Is New Zealand more egalitarian than Australia?

Note: I'm still getting my head around many of the nuances of the New Zealand tax system (as well as many other things), and I admit that I'm missing some nuances. I certainly wouldn't take my comments below to constitute advice! Seek personalised professional advice.

My wife and I are considering moving back to New Zealand. We're considering a number of factors. Near the bottom of the list is money and tax, but it's not something we're blind to.

One thing that has struck me is that the New Zealand tax system seems like it will benefit my wife and I tremendously. And it flies in the face of my personal perception that New Zealand has more of an egalitarian spirit than Australia (or, to be fair, almost anywhere else in the world). It's great for my wife and I and our children, but it makes me wonder whether it's great for the country as a whole. 

Here are a few areas in which it seems that New Zealand is less egalitarian than Australia. 

The top marginal tax rate in New Zealand is way, way lower than in Australia

For someone earning $180,000 or more in Australia, the marginal tax rate is going to be 47% (including the Medicare levy). In New Zealand, the top marginal tax rate you can expect to pay is approximately 35%. 

New Zealand doesn't have a capital gains tax

My wife and I are likely to buy into or establish professional practices in the short- to medium-term future. If we buy in, then our business partners aren't going to be burdened by capital gains tax which in turns means that the cost to purchase are likely to be lower than they would otherwise be. And in time, once we've built the businesses up (and hopefully built up a fair amount of additional equity in the form of capital gains) and we come to sell, we won't have to pay any tax on those gains. 

In terms of our personal investments, it's also likely that the majority of our investment assets are going to be focused on asset classes that are likely to exhibit a high amount of capital gain. Again, whereas in Australia we'd be taxed on these gains, this doesn't appear to be the case in New Zealand. 

New Zealand seems to be less strict in terms of means testing in relation to government benefits

This is based entirely on informal conversations with a number of people, so I'm inclined to take my own comments with a grain of salt. However, it seems that Australia is far more strict in terms of the means (assets and income) tests it applies to determine whether a person is eligible for a certain government benefit. This means that more people who don't need government services are likely to receive them in New Zealand than Australia.

Am I wrong about these things? I'm open to it. And in some strange way, I hope so. Ultimately, it's a moot point for me personally because it's not going to be the determining factor about whether we end up in New Zealand or Australia.

Sonnie Bailey

Sonnie is the founder and principal of Fairhaven Wealth.

Before founding Fairhaven Wealth, Sonnie worked in the legal and financial services industries for over a decade.

Sonnie first became involved with financial advice as a specialist financial services lawyer. For many years, he was an “adviser of advisers”, reviewing thousands of advice files prepared by hundreds of financial advisers, and providing feedback in relation to the quality and appropriateness of advice; industry best practice; risk management; and regulatory compliance. He has published work in industry publications and spoken at various financial advice conferences.

Sonnie has also worked with banks, investment management firms, insurers, and derivatives providers.

Sonnie has worked as a private client lawyer, focusing on succession, estate planning and trusts. He ran his own legal firm in Australia before relocating to New Zealand. He has also acted in independent trustee and company director positions.

Sonnie is passionate about helping people achieve their goals and manage the risks to which they are exposed.

He has written extensively on his blog, New Zealand Wealth and Risk, which can be found at www.wealthandrisk.nz.

Sonnie is married to his wonderful wife Chrissy, and has two young children, Ben and Anna.