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
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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.