Australian company tax cuts give NZ some breathing space. The Henry tax review had recommended the corporate tax rate be slashed to 25% but the Aust Govt is only dropping the rate from 30 to 28% by 2014. This gives the NZ Govt time to think about what we need to do to be competitive. Finance Minister Bill English is not saying whether it will mean any changes in NZ, but he is probably relieved the rate isn’t going down to 25% as Henry wanted. He says the Govt will set out details of its tax package in the Budget later this month and he won’t pre-empt the process.

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The Aust Govt will fund the corporate rate cut and other changes by imposing a 40% tax on the profits of resource companies. The resources tax, scheduled to begin on July 1, 2012, will be paid on the realised value of resource deposits - the difference between the revenue generated from resource extraction and associated costs.
The company tax rate, reduced to 30% from 36% by the previous Coalition Govt, will be cut to 28% by mid-2014, with 720,000 small businesses getting a one-year head-start. The Govt says it may yet decrease the corporate rate further, and reserves the right to make other changes based on the Henry review.

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