Following our recent article about the tax changes of the new government, we’ve outlined some further policy changes that will effect small businesses and property owners:
1. Minimum wage increases to $16.50 from 1 April 2018
This is an increase of $0.75 per hour from the current $15.75 per hour, and Labour plans to increase this further to $20 an hour by 2021.
Small businesses will likely be hurt as the minimum wage gradually increases. There is also the potential for consumer prices to increase (accelerated inflation). Robotic learning (such as self-checkouts at the supermarket) will only become more common.
There might also be increased temptation for tax avoidance, such as to pay wages under the table. Labour has also announced higher penalties for tax avoidance and a further crack down on this. It has previously been reported that for every $1 spent on an IRD investigation, $5 is recovered.
2. A ban on foreigners buying existing NZ houses - they will only be allowed to buy brand new houses.
This is already policy in Australia, and some of their economists have the view that it has not lead to the desired results.
Labour’s intention is that land cannot be sold to anyone who isn’t a citizen or a resident without ministerial approval which will be automatically refused.
It is reported that currently 3% of land sales are sold to foreigner buyers. Labour will also instruct the Overseas Investment Office (OIO) that the sale of farms over 5ha to foreigners will be more strongly restricted.
3. Removal of Loan to Value Ratios (LVR)
At present, banks require a 20% deposit for owner-occupied property, and a 40% deposit for secondary properties. These are known as the LVR rules.
The LVR rules were implemented by the Reserve Bank of NZ (RBNZ). They are not controlled by central government, and pre-election both Labour and National said they would like these rules to be removed as they have played out their intended effect on the market.
BNZ Chief Economist, Tony Alexander has stated the chances of the LVR rules being removed in the next 12 months has increased. Watch this space.
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.