Budget 2023 – Trustee Tax Rate Heading North
The headline tax change in Budget 2023 is the raising of the trustee tax rate from 33% to 39% — effectively bringing the Trustee rate in line with the top marginal tax rate. The increased rate takes effect from the 2024–25 income year.
Noting that some taxpayers had taken advantage of the misalignment in tax rates once the top tax was raised in 2021, the Minister of Revenue pointed to the Inland Revenue’s recent High Wealth Individuals research:
“New information from Inland Revenue has shown an almost 50% spike in income subject to the trustee rate, from $11.4 billion in the 2020 tax year to $17.1 billion in the 2021 tax year.” The legislation will contain measures to ensure that deceased estates and Trusts for disabled persons are not subject to the 39% rate.
Tax cuts, and any moves to change the tax thresholds, have been firmly ruled out on the grounds that any relaxation of tax rates would fuel inflation.
Economic outlook
Treasury’s executive summary notes that:
- Treasury no longer anticipates a recession during 2023, although growth remains low and labour market conditions will begin to deteriorate
- the economy is forecast to grow by 3.2% in the year to June 2023 but slows to 1.0% in the June 2024 year, and averaging 2.7% thereafter
- net debt is expected to peak as a percentage of GDP in 2023–24 at 22.0%
- a surplus is forecast for the 2024–25 financial year
- inflation peaked at 7.3% in June 2022 and is forecast to fall to 4.5% by the end of 2023.
Source: Wolters Kluwer Budget Report 2023
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