In the not so distant past, Budget day would herald significant, and often unexpected, tax announcements. But in more recent years, the big tax changes have more often than not been well-signalled and consulted on outside the annual Budget process.
Budget 2022 was no different in that no major tax announcements were made. We did not see any changes to the personal tax rates or marginal tax bands.
We also did not see the hoped-for employer tax concessions to encourage the use of electric vehicles in their fleets and to promote public and shared transport options for employee travel to work.
The Emissions Reduction Plan issued just days before the Budget included reference to Inland Revenue having conducted some research into options in this space, so maybe we will see some good news in the not too distant future.
What did take us all by surprise though was the Government’s cost of living package.
Whatever your thoughts on the value or potential effectiveness of the $350 cost of living payment to be made to eligible taxpayers, the tax system will be integral to the implementation of this payment.
Details yet to be published
While detailed eligibility criteria are yet to be published, the official documents tabled along with the legislation for the payment, provide some insight as to how eligibility will be assessed and the payments made. The $350 payment will be made to the roughly 2.1 million qualifying individuals aged over 18 who are earning less than $70,000 and who are not in receipt of the winter energy payment, with the income test being based on taxable income information for the 2021/22 tax year.
The payment will be made in three monthly instalments, starting 1 August 2022, coinciding with the completion of Inland Revenue’s “auto-calc” process and the 7 July 2022 tax return due date for taxpayers without a tax agent.
Eligibility will be checked at each payment date, so if you become eligible for the winter energy payment part way through the August – October period you will not qualify for the remaining cost of living payments, and vice versa if you cease being eligible for the winter energy payment.
If you think you are eligible for this payment and are not on a tax agent’s list, you should make sure that you check your reported income in myIR well before 7 July, make any updates required to ensure your income is correctly reported and check that the right bank account is loaded in the system. All going well, if you have done this the money should just appear in your bank account.
Around 500,000 individual taxpayers use a tax agent to complete and file their income tax returns. Many of these will be eligible for the payment in the sense that they will have income under the $70,000 threshold for the 2022 tax year, but because tax agents do not need to file all of their client tax returns until 31 March of the following year, not all of the eligible taxpayers will have their returns filed before 1 August.
If you are one of these taxpayers, your eligibility for the payment will be assessed when your tax return is filed and Inland Revenue has the full picture of your income for the 2022 year.
This may not be until after 31 March 2023 for those individuals who leave filing their returns until the last minute, so if you are counting on having this money earlier, make sure you provide your information to your accountant as soon as possible.
Related: Inland Revenue’s mistrust of trusts