On May 1st, Parliament passed the biggest tax support package in New Zealand history. It is the latest round of COVID-19 support announced by the Government and the latest in a number of tax-related relief initiatives to help New Zealanders. In this month’s blog, we break down what tax support is available.
Tax support for individuals and families
If your income has been significantly reduced as a result of COVID-19, you can now apply for a tailored tax code. This is to ensure that your withholding rate will not be too high for your new income. If your income has been significantly impacted talk to your accountant or the IRD about a tailored tax code.
Also, some self-employed customers can apply for a certificate of exemption. Certificates of exemption can only be used for schedular payments. They cannot be used for salary or wages.
Working for Families Tax Credits
Many New Zealand families receive Working for Families entitlements which are based on your yearly family income.
If your family income has dropped, you may be eligible for increased payments. your entitlement may change as well. If your yearly family income has dropped, you may be entitled to increased payments.
Find out more here
Working from Home
If you are now working from you may be wondering if you are entitled to any additional support with associated costs. In most cases, you won’t be, and the government acknowledges that many employers will be unable to pay staff more during these difficult times. You can find out more here.
Inability to pay tax
The IRD has acknowledged that this year, some New Zealanders may be unable to pay their tax on time. In these cases, they have agreed to write off any penalties and interest accrued as a result of late payment. However, they do ask that you still file your returns even if you are unable to pay them.
Tax Support for Businesses
Tax loss carry-back scheme
In the latest announcement, the Government committed to a $3 billion tax loss carry back scheme. This will allow businesses to access previous tax payments as cash refunds. This means that a loss in the current financial year can be offset against the tax paid on any profit made in the previous year.
The omnibus bill also has measures to support commercial tenants and landlords and $25 million for further business support over the next year.
Immediate asset deduction
The Government has given businesses the ability to take an immediate deduction for assets that cost The ability to take an immediate deduction for any assets costing $5,000 or less from 17 March 2020 through to 17th March 21st. from which date the threshold will reduce to $1,000 (the current threshold is $500).
This will be of help to businesses who have had to invest in new assets to assist with staff working from home or social distancing within the office.
There are two restrictions to this:
- If multiple assets with the same depreciation rate are acquired from the same supplier at the same time, the $5,000 threshold applies across all the assets acquired (it is not a per asset threshold);
- If the asset being acquired forms part of another item of depreciable property an immediate deduction is not available.
Depreciation on Non-Residential Buildings
Applicable from 1st April 2020, the Government has reintroduced depreciation on non-residential buildings at the rate of 2% diminishing value and 1.5% straight line from the 2020/21 income year.
This is a permanent introduction.
Research and Development Tax Credits
There is now increased access to refunds of Research and Development Tax Credits in the 2019/20 income year.
Until now, the Research and Development tax credit scheme had limited refundability however, new measures allow more businesses to cash out a refund in year one.
Use of Money Interest Changes
If you are a business who is making late tax payments as a result of COVID-19’s adverse impacts, you can apply to the IRD to have any use of money interest on late tax payments remitted. Payments due after 14 February 2020 are eligible.
In order to qualify, you need to apply to the IRD and make the payment as soon as possible. In this circumstance, talking to your accountant and the IRD is critical so keep the lines of communication open.
You must still file your tax returns on time even if you are unable to pay the tax that is due.
Changes to Provisional Tax
Finally, the government has also made a small change to provisional tax. Currently, the threshold before provisional tax kicks in is $2500 however this has been increased to $5000.
All the advice above will be dependant on your own individual circumstances so while this gives a good rundown on what is available, it is imperative that you discuss these measures with your accountant or the IRD.
Next month, we will talk about what is changed in the housing sector as a result of the pandemic.