Carmen Horn
August 29, 2024
As of July 2024, the New Zealand government's new tax rules are:
Let’s dive in!
The new personal tax thresholds, from 31st July 2024 are:
As the bracket values increase, it provides more room for individuals to be taxed at a lower rate.
For example, let’s say you earn an annual income of $15,000. Prior to the changes, the first $14,000 would have been taxed at 10.5% and the remaining balance of $1,000 would have been taxed at 17.5% [(14,000 x 10.5%) + (1,000 x 17.5%) = $1,645). After the changes came into effect, the full annual earnings of $15,000 would be taxed at 10.5% (15,000 x 10.5% = $1,575). There is a saving of $70.
Essentially, these tax bracket changes mean less tax paid for individuals in New Zealand.
In the past, when your annual taxable earnings were between $24,000 - $48,000 you qualified for the independent earner tax credit.
In July 2024, the $48,000 limit was increased to $70,000. This means that if you now earn between $24,000 and $70,000, you are eligible for the independent earner tax credit. Isn’t that great news! This is obviously subject to meeting the requirements around the credit. If we help you with your tax, reach out to us if you want to talk more about this.
The bright-line period is the duration within which the sale of residential property is subject to tax if sold.
The bright-line period officially reduces to two years for all residential property from 1 July 2024. This means if you buy a property on or after 1 July 2024, the bright-line rule will only apply if you have owned the property for less than two years (meaning you only need to pay tax on the sale of the property if you have owned it for less than two years).
For residential property sold from 1 July 2024, the new bright-line property tax rules apply. This means that the property does not have to be purchased on or after 1 July 2024 for the test to apply. The 2-year test may apply to property purchased on or after 1 July 2022.
For residential property sold before 1 July 2024, the previous bright-line property tax rules apply (see below):
For properties acquired on or after 27 March 2021, the bright-line period is 10 years for all properties except qualifying new builds, which have a 5-year period.
For properties acquired between 29 March 2018 and 26 March 2021, the bright-line period is 5 years.
For properties acquired between 1 October 2015 and 28 March 2018, the bright-line period is 2 years.
Please note that both the new and the old bright-line rules excludes your main home and applies to investment properties.
If you have investment property (i.e. a long-term rental or Airbnb), it’s useful to understand these 4 tax policies that have changed with the new government: Interest Deductibility, The Bright Line Rule (highlighted above), App Tax (for Airbnb and Uber) and Building Depreciation.
Our blog on ‘Tax Changes Property Owners Need To Know in 2024’ will help you with the info you need if you have an investment property.
We hope this blog helps you understand the 2024 changes to New Zealand tax. If you’re a small business owner in New Zealand and want to learn more about how we can help you with our range of tax services, bookkeeping services and accounting services, get in touch here.
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