Articles by John Rowe
With the Labour Party winning the 2020 election, they now are expected to implement their proposed higher individual tax bracket of 39% for income over $180k. This is anticipated to come into effect in 2021/2022 income year.
This imminent change makes it an opportune time to ensure your affairs are structured in the best possible way for both asset protection and tax – because if you don’t address this now, you may end up paying a lot more tax than is necessary.
It makes good sense to legally maximise the deductions you are entitled to and to periodically review your structures to ensure they are appropriate for your current circumstances and the prevailing tax environment. If you set up your structures several years ago, they will almost certainly need to be updated – structures need to change as the times and legislation change. The impending new tax bracket is the perfect trigger to do this.
For example, if you hold investments/shares in your personal name, or have entities with historical profits that haven’t yet been distributed via dividends, it is likely you will be in a less than optimal position from a tax perspective once Labour’s new tax increase comes in. Currently, the difference between the company tax rate and the top individual tax rate is just 5%. With the change, it is expected to move to 11%, which for many people will be a significant increase. Therefore, it is prudent to look at alternatives. Additionally, holding wealth in your personal name or a trading entity puts it at risk, so is generally not ideal from an asset protection perspective.
However – and this is very important – any changes you make must be dealt with extremely carefully in order to stay clear of anything that could be construed as tax avoidance. You should seek specialist advice around this. It is also worth noting that although Labour have said the tax increase will only apply to individuals, it would not surprise us to see it extended to trusts at some point. At the same time, we believe it is highly unlikely that Labour would ever change the company tax rate. These are factors to consider when discussing your options with your tax adviser.
If you have any questions or would like a review of your structure, contact your GRA Client Services Manager. Or, or if you are not a GRA client, book a meeting with one of our senior consultants to see how we can help. (The first meeting is free if you are new to our practice.) Ph +64 9 522 7955 or [email protected].
Hi Mathew. Thanks for meeting with us. I took your advice and have started on Property 101 and more than half way through. I now realise why you advised us to stay where we are and look for properties with land in Hamilton or Waiuku. Information, calculations and case studies in this book are priceless. I'm so glad you decided to write this book and managed to find time to do it. Thanks very much for this and for advising us to check with you should we need to. Thanks - Helen - July 2015
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