Millionaire number grows since loophole closed

BEN HEATHER
Last updated 05:00 03/01/2014

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More New Zealanders are earning millions, but the culprit may be a crackdown on tax dodgers rather than newfound wealth.

Latest figures show 830 Kiwis declared more than $1 million in income in the 2012 financial year, paying $510m in tax.

The number of self-confessed millionaires has been trending upwards since at least 2003, with the exception of a sharp drop in 2011, attributed to a tweak in tax rates.

In Wellington alone, there were 140 millionaires, nearly triple the number recorded in 2003.

Auckland had the most, with 430, and had experienced a steep rise over the past decade.

The figures, released under the Official Information Act, came amid increased concerns over inequality. Recent reports have highlighted growing child poverty, income equality and rising demand at food banks.

Trevor McGlinchey, executive officer at the Council of Christian Social Services, said more people declaring their wealth as personal income was good news, as it meant more tax for everyone else.

However, it also highlighted the widening gap between the haves and have-nots, and the need to spread wealth more evenly.

"New Zealand is becoming more and more unequal, but that's not about saying rich people are bad," he said.

It appears, however, that the rich may not be getting richer, just more forthcoming about their earnings.

While the number of individual millionaires has been rising, the number of trusts earning $1m or more has declined. In 2012, there were 1150, far fewer than the peak of more than 1800 in 2010.

Wellington tax specialist Brent Gilchrist said a landmark Supreme Court decision in 2011, in which two Christchurch surgeons were penalised for diverting their income into trusts to mask their income, had probably scared many people off.

"People are just saying it is not worth the trouble."

Changes in the top personal and company tax rate had also meant trusts were no longer the obvious option when it came to reducing tax bills.

"Using trusts as an income tax-saving mechanism is all but dead," Mr Gilchrist said.

 

WEALTHY KIWIS

830 people paid tax on income of more than $1 million each.

They paid $510m in tax

430 lived in Auckland

140 lived in Wellington

170 lived in the South Island

710 were men and 120 were women

400 were between 50 and 70 years old

390 declared themselves millionaires for the first time in the past decade

1150 trusts earned at least $1m

30 earned more than $10m

Source: Inland Revenue, figures from the 2012 financial year and rounded to nearest 10 

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- Fairfax Media

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