Higher Tax Rate

This Bill introduces a new personal income tax rate of 39% on annual income over $180,000.

The new rate applies for the 2021–22 and later income years. Aside from amending basic income tax rates, the Bill amends a number of tax rules to incorporate the new top personal rate to 39%, including:

• PAYE rules (new secondary earnings and extra pay codes):

• fringe benefit tax (FBT):

• resident withholding tax (RWT) on interest:

• employer’s superannuation contribution tax (ESCT):

• residential land withholding tax (RLWT):

• retirement scheme contribution tax (RSCT): 

The consequential changes to the PAYE rules, FBT, ESCT, RLWT, RSCT, and the taxable Māori authority distributions non-declaration rate will apply from 1 April 2021.

The higher RWT rate on interest will take effect from 1 October 2021 to ensure that interest payers are able to implement the required systems changes.

It would be interesting to see how dividend imputation regime will come into force, currently 28% tax is part of imputation and a further 5% deduction is made to bring it up to the top rate of 33%. 

If this is not aligned then top income earners can defer or dont pay the tax at all. If this is changed to 11% deduction then this will lead to tax refunds for many tax payers. 

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