Finance Minister Jack Chambers has supported a recommendation from his department to reduce the tax rate on certain investment funds from 41 per cent to 33 per cent.
The proposal follows a review by civil servants who suggested that lowering the levy would simplify the tax system and encourage more people to invest in funds.
A major concern raised in the review is that many investors are currently keeping their money in low-interest deposit accounts. The proposed tax cut aims to encourage these individuals to seek better returns through investment funds.
The proposed tax cut would align the rate on investment funds with the 33 per cent Capital Gains Tax, which is currently applied to other forms of investment income.
Chambers highlighted that this change could reset public participation in investment funds, potentially boosting the sector’s growth.
Although the minister backs the proposal, implementing the change would require new legislation.
Chambers noted that this would be a task for the next government, but urged a future finance minister to consider adopting the broader recommendations from the review.