Grant Robertson, New Zealand’s Deputy Prime Minister and Finance Minister
Photo credit: Stuff.co.nz

The New Zealand government on Wednesday instituted a new top tax rate of 39 per cent on income earned over 180,000 NZ dollars (127,186 U.S. dollars).

Deputy Prime Minister and Finance Minister Grant Robertson said in a statement “this will only affect the top 2 per cent of earners.

“It is a balanced measure that is about sharing the load so everyone is doing their bit to help our country rebuild after our fight against the COVID-19 virus.

“It is also about keeping a lid on debt while ensuring we can maintain our investment in health and education. For 98 per cent of earners, there won’t be any change.

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Robertson said “it’s important to remember too that this is for individual income,” adding that if a couple together earns over 180,000 NZ dollars but individually earn less than that amount, then there is no change at all to the amount they have to pay.

The new rate will apply as from April 1, 2021.

Revenue Minister David Parker said the government is aware that some people may seek to escape the higher tax rate and shelter their income in trusts.

Parker said that commentators often make such comments when changes to the top tax rate are proposed.

“This bill includes powers to collect information from trustees to test compliance and the effective operation of the 39 per cent tax rate and to further understand what trustees do with trust assets and income.

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“If trusts are used for the sole purpose of paying a lower tax rate, it is unfair to all those New Zealanders that pay the right amount of tax. If there is evidence of this type of behaviour, we will move on it.’’

New Zealand currently has four layers of progressive or gradual tax rates of 10.5 per cent, 17.5 per cent, 30 per cent, and 33 per cent. The rates increase as taxpayers’ income increases.