand government has changed its economic track enough to ensure that no credit downgrade will occur.

As an indicator of economic stability and certainty, the credit rating has a direct effect in the cost of financing that New Zealand will face. It is therefore in the interest of all New Zealanders that the rating not drops. John Key said, in an interview on TV One show “Breakfast” that such a downgrade would see roughly 2% in interest rates.

John Key has stated previously that the new budget would be a slimmer one then seen previously. Also he claimed that there have been savings and increases in efficiency with government spending, to aid in maintaining a good credit rating while not cutting back in entitlements to New Zealanders.

Revenue Minister Peter Dunne gave a speech to the New Zealand Institute of Chartered Accountants in Masterton. He addressed the current state of the economy as an opening for his update of the government’s current tax policy plans.

Peter Dunne restated his plans to instate a 30% tax alignment policy between company, top personal and trustee tax. Although he did say that this currently limited to a medium term plan on account of the Government’s financial position, unless an unexpected and large financial turnabout occurs.
He mentioned the Income splitting bill, which is scheduled to be introduced in 2010. This will effectively allow families with children to split their income for taxation purposes.

Mention was made of charitable giving and its importance to the revenue Minister. He alluded to their being further taxation incentive options available to him to encourage charitable giving, but did not reveal specifics.

The idea of modernising the Inland Revenue administrative system was also voiced, to increase efficiency. Similarly, the idea of increasing efficiency in the management of student loans was raised.

As of the first of April, 2009, a number of changes are taking place in the New Zealand taxation system both in regards to business and personal taxation.

To the everyday individual, most noticeable amongst these will be the introduction of the Independent Earners Tax Credit, which will deliver a net $520 ($10 per week) to those earning between $24,000 and $44,000. This decrease at 13 cents per dollar above the $44,000 bracket. Also, the 33% marginal taxation bracket begins from $48,000. The above $70,000 earnings bracket tax is decreased from 39% to 38%.

Changes also come into effect for small and medium enterprises. Provisional tax estimation uplifts are now removed. The GST payment threshold is now at $2 million. GST registration is now set at $60,000. The provisional tax “use of money” threshold is $50,000 and the use of money interest rate has been reduced also.

The full list of changes and breakdown of tax brackets can be seen at the Beehive website, here.

According to the financial statements released by the New Zealand Government under the Public Finance Act 1989, the government is operating with a much lower monetary amount than previously predicted. Chief blame behind this rest with the lowered tax revenue experienced by the government, with figures of $29,344 million as opposed to the December forecast of $30,529 million. Similarly the Crown’s core expenses were almost one billion dollars higher than expected.

ACC contributed a nearly $2.4 billion dollar extra loss to the government budget, on top of the tax lowering. Another serious contributing factor is some “unforeseen losses” with Mortgage Backed Securities that the Government held.

At the initial release of these figures on Friday 20th of February, when asked about upcoming tax cuts and their effects on the Government budget, John Key is said to made furlong and melancholy replies. The gloomier than expected numbers can easily attributed to this, although no committed word was given as to the fate of the promised tax cuts.

Businesses are now able to provide up to $300 worth of fringe benefits per quarter per employee without attracting Fringe Benefit Tax. Further, the interest rate on for low interest employee loans has been reduced from 10.9% to 8.05%. Government press releases are vague in regards to some changes, although they are positive changes to business. These include simplification of some tax systems and alteration of some expenditure thresholds.

These changes will take place alongside the next set of personal tax cuts, on April 1st 2009. Changes to the Provisional Tax system will take place on the 1st of March. The change to the low interest scheme applies retro-actively from the 1st of January.

Post change commentators are beginning to praise the new scheme. While many concede that in all reality they would not expect to see these changes make drastic changes to New Zealand’s financial position both internally and internationally, they do believe that the small business sector will be breathing a sigh of relief.

Aimed primarily at improving the situation for small and medium businesses, the Jobs and Growth Plan is currently constructed out of eleven changes to the taxation system, along with four changes with the same aim but not in regards to tax.

The two main aspects of the new changes are a lowering of the tax underpayment interest rate to 9.73% (from 14.24%) and the removal of the mandatory 5% yearly increase on Provisional Tax estimates. Other changes include the GST registration threshold which is lifted to $60,000 and the GST payment threshold which is now $2 million.

Legal expenditure of less than $10,000 can now be fully deductible. The PAYE once-a-month filing and payment threshold is raised to $500,000, which is also the threshold for Fringe Benefit Tax filling.

Current estimates have placed the total cost of these changes at $480 million over the next four years. Initial reaction to these measures have been positive, although some commentators are already begging to call it a short measure, whether this is an accurate description or mere attempts at publicity is yet to be determined. Further reactions to the tax measures are expected to arise over coming days.

Additional information on the official site of New Zealand Government.

The Australian government estimates that the currently hold $13 billion AUD in unclaimed superannuation funds, estimates put up to 30% of this as possibly belonging to New Zealanders who no longer reside in Australia. By current regulation there is no way to access these trans-Tasman funds until their owner is 60 years old.

The scheme allows for reciprocal action of Australian residents wishing to transfer their New Zealand superannuation funds to Australia. Under the scheme proposed by Trade Minister Phil Goff, the portability of superannuation will begin in 2009.