As expected, Dr Cullen's eighth Budget delivers a welcome reduction in the
corporate tax rate and a tax credit for employees'
contributions to KiwiSaver from 1 July 2007 paid
directly into their KiwiSaver accounts.
Friday, May 18th 2007, 11:29AM
In a surprise move Dr Cullen has also announced compulsory employer
contributions to KiwiSaver that will be phased in over four years from 1
April 2008 (to help manage the cost to employers) and a tax credit to
reimburse employers for the cost of matching employee contributions, which
is capped at $20 a week.
With the two tax credits, the Government's kickstart of $1,000 and the
SSCWT exemption previously announced KiwiSaver is a significantly tax
enhanced saving opportunity for employees.
The reduction in the corporate tax rate will apply from the 2008-2009
income year (for most companies from 1 April 2008) and will also apply to
unit trusts and certain widely held savings vehicles. In welcome news the
current 33% imputation ratio will be available until March 2010.
The Budget also confirms that the Government will introduce:
a refundable tax credit for research and development expenditure which
at 15% is at the top end of the range foreshadowed;
tax incentives to boost charitable giving: removal of the current $1890
rebate threshold on donations made by individuals and of the 5% deduction
limit on donations made by companies; and
a welcome exemption from income tax for the active income of controlled
foreign companies, as foreshadowed in last year's Discussion Document,
however one with a sting in the tail being the repeal of the conduit regime
and the introduction of outbound thin capitalisation rules.
Further
consultation is to be undertaken with legislation likely to be introduced
in early 2008.
There will be increased funding for the IRD to strengthen its auditing of
property transactions.
