Taxation (Tax Rate Increase) Bill - Info Sheet
Details of the changes are given in the attached technical
information
sheet.
Taxation (Tax Rate Increase) Bill - Information Sheet
Increase in the top personal tax rate
The proposed statutory
income tax rates for individuals
(including
unincorporated bodies) will be:
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| |
|
| Income not exceeding $38,000 |
19.5 cents |
|
| |
|-----------------------------------------+------------------|
| |
|
| Income exceeding $38,000 but not | 33
cents |
| exceeding $60,000
| |
|
| |
|-----------------------------------------+------------------|
| |
|
| Income exceeding $60,000 | 39
cents |
|
| |
|-----------------------------------------+------------------|
The effective marginal tax rates (taking into account the
Low Income
Rebate) will be:
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| |
|
| Income not exceeding $9,500 | 15
cents |
|
| |
|-----------------------------------------+------------------|
| |
|
| Income exceeding $9,500 but not | 21
cents |
| exceeding $38,000
| |
|
| |
|-----------------------------------------+------------------|
| |
|
| Income exceeding $38,000 but not | 33
cents |
| exceeding $60,000
| |
|
| |
|-----------------------------------------+------------------|
| |
|
| Income exceeding $60,000 | 39
cents |
|
| |
|-----------------------------------------+------------------|
The new tax rates will apply for the 2000-01 and subsequent income years.
Extra emolument rate
The extra
emolument rate for lump sum payments such as bonuses,
back
pay, redundancy and retirement payments will
be increased to 39%.
This higher rate will apply if
the sum of the extra emolument and the
annualised
value of salary or wages paid to the employee by that
employer in the previous four weeks is more than $60,000.
Employees may elect to have this higher rate of 39% apply
to extra
emolument payments. This higher rate
will ensure that taxpayers
do not have an
end-of-year tax liability because their extra emolument
was under-deducted at source. This under-deduction could
arise if a
taxpayer?s annual income is over $60,000
and he or she receives an
extra emolument and has
other income not taxed at source.
Extra emolument rates
|---------------------------------------+---------------------------|
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|
| |
Income does not exceed $38,000 | 21 cents
| |
|
|
|---------------------------------------+---------------------------|
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|
| |
Income exceeds $38,000 but does | 33 cents
(mandatory and | |
exceed $60,000
| elective) | |
| |
|---------------------------------------+---------------------------|
|
|
| |
Income exceeds $60,000 | 39 cents
(mandatory and | |
| elective) | |
| |
|---------------------------------------+---------------------------|
The increased extra emolument rate will apply to extra
emolument
payments on or after 1 April 2000.
Secondary employment earnings
Employees who earn
secondary employment income will be able to elect a
39% PAYE withholding rate. This rate should be used by
taxpayers
whose annual income is more than $60,000
and who also earn secondary
employment income. This
will ensure that these taxpayers do not
have
an end-of-year tax liability because their secondary
employment
earnings were under-deducted at source.
The secondary employment earnings tax deduction codes will be as follows:
|-----------------+----------------+---------------------------|
|
| |
| | Tax
deduction | Withholding | Who should
use this code | | code
| tax rate
| | |
|
| |
|-----------------+----------------+---------------------------|
|
| |
| | ?S?
| 21 cents | Taxpayers
with secondary | |
|
| employment earnings whose | |
|
| annual income does not | | |
| exceed $38,000 | | |
| |
|-----------------+----------------+---------------------------|
|
| |
| | ?SH?
| 33 cents | Taxpayers
with secondary | |
|
| employment earnings whose | |
|
| annual income exceeds | | |
| $38,000 but does not | | |
| exceed $60,000 | | |
| |
|-----------------+----------------+---------------------------|
|
| |
| | ?ST ?
| 39 cents | Taxpayers
with secondary | |
|
| employment earnings whose | |
|
| annual income exceeds | | |
| $60,000 | | |
| |
|-----------------+----------------+---------------------------|
The increased rate and the new tax deduction codes will
apply to tax
deducted from secondary employment
earnings for pay periods beginning
on or after 1 April
2000.
Resident withholding tax on interest
Taxpayers who earn interest will be able to elect a 39%
resident
withholding rate. It is expected that
this rate will be used by
taxpayers with income over
$60,000 so they can have the correct tax
deducted at
source to prevent end-of-year tax liabilities.
The
non-declaration rate will reduce from 45% to 39% from 1
April 2000.
The non-declaration rate applies to
those who do not give the
interest payer (such as a
bank) their IRD number.
The rate will be 19.5% for
taxpayers who provide the interest payer their
IRD
number but do not elect a resident withholding tax rate.
|------------------+-----------------------------------------|
| |
|
| Resident | Who should elect to use
this rate |
| withholding tax |
|
| rate on interest |
|
| |
|
|------------------+-----------------------------------------|
| |
|
| 19.5% | Taxpayers whose annual
income does not |
| | exceed
$38,000 |
|
| |
|------------------+-----------------------------------------|
| |
|
| 33% | Taxpayers whose annual
income exceeds |
| | $38,000
but does not exceed $60,000 |
|
| |
|------------------+-----------------------------------------|
| |
|
| 39% | Taxpayers whose annual
income exceeds |
| | $60,000
|
| |
|
|------------------+-----------------------------------------|
| |
|
| 39% | Taxpayers who do not
provide their IRD |
| | number
|
| |
|
|------------------+-----------------------------------------|
The higher resident withholding tax rate and reduced
non-declaration
rate apply to interest paid on or
after 1 April 2000.
The rules allowing taxpayers to
elect a higher resident withholding rate
will be
amended to cater for the election of the 39% rate. This
change
will apply from date of enactment so that
interest payers (such as
banks) can put in place
systems allowing taxpayers to make elections
before 1
April 2000.
The rules setting out the information to be
shown on resident withholding
tax deduction
certificates will be amended to reflect the
introduction of the elective 39% resident withholding tax
rate.
Provisional tax
Rules for calculating
provisional tax during the 2000-01 and 2001-02
income
years are being introduced to ensure that provisional
tax
payments for these years reflect the increased
tax rate. These rules
will apply to individuals and
other persons to whom the individual
tax rates
apply, such as unincorporated bodies, who use the
?uplift factor? to calculate their provisional tax
for the 2000-01
and 2001-02 income years. These new
rules will apply to such taxpayers
whose annual income
for 1999-2000 (or 1998-99 if a 1999-2000 tax return
was not filed) is over $60,000.
These rules will
require taxpayers to calculate their residual income tax
for the their 1990-2000 tax return (or if their 1999-2000
tax return has
not been filed, their 1998-99 tax
return) as if the new tax
rates applied in
calculating their residual income tax. In calculating
residual income tax, a credit is allowed for the tax
withheld at
source or paid on that income. These tax
credits should be adjusted to
take into account the
higher tax rate if the income for which the credit
is
allowed would have been subject to the higher tax rate.
The ?uplift
factor? is then applied to the residual
income tax calculated taking into
account the new tax
rates.
The following example shows the calculation
that will be
required to calculate the 2000-01
provisional tax using the ?uplift
factor?. A taxpayer
has filed her 1999-00 tax return, which shows an
annual salary of $80,000 (PAYE $21,270) plus business
profits of $20,000.
|-----------------------------------------+------------------|
| |
|
| Taxable income |
$100,000 |
|
| |
|-----------------------------------------+------------------|
| |
|
| Income tax liability using 2000-01 tax |
$30,270 |
| rates ($27,870 as per tax
return plus | |
| $2,400
($40,000 * 0.06) | |
| |
|
|-----------------------------------------+------------------|
| |
|
| Less tax credits for PAYE ($21,270 as |
$22,470 |
| per tax deduction
certificate plus | |
|
$1,200 ($20,000 * 0.06) |
|
| |
|
|-----------------------------------------+------------------|
| |
|
| Residual income tax based on 2000/01 |
$7,800 |
| tax rates
| |
|
| |
|-----------------------------------------+------------------|
| |
|
| 2000/01 provisional tax is 105% of |
$8190 |
| $7,800
| |
|
| |
|-----------------------------------------+------------------|
These rules will apply for the 2001-02 income year for
taxpayers who
have calculated their provisional tax
on the basis of their 1999-00
residual income tax
because they have not filed their 2000-01 tax return.
For those taxpayers that use the estimation option to
calculate their
2000-01 provisional tax, it is
recommended that they use the new rates in
calculating
their provisional tax, to minimise their exposure to
use
of money interest that may be payable on any
under-payment of provisional
tax.
These
provisional tax changes may have implications for trustees
of
trusts in respect of the calculation of
2000-01 and 2001-02
provisional tax for
beneficiaries whose income from the trust is
more
than $60,000 and Maori authorities with less than 20
beneficiaries.
These changes apply to the payment
of provisional tax for the 2000-01
and 2001-02 income
years.
Fringe benefit tax
Fringe benefit tax
rate will increase from 49% to 64% for fringe
benefits provided or granted on or after 1 April 2000.
Because fringe
benefit tax is calculated on the
after-tax value of the benefit, it is
grossed up to
give a rate of 64% (64% = [0.39/[1 ? 0.39]]).
For
those employers who provide fringe benefits to
shareholder-employees on an income year basis, the
increased rate will
apply from 1 April 2000 on the
annual value of the fringe benefits
provided or
granted in the 1999-00 or 2000-01 income year, prorated
for the period after 1 April 2000. For example,
a company has
elected to pay fringe benefits
provided to its shareholder-employees
on an income
year basis (1 July 1999 to 30 June 2000). The annual
value
of fringe benefits provided is $10,000. The
value of the benefits
prorated on a daily basis is as
follows:
Value of benefits provided or granted to 31
March 2000 (subject to tax at
49%) is $7513.66. Value
of benefits provided or granted on or after 1
April
2000 (subject to tax at 64%) is $2486.34.
Tax
return filing
The rules setting out which individuals
have to file tax returns or
receive income statements
will be amended to reflect the increase in the
threshold at which the top personal tax rate applies
(from $38,000
to $60,000). New provisions will
require taxpayers to file a tax
return or receive an
income statement if their total annual income is
more
than $60,000 and they received interest, dividends,
extra
emoluments and/or secondary employment income of
more than $200 that was
taxed at a withholding rate of
less than
39%.
ENDS