Retirement Life
17 April 2024

Four money-related changes you should know about

The coalition Government’s first annual Budget is due to be delivered on 30 May 2024 and will face close scrutiny as to its likely impact on our respective bank accounts and the economy as a whole. Meanwhile, a number of policy changes have been confirmed in recent weeks that could also have implications for your finances, depending on your situation.


Superannuation increases

While a yearly event rather than a one-off policy change, if you’re eligible for NZ Super you probably noticed a bump in your most recent payment. The Annual General Adjustment happens every year on 1 April, when benefits and other financial supports are revised to reflect inflation or average wage growth (depending on what they’re measured against).


NZ Super is based on net average wages, which increased by 5.28% over the relevant period. That means a couple on NZ Super now get $71.08 more a fortnight, while a single person living alone receives $46.20 more.


Taxing trusts

On 1 April, the trust tax rate increased from 33% to 39% to align with the top marginal PAYE tax rate. Many in the industry objected to the proposed new rate being applied to trusts on the basis that it would significantly overtax many New Zealanders. This was largely because trust tax is a flat rate, while PAYE tax is a progressive rate (only income over $180,000 is taxed at 39%) and very few trusts in NZ earn more than $180K. As a concession to this, the new legislation includes a $10,000 minimum income threshold.  


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The IRD has not yet released guidelines to help interpret the law, while some exemptions are still to be confirmed – for instance, whether immediately distributable estates will remain at the 33% tax rate for up to three years from date of death.


If you have a trust and are unsure how it might be impacted by the new law, it would be well worth seeking advice from a qualified expert.


Bright-line test reduced

If you own investment property, the Government has now confirmed it will reduce the bright-line test from 10 to two years from 1 July 2024. From that date, people who have owned a residential investment property for two years or more when they sell it will not have to pay tax on any gains received.


Currently, those who sell existing investment property within 10 years, and new builds within five years, are taxed at their personal marginal income tax rate. People are only exempt from the tax if the home is considered their “main home”. Under the new policy, the property would be considered an investment if it wasn’t used as the main home for more than half the time it was owned.


Interest deductibility

Another one for property investors is the part-restoration of interest deductability. In 2021, interest limitation rules were introduced which meant that residential property investors who bought after 27 March 2021 couldn’t deduct mortgage interest as an expense when paying tax on their rental income. Meanwhile, those who bought before then could deduct 50% of their interest in the current tax year.


Under the revised policy, from 1 April 2024 all investors will be able to deduct 80% per cent of their interest for the current tax year. Then from 1 April 1 2025, they’ll be able to deduct all their interest.


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Photo of Vanessa Glennie
Written by:

Vanessa Glennie

Vanessa is Head of Communications at Lifetime Retirement Income. She’s an experienced investment writer, having spent more than a decade writing about financial markets in the global fund management industry.

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