It’s fair to say 2021 has not exactly delivered the “return to normal” we were hoping for. Businesses in New Zealand - regardless of industry or size - are collectively facing an unknown road ahead. For some, there are many opportunities, for others, there are many challenges.
One of Labour’s key election promises, the new top tax rate began to see the light of day towards the end of last year. In case you were preoccupied with summer holidays and planning Christmas parties, here's a recap of the details you need to know:
From the start of the 2022 financial year, a new tax rate of 39% will apply to personal income above $180,000 pa. Currently there are four individual tax rates in New Zealand using a progressive system; this will become the fifth. Current tax rates in New Zealand are:
Another follow on from Labour’s election promises is an increase to the minimum wage. From April 1, 2021, we will see the adult minimum wage rise to $20 per hour. This is an increase of $1.10 per hour from the current rate of $18.90 per hour. The last time New Zealand saw a wage increase was in 2017.
The training and starting-out minimum wages will both increase to $16 per hour, remaining at 80% of the adult minimum wage. The current rate for this group is $15.12 per hour.
Workplace Relations and Safety Minister Michael Wood has stated the wage increase will boost the economy by $216 million adding $44 a week into the pockets of nearly 175,000 Kiwis.
While the wage increase aims to strengthen the economy, it is coming at a tough time for business owners. The wage increase has been on the cards for many years; business owners at least have some certainty in this area now that the new rate is locked in.
From March 1, 2021, employees will have the ability to apply for and manage their paid parental leave (PPL) in myIR. Through IRD’s myIR site, individuals can easily update contact details, account details and change of circumstances.
As well as this, recent regulation changes now allow more information to appear automatically in myIR. The IRD will pre-populate some of the information required for maternity leave applications, including employer details and income estimates. For employers, this means they no longer need to verify income details for employees. The changes also apply to self-employed workers.
Find out more about paid parental leave changes here.
The IRD has released mileage rates for 2019/2020. This information will be of use to anyone who runs a vehicle for work purposes.
If you have a vehicle used only for business purposes, you can claim all running costs as a business expense. If the vehicle is used for both business and personal trips, you will need to work out how to allocate costs correctly. The recently announced 2019/2020 mileage rates will affect how you do this.
The new Tier One rate - relating to your vehicle's fixed and running cost - has increased. The IRD says the increase reflects rises in owning a vehicle, including insurance and registration charges.
The new Tier Two rate - relating to running costs only - has lowered. The decrease reflects the lower overall cost of operating a vehicle mainly due to lower fuel prices.
Any employer needing to estimate reimbursements for employees who use their vehicle for business purposes will also need to be aware of the new mileage rates.
| Vehicle Type | Tier One Rate | Tier Two Rate |
| Petrol or Diesel | 82 cents | 28 cents |
| Petrol hybrid | 82 cents | 17 cents |
| Electric | 82 cents | 9 cents |
If you've already filed your 2020 income tax return using the previous rates, get in touch and we can help with any amendments you may need to make. Find out more information on the 2019/2020 mileage here.
