New government will have impact on financial services

Labour’s new coalition partners look set to have a significant impact on the financial services industry – both in superannuation and tax.

Tuesday, October 18th 2005, 2:29AM

The impact on superannuation is less than it might have been. New Zealand First’s policy was for a rise in the payment, from its present level of 65% of the average wage to 72.5%, and late last week the party thought it could get 68%.

For now, at least, the party has an increase of 66% from April. which will cost $80 million a year, says Finance Minister Michael Cullen.

There is no intention to raise the level further, his office told Good Returns last night.

On tax, the picture is less clear. The new Revenue Minister is United Future leader Peter Dunne, and he will take over responsibility for the government’s review of how collective funds and offshore portfolio share investments are taxed.

The agreement between Labour and United Future does not refer to this but promises a large review of New Zealand’s business tax regime, with a view to making it more competitive with that of Australia.

That wider review could touch on the work being done in the investment area.

Perhaps more significantly, it could take away resources from the policy division of the Inland Revenue Department and the Treasury’s tax policy specialists.

Dunne’s office told Good Returns he would not be commenting on the issue until he has been briefed.

However Dunne is not a stranger to the issues around how investments and savings are taxed.

He was Revenue minister in 1996 in a deal between the then United Party and the Jim Bolger-led national administration. It was during his time as revenue minister that the ill-fated TOLIS (taxation of Life and Superannuation Fund Savings) proposals were put forward.

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