tmmonline.nz  |   landlords.co.nz        About Good Returns  |  Advertise  |  Contact Us  |  Terms & Conditions  |  RSS Feeds

NZ's Financial Adviser News Centre

GR Logo
Last Article Uploaded: Friday, August 14th, 7:08PM

News

rss
Latest Headlines

Government cuts tax on savings vehicles to 28%

[UPDATED] Finance Minister Bill English has heeded the calls by the Reserve Bank to help boost incentives for savings by cutting tax on investment vehicles, including PIEs, to 28%. [includes ISI comments]

Thursday, May 20th 2010, 2:47PM 2 Comments

As part of a wide array of changes to the tax system, the government's 2010 Budget cuts the rate on savings vehicles to the new corporate rate of 28% to help stoke consumer savings, along with raising GST to discourage spending.  

The lower rate for portfolio investment entities (PIEs), superannuation funds, unit trusts, group investment funds and life insurance is forecast to cost $170 million over the next four years. 

"Applying lower and more uniform tax rate to most forms of capital income will improve the durability and integrity of the tax system," English told Parliament.

"It will encourage individuals to save and companies to invest."  

Reserve Bank of New Zealand governor Alan Bollard has been a long-time advocate for rebalancing of the economy to higher savings and away from consumption, which shows signs of occurring as households pay down debt in the wake of the worst recession in 18 years.  

New banking regulations that require lenders to source more money domestically than in the past has helped stoke savings as financial institutions have been forced to woo investors from their rivals with higher deposit rates.

To read more about the Budget, go to www.netprophet.co.nz

 

The Investment Savings and Insurance Association (ISI) has welcomed the tax changes announced in the Budget, saying it is a step in the right direction in creating a platform for greater savings by New Zealanders.

ISI chief executive Vance Arkinstall says the announced tax changes provide a balance in giving New Zealanders more disposable income while encouraging saving and discouraging increased discretionary spending.

"By lowering personal tax rates and raising GST the Government is signalling to New Zealanders that they should take this opportunity to save more rather than spend more, " says ISI chief executive Vance Arkinstall.

While the changes to income tax and GST had already been signalled, Mr Arkinstall believes the lower tax rates for managed funds, KiwiSaver, superannuation funds and PIE funds are a bonus that will provide further incentive for savers.  "I think it demonstrates Government is serious about increasing New Zealanders level of saving," he says.

"This country faces a number of economic challenges, particularly with an aging population that will see only 2 New Zealanders working for every person on Government superannuation by 2033."  The current ratio is around 4:1.

Arkinstall says one of the main reasons Australia has emerged from the Global Financial Crisis much faster than New Zealand is that Australian's have more than $1.3 trillion invested in savings (with almost two thirds of this invested in superannuation) versus the $23.3 billion New Zealanders have invested across retail funds and the NZ Superannuation Fund.

"That means, on a per capita basis, Australia has $59,750 saved for every Australian while we've only managed to save a mere $5,330 for every Kiwi."

"It's one of the main reasons why Australia can support and stimulate its own economy," says Arkinstall.  "When capital was tight around the world, Australian businesses received financial support from their local savings industry.  Businesses had access to funds, jobs were saved, and the machine kept running."

"Quite simply, we need to save more as a country.  Not only will it ensure Kiwis have a more comfortable retirement, it will also provide the sort of economic stimulus that will lift New Zealand's international competitiveness and provide greater opportunities for growth and prosperity."

 

« Sovereign reducing adviser commissionsKiwiSaver mismatch a 'huge challenge' for advisers »

Special Offers

Comments from our readers

On 20 May 2010 at 5:53 pm Neil Smith said:
Awesome news for KiwiSaver, for once! I wonder how much mileage it will get in the media. Its good news afterall!

It ought to be reverberating around Facebook by now. (If only the younger generation could pick it out and understand its significance).
On 21 May 2010 at 9:30 am Malcolm Tarbotton said:
This budget is I hope the first step to all GST and remove PAYE tax all together which would even remove further tax loop holes as GST is clear as to its rules.
Commenting is closed

 

print

Printable version  

print

Email to a friend
News Bites
Latest Comments
  • a2: could the milk be starting to turn?
    “Great Fundemental look.I guess in the ASX50 . as long as Aussies still love buying the Dip..its no worries Graeme Adams...”
    24 hours ago by Graeme33
  • It starts with governance
    “Hi David and thanks for your words also. I did read the FMA stuff before the post and also in my first response mention...”
    1 day ago by gavin austin adviser business compliance
  • AMP reports profit drop amid 'solid' result
    “Sadly, AMP is becoming less and less relevant. Apart from this tiny blip of positive cash inflow, they've been bleeding clients...”
    1 day ago by Contrarian
  • It starts with governance
    “Good words Gavin - might also mention the FMA publication - https://www.fma.govt.nz/compliance/guidance-library/corporate-governance-in-new-zealand-principles-and-guidelines/...”
    1 day ago by dcwhyte
  • It starts with governance
    “adviser1 - go talk to Partners Life. they have a great tool to help with this sort of stuff. ...”
    1 day ago by Tash
Subscribe Now

Weekly Wrap

Previous News

MORE NEWS»

Most Commented On
Mortgage Rates Table

Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
AIA 4.55 2.55 2.69 2.79
ANZ 4.44 3.15 3.25 3.39
ANZ Special - 2.55 2.69 2.79
ASB Bank 4.45 2.55 2.69 2.79
Bluestone 3.49 3.49 3.49 3.49
BNZ - Classic - 2.55 2.69 2.79
BNZ - Mortgage One 5.15 - - -
BNZ - Rapid Repay 4.60 - - -
BNZ - Std, FlyBuys 4.55 3.15 3.29 3.39
BNZ - TotalMoney 4.55 - - -
CFML Loans 5.50 - - -
Lender Flt 1yr 2yr 3yr
China Construction Bank 4.49 4.70 4.80 4.95
China Construction Bank Special - 2.65 2.65 2.80
Credit Union Auckland 5.45 - - -
Credit Union Baywide 5.65 3.95 3.85 -
Credit Union South 5.65 3.95 3.85 -
First Credit Union Special 5.85 3.35 3.85 -
Heartland 3.95 2.89 2.97 3.39
Heartland Bank - Online - - - -
Heretaunga Building Society 4.99 3.85 3.95 -
HSBC Premier 4.49 2.45 2.60 2.65
HSBC Premier LVR > 80% - - - -
Lender Flt 1yr 2yr 3yr
HSBC Special - - - -
ICBC 3.69 2.55 2.65 2.79
Kainga Ora 4.43 ▼2.93 ▼3.07 ▼3.24
Kiwibank 3.40 3.30 3.54 3.54
Kiwibank - Offset 3.40 - - -
Kiwibank Special 3.40 2.55 2.79 2.79
Liberty 5.69 - - -
Nelson Building Society 4.95 3.45 3.49 -
Pepper Essential 4.79 - - -
Resimac 3.39 ▼3.35 2.99 3.35
SBS Bank 4.54 3.05 3.19 3.25
Lender Flt 1yr 2yr 3yr
SBS Bank Special - 2.55 2.69 2.75
The Co-operative Bank - Owner Occ 4.40 2.55 2.69 2.79
The Co-operative Bank - Standard 4.40 3.05 3.19 3.29
TSB Bank 5.34 3.35 3.49 3.79
TSB Special 4.54 2.55 2.69 2.99
Wairarapa Building Society 4.99 ▼3.55 ▼3.49 -
Westpac 4.59 4.15 4.09 4.49
Westpac - Offset 4.59 - - -
Westpac Special - 2.55 2.69 2.79
Median 4.55 3.05 3.13 3.12

Last updated: 14 August 2020 1:06pm

About Us  |  Advertise  |  Contact Us  |  Terms & Conditions  |  Privacy Policy  |  RSS Feeds  |  Letters  |  Archive  |  Toolbox
 
Site by Web Developer and eyelovedesign.com