Navigating New Laws: Key Changes under the Coalition Government
The recent formation of the National, Act, and New Zealand First Coalition Government in New Zealand has brought forth a series of pivotal changes. These updates, could significantly impact financial decisions and strategies. Here's a breakdown of the major changes:
Accelerated Mortgage Interest Deductibility
Fast-Tracked Timelines for Property Investors
The coalition government has agreed to accelerate the restoration of full mortgage interest deductibility for residential rental properties. Originally planned as a phased approach, the updated schedule is now more aggressive:
60% Deductibility starting from 1st April 2024
80% Deductibility from 1st April 2025
Full 100% Deductibility by 1st April 2026
This expedited plan, a result of collaboration between National and Act, provides faster financial relief for property investors, some of whom were being forced out of the rental property market by Labour's policies..
The Status of the 39% Trustee Tax Rate
Awaiting Clarification on Increased Tax Rates
The coalition's agreement is currently silent on whether the outgoing Labour Government’s proposal to increase the trustee tax rate to 39% will be implemented. This increase is part of a lapsed tax bill, which needs reintroduction for formalizing annual income tax rates. The lack of immediate commentary suggests that the increase to a 39% Trustee tax rate might remain, but concrete details are expected in the upcoming Half-Year Economic Fiscal Update. The 39% tax does not apply to income distributed to trust beneficiaries..
Bright Line Tax on Residential Properties
Reducing the Bright Line Test Duration
The government plans to reduce the bright line test on capital gains tax for rental properties. This test will be shortened from the current duration of ten years to just two years, aligning with National's earlier proposal.
Repealing the Fair Pay Agreement Act
Changes in Employment Agreements by Year-End
The Fair Pay Agreement Act of 2022 is set to be repealed “by Christmas,” as part of the National-Act deal. This repeal aligns with National’s 100-day plan and marks a significant shift in employment law.
Reintroduction of 90-Day Trial Periods
Wider Application for Businesses
Another significant change is the reintroduction of 90-day trial periods for all businesses, not just limited to those with fewer than 20 employees. This forms part of both the National 100-day plan and the National-Act deal.
Adjustments in Landlord and Tenant Rights
Shifting the Balance in Notice Periods
The Act-National agreement will see a restoration of landlords' rights to issue a 90-day notice without cause, while tenants’ notice period reverts to 21 days and landlords’ to 42 days in certain situations. This is a shift from National’s initial plan, influenced by Act's stance for a quicker implementation.
Stay tuned for our next blog. If you have more questions or want to talk about it more, just let us know. We're here to help and make sure that your estate plan will achieve your goals for you and your family.
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