How Property Taxes Impact Brick-and-Mortar Establishments in New Zealand
New Zealand is certainly one of the most sought-after living destinations on the planet. Thanks to benefits such as an agreeable climate, an abundance of natural beauty and a strong economy, many businesses choose to call New Zealand home. These observations have been reinforced by a recent recovery in the real estate market clearly indicating that consumers are confident in their long-term future.
On top of this, New Zealand has traditionally made well-thought-out and intelligent trade moves within the wider world. As of last year, they even signed a free trade agreement with the European Union, showing they see their economic future as one of globalisation, and not just as a part of Australasia.
However, one of the downsides that is often associated with a strong economy involves property taxes that can quickly eat into business profit margins. This is why (like many other regions of the world) New Zealand has begun to witness an influx of entrepreneurs who are keen to leverage the advantage of online opportunities. Let’s look at how taxes, alongside a handful of other factors, could very well cause New Zealand businesses to choose the digital ecosystem.
A Quick Breakdown of the Property Tax System in New Zealand
It is first wise to point out that there is currently no type of real estate tax in New Zealand. While this may seem beneficial at first glance, we need to look at the bigger picture. Many businesses rent properties as opposed to opting for an outright purchase. These entities are, therefore, subject to rental taxes based on their monthly income. Here is a quick breakdown of the present thresholds:
- Below $1,500 dollars: 14.06 per cent.
- Up to $6,000 dollars: 25.02 per cent.
- $20,000 dollars or more: 30.27 per cent
While smaller businesses might not be affected by low-end taxes, there is little doubt that entities generating a significant amount of capital will be obliged to allocate nearly one-third of their income toward rental property taxes.
Additional Factors to Consider
It is now becoming clear to see why a growing number of New Zealand businesses are beginning to realize the potential of online operations. Not only will this ultimately eliminate the need to be concerned with rental taxes, but in the vast majority of cases, overhead is significantly reduced. This is, nonetheless, only part of the picture.
New Zealand was not exempt from the long-term effects of the COVID pandemic and the subsequent global economic slowdown. The good news is that most economies have recovered. However, COVID also caused many organizations to move into the digital ecosystem in order to continue to market their goods and services. The same holds true in regard to consumers who came to rely upon the e-commerce community.
As consumers have now come to embrace the online community, it only stands to reason that a sizeable portion of New Zealand businesses do not feel it necessary to focus on brick-and-mortar operations. In other words, real-world businesses that are now operating within the digital domain do not see any reason to return to traditional forms of sales and marketing.
What industries have been the most affected by this paradigm shift, and how might this impact New Zealand from a long-term perspective?
Online Gaming
Imagine for a moment that you are an avid casino fan. While there are still a handful of real-world establishments to enjoy, looking for an NZ online casino is now by far the most practical option. As with any traditionally physical business, the opportunity to move online while still continuing a high-volume business and avoiding any associated taxes is hugely inviting.
Not only is this due to the sheer number of platforms now in existence, but the New Zealand Gambling Act 2003 limits the ability to create any new brick-and-mortar properties. This means there are only six physical casinos in the country, and until changes in legislation it’s likely to remain this way. So virtual gaming is the most practical solution at this moment in time.
Telehealth
This is a rather innovative field, and while still in its infancy, it certainly illustrates what the future could have in store for New Zealanders. Thanks to technologies such as 5G wireless connectivity and VoIP services, many consumers can now consult with their physicians without being forced to leave their homes.
As other advancements such as augmented reality become even more prevalent, the chances are high that telehealth will stand to benefit as a direct result. This was also an important part of the pandemic, with hospitals being stretched due to Covid cases, and infection needing to be curtailed, telehealth was a huge help to the public.
Freelancers
In truth, freelancers have existed since the dawn of the Internet. The major difference is that there are now more professionals than ever before. Whether referring to content creation specialists, website designers, or digital marketing experts, these virtual “nomads” are indeed here to stay. Instead of having to rent an office, they can work from home or even travel around the world, further decreasing their costs.
New Zealand is likewise known for its ability to churn out highly skilled individuals thanks to its educational system and for this reason, most experts agree that freelancers will become an integral portion of the domestic economy in the coming years. While there is still some doubt in relation to the role that artificial intelligence (AI) could play, it is clear that freelancing is not going away anytime soon.
Is This the End of Brick-and-Mortar Ventures?
The good news is that there are, nonetheless plenty of brick-and-mortar businesses throughout New Zealand. Furthermore, some industries such as construction and labor simply cannot translate into the digital community. Still, issues such as property taxes and the sheer number of online opportunities signal that New Zealand e-commerce is slated to enjoy a bright future.
