Budget, budget, read all about it!

May 24 2018

The budget announcement is an annual event that generally affects every New Zealander in one way or another. This year, it was a ‘business as usual,’ no surprises budget with the government taking a cautious approach going forward. Here’s a rundown on the 2018 Budget announcements...

The first budget from Minister of Finance, the Hon Grant Robertson, presented on 17 May takes a safe approach with cautious spending in key sectors, focussing spending on housing, health and education.

Radical announcements were always unlikely as the government is operating from a healthy economy, having inherited a strong fiscal position from the previous government.

There is a positive and optimistic view of the economy, with Treasury forecasting 3% growth on average per year to June 2022. Our economy is also projected to grow at a faster rate than our major trading partners.


And the winner is... Kiwi health!

In the election, the government indicated they would give priority to the health and well-being of New Zealanders, and focus on lifting a large percentage of Kiwis out of poverty. Here’s what the budget includes:

  • District health boards will receive significantly more funding to help rebuild ageing health and hospital infrastructure. Core services such as air ambulances, bowel cancer screening, disability support and maternity services will receive particular emphasis.
  • From December this year, free GP visits will be extended for children and teens under 13 to under 14. GP costs will also be reduced for Community Service Card holders.
  • The eligibility criteria for getting a Community Services Card will extend to include all people living in state housing or receiving an income-related rent subsidy or accommodation supplement.
Education is also a winner
  • The Budget provides new funding of $395 million over the next three years for building new schools and hundreds of additional classrooms. As expected with the earthquake rebuilding, Christchurch will get a big slice of the pie with $62 million allocated for rebuilding schools.
  • There is a funding boost for the Ongoing Resourcing Scheme (ORS) and other learning support initiatives for students with very high or complex learning needs.
  • New Zealand’s population growth sees more funding for early childhood education to meet increasing demand.
The housing situation

There’s more good news with the government indicating a significant investment in public housing.

  • Over the next four years, more than 6,000 new state houses will be built.
  • There will be funding provided to implement the Healthy Homes Guarantee Act 2017. This act regulates healthy home standards such as heating, ventilation, draught stopping, drainage and moisture.
  • The four year Warmer Kiwi Homes programme has been established to help make warmer, drier homes for lower income New Zealanders. The first stage will focus on ceiling and underfloor insulation, giving lower income homeowners access to grants covering up to two thirds of the installation costs. Stage two will focus on installing heating appliances.
What’s in it for business and tax?

The big boost for the business sector is the $1 billion R&D tax credit available through tax rebates over the next four years. The rebate will be paid out at 12.5 cents to the dollar and will be available from 1 April 2019.

There won’t be any tax initiatives to speak of at present. The Tax Working Group chaired by Sir Michael Cullen is reviewing the current tax regime and is expected to present its findings to the government by the end of this year. If there are going to be any new major tax policies, expect to see them in government’s 2020 election manifesto.

There are no surprises with ‘Amazon tax.’ The government has already signalled that goods purchased under the value of $400 will now attract GST.

The extension of the bright-line test will ring fence investors’ tax losses on rental properties and generate significant tax revenue for the government. See our due diligence article for more on this subject.

You can read the Minister’s presentation of the Budget to the House at the Treasury website.

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