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How New Labour Government Policy Affects the Market for Business Sales
After nearly a decade of National Party rule, the New Zealand Labour Party recently formed a government in coalition with New Zealand First. A new government means new policies and for business owners it’s important to know how these policies will affect any future transactions.
Although it’s not clear how Labour’s election policies will change with the input of New Zealand First, it’s possible to gain insight into the Labour Party’s plans. For business owners it’s important to know about policies likely to affect their companies. For those planning to buy or sell a business soon, below are some of the policies it’s important to understand.
The Labour Party has plans to support small businesses in New Zealand. On the tax front, Labour has plans to make the voluntary withholding tax more flexible, freeing up time and money for businesses to concentrate on growth. At the same time, the government plans to take strong action on multinationals not paying their fair share of tax.
Labour also plans to invest in a bureau specifically to assist small businesses. New legislation aims to help protect franchisees and improve contractual protection and the establishment of a seed investment scheme might help small business owners grow further.
A raise in the minimum wage, to $16.50 an hour, is likely to increase payroll obligations for small business owners, but a commitment by the government to buy Kiwi-made may increase opportunities that offset this.
The Labour Party plans to close the tax loophole that permits negative gearing, which allows losses on rental properties to lower all taxes and makes property a very attractive investment option. If this tax loophole is closed, businesses will become a far more attractive investment option in New Zealand. With the tax benefits of property speculation gone, investors will be looking for new places to put their money to work.
This could affect small businesses in two ways. Firstly, there may be more money available for those looking for private funding. Secondly, it could push up the price of established businesses for sale as more investors decide to enter the market.
Labour Party policy aims to reduce immigration to New Zealand by 20,000-30,000 each year. Most of this reduction will be through tightening student visas and strengthening the Labour Market Test for foreign workers. Businesses that rely on foreign workers may find it more difficult to get visas approved. The government plans to work with firms to train New Zealanders to fill roles rather than relying on foreign labour.
It’s not clear how this will work in most industries, but for the construction industry, KiwiBuild will allow firms to bring in a foreign worker if they also hire and train a local apprentice. Student visas will not be issued for courses lower than a bachelor’s degree unless the training or education is independently assessed to be of high quality. This may affect the income of training organisations and at the very least, it will add a layer of bureaucracy through the independent assessment process.
The Labour Party has a number of investment plans to help small businesses grow.
Young entrepreneurs aged 18-23 will be able to apply for up to $20,000 to support their innovative ideas. A push to grow software business is going to add a funding pool and incubator space available for those in the digital sphere and tax credits will be available for those who invest in research and development.
A Tourism and Infrastructure Fund of $75 million a year, funded by a levy on international visitors, will see the government investing in infrastructure around the country and supporting the growth of tourism, helping business owners in those fields.
As with all change, the new Labour government brings both challenges and opportunities. Those who are well-informed may be in the best place to minimise the challenges and quickly take advantage of opportunities.
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