Wellington, May 20 NZPA - Business gets a lower company tax rate but loses the ability to charge depreciation on buildings in the budget.

The Government said it was delivering the biggest reform of the New Zealand tax system for nearly 25 years.

But the budget both gives to and takes from business. The company tax rate will fall to 28 percent from 30 percent from the 2011/12 income year. For most this will apply from April 1, 2011.

Australia is cutting its company tax rate to 28 percent from the middle of 2014. Business has consistently lobbied for a tax rate in line with, or lower, than Australia.

Small business owners and sole traders will also benefit from income tax rate cuts in the budget, which reduce the top income tax rate from 38 percent to 33 percent.

GST rises to 15 percent from 12.5 percent, as expected, which will increase costs for business.

Property companies argued against changes to depreciation on buildings but lost the argument. Depreciation on both rental houses and commercial buildings was removed in the budget. The Tax Working Group argued it was wrong to allow depreciation on buildings when they appreciated in value. The property sector argued that commercial buildings did not always appreciate.

The Government was allowing dividends after the new company tax rate takes effect, to be imputed at the existing 30 percent rate for two years if company tax had been paid at 30 percent.

The Government has also moved to stop foreign companies loading up New Zealand subsidiaries with debt to reduce tax. The so-called thin capitalisation cap would reduce to 60 percent from 75 percent. This means companies cannot claim tax deductions for interest above a debt to asset ratio of 60 percent.

"This budget is all about building on the recovery that is under way," Finance Minister Bill English said.

As signalled ahead of the budget, $1.8 billion of spending was being redirected from low priority to high priority areas over four years. The Government was investing in research, technology and infrastructure to boost economic growth, Mr English said.