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Six Changes Businesses Should Note This Financial Year
April 1st officially marks the beginning of the financial year, and with it comes new and noteworthy government regulations. From minimum wages to interest deductibility, it's important that businesses are aware of these changes and how they affect their day-to-day operations.
So, what can Kiwi businesses expect this financial year? We’ve identified six main considerations.
Increase in minimum wage
The minimum wage for adults has increased from $22.70 an hour to $23.15. Meanwhile, the training and starting-out minimum wages increased from $18.16 to $18.52 per hour – remaining at 80% of the adult minimum wage.
According to Workplace Relations and Safety Minister Brooke van Velden, these changes would impact around 80,000 to 145,000 Kiwi workers. Van Velden claims that the increase is aimed at “protecting the incomes of our lowest paid workers and maintaining labour market settings that encourage employment.”
This conservative increase recognises the pressures small businesses face in keeping up with costs. Initially, Van Velden proposed increasing the minimum wage by 1.3%, while the Ministry of Business, Innovation, and Employment had recommended a 4% increase.
The return of mortgage interest deductibility
After a hiatus, Mortgage Interest Deductibility is now reintroduced, allowing property investors to continue deducting the interest costs of their property mortgages against their rental incomes.
Residential property owners can now claim 80% of their interest costs for this year and 100% of the costs from April 2025. The act is part of a $2.9 billion tax break for landlords that is said to be forwarded to renters.
Prime Minister Christopher Luxon believes the policy would be a “relief to landlords … so they can put downward pressure on rents.” However, academics and economists have claimed that this move will unlikely have any effect on rent.
Introduction of ‘app tax’
Although National promised to remove the ‘app tax’ during its election campaign, it has now rescinded this after forming the coalition government. The app tax will see online marketplaces such as short-stay accommodations, food-delivery services, and ride-sharing services collect and return GST on all listed services.
Previously, Airbnb hosts and Uber drivers who made less than $60,000 in annual revenue did not have to pay the app tax, but this has changed since April 1. Finance Minister Nicola Willis defended this decision, saying that adjustment must be made as National is now part of a coalition government with other parties.
EVs and hybrid exemptions lifted
Kiwis driving light electric vehicles will now have to pay $76 per 100km in road user charges (RUC). Meanwhile, plug-in petrol hybrid vehicles will pay $38 per 1000km. This news comes as the government confirmed earlier this year that it will end the RUC exemption of all EVs and plug-in hybrids.
Transport Minister Simeon Brown reiterated that this change is to maintain fair use of New Zealand’s roads.
"This transition to RUC is about fairness and equity. It will ensure that all road users are contributing to the upkeep and maintenance of our roads, irrespective of the type of vehicle they choose to drive," Brown said.
The lifting in exemptions is welcomed by the Motor Trade Association, who claimed it's necessary to prevent the deterioration of New Zealand roads.
Government benefits increase
As part of the yearly Annual General Adjustment, government benefits have gone up as of April 1st. While the previous government indexed the main benefits to average wage growth, these benefits will now be indexed to the consumer price index (CPI).
This change in indexing has received some criticism from economists, stating that Jobseeker benefits would receive less in the switch. Additionally, this switch has said to disproportionately affect women, Māori, Pasifika, and disabled people, assuming no other changes were made.
Social Development Minister Louise Upston defended the move, stating that "CPI for beneficiaries is directly linked to the real costs that they face,"
"And actually, I want to focus on having fewer people receiving welfare and have more people in work. Higher incomes in work and better life outcomes," she said.
Changes to trustee tax rates
The trustee tax rate will increase from 33% to 39%, much to the dismay of Kiwis with a family trust, as a bill is currently being proposed in Parliament. However, there is a silver lining for some trust holders.
Currently, a $10,000 trustee income threshold has been proposed by the government, meaning that trusts with less than $10,000 of trustee income would still be taxed at the lower rate of 33%. Meanwhile, Trusts with more than $10,000 would be taxed at the new 39% rate.
This move is an attempt to stop people from using trusts to pay tax, and to bring it in line with the top personal tax rate.
Key takeaway
The new changes in April have their benefits and drawbacks, but the effects will certainly be felt by businesses in many sectors. Business owners, particularly small businesses and sole traders, should consider avenues that can help them prepare for these changes and minimise risk.
Bonded NZ helps businesses remain efficient in economic uncertainties through comprehensive and tailored business insurance. Whether it's public liability or professional indemnity insurance, our cost-effective options help them secure their business at every angle.
For more information about our services, contact our team today.