COVID-19 tax proposals

The Minister of Finance today announced a business package containing proposed measures to support businesses affected by the corona virus outbreak. The tax-related measures include:

Reintroducing depreciation on commercial and industrial buildings

Depreciation deductions will be reintroduced for new and existing industrial and commercial buildings, including hotels and motels.

Interestingly, this will enable the capital cost of seismic strengthening of buildings to be depreciated and therefore claimed as a deduction.  This wasn’t possible under the Governments previous approach that saw the seismic strengthening as a non-depreciable improve, not repairs and maintenance.

The law change will allow owners of commercial and industrial buildings to start reducing their provisional tax payments for the 2020-21 income year immediately. There is no application process as the increased deduction will be available as part of normal tax filing processes.

The rate allowed willed to calculated at 2% diminishing value basis.

This change is considered to be a permanent one starting with the 2021 tax year, rather than for a period of time.

Immediate deductions for low value assets

Taxpayers are currently able to claim an immediate deduction for the purchase of assets that cost less than $500. This threshold will be further increased to allow the immediate expensing of assets that cost up to $5,000, for a year (the 2021 tax year). The threshold is being permanently increased to $1,000 (from 2022 tax year onwards). This will reduce compliance costs for businesses and encourage businesses to continue investing.

 Fewer small businesses having to pay provisional tax

The threshold for having to pay provisional tax will moved from residual income tax of $2,500 to $5,000 for the 2021 tax year.  Your 2020 residual income tax will dictate whether you meet the criteria.

This is a permanent change with the $5,000 threshold continuing indefinitely.

Writing off interest on some late payment of tax

The Commissioner of Inland Revenue will be given the power to waive interest on late tax payments for taxpayers who have had their ability to pay their tax on time significantly adversely affected by the COVID-19 outbreak. Use of Money Interest (UOMI) is routinely charged on late tax payments.

Businesses and individuals will need to show an inability to pay tax by the due date as a result of being significantly adversely impacted by COVID-19. Detail on objective tests is yet to be finalised but will be in the coming days.

The relief will apply to interest on all tax payments (including provisional, PAYE, and GST) due on or after 14 February 2020.  This scheme will continue for a period of two years.

What does this mean for me?

The above are the one branch of a number of packages that the Government has announced.  We will be covering the impact of the other packages separately.

If you want to better understand your personal situation and how these changes impact on you, contact your Campbell Tyson Advisor, or drop me a line.

The Taxman won’t take a cheque

From 1 March 2020, the New Zealand IRD will stop accepting tax payments by cheque.  They’ve provided a helpful resource for online payment options (www.ird.govt.nz/cheques) but what do you do if you can’t get online?

Cash or Eftpos at Westpac

You can still pay using cash or Eftpos at Westpac, but be aware of your Bank Limits if not a Westpac customer.  You will also need to generate a bar code from 1 July 2020 to deposit the money with Westpac.  More details on this are at http://www.ird.govt.nz/barcode.

Automatic Payments

If you like to cash flow your tax payments with smaller, regularly amounts, may be automatic payments are for you.  Get an IR586 form from the IRD website, fill it out and send it in.

Or Get Online

My Father-in-law was a technophobe until he discovered the joys of TradeMe .  Once he dipped his toes in to the online World and stretched to online banking, he hasn’t looked back.  Sometimes it can look worse than what it is!  Check with your Bank.  They have Teams dedicated to helping you get online.

Using Contractors not necessarily protection against claims

Photo by Pixabay on Pexels.com

A great article from Dukesons about the dangers of thinking you don’t have employment exposure when using agencies to provide workers.  This is very applicable for the Horticulture Industry, which has a heavy dependency on seasonal workers to plant or harvest crops.

The main effect of the changes for Agencies and Clients is that if an employee of the Agency raises a personal grievance against the Agency when the Employee has been on an assignment with a Client, either the employee or the Agency can join the Client as a party and the Client may have liability if it has caused or contributed to the grievance.

The Client would only have liability where it exercises or is entitled to exercise control or direction over the employee in the same way that the employer (Agency) would. Where that occurs, the Client is regarded as a controlling third party.

From the Agency’s point of view, it would be prudent to include a term in its contract with the Client whereby the Client agrees to indemnify the Agency against any liability that the Agency incurs as a result of the Client’s actions.

In some respects, it would be prudent for the Client to treat workers provided through the Agency as though they were the Client’s workers. Examples would include avoiding bullying, harassment, and unlawful discrimination.

Redundancy could also be an issue for the Client to the extent that it wants to terminate any contract with the Agency because the worker is no longer required (before the end of any period agreed with the Agency) and where that may result in termination of the worker’s employment with the Agency. In that case, even though the worker isn’t the Client’s employee, it would be prudent for the Client to consult with the worker in a timely fashion to advise why their services aren’t required.

Some real risk that historically could be avoided by using contractors.

Coming to you from 27 June 2020.

Pay rise time!

New minimum wage rates take effect from 1 April 2012. The new adult minimum wage rates (before tax) that apply for employees aged 16 or over will be:

· $13.50 an hour, which is

· $108.00 for an 8-hour day or

· $540.00 for a 40-hour week.

The new minimum wage rates that apply to new entrants and employees on the training minimum wage (before tax) will increase to:

· $10.80 an hour, which is

· $86.40 for an 8-hour day or

· $432.00 for a 40-hour week.

Record keeping is very important regardless. To cover potential claims, questions and audit, you need to:

1 Keep worked time records. This is a legal requirement and ensures you know how many hours everyone is working.

2 Ensure that in any pay period the salary amount paid to your staff member meets the minimum wage rates above.

Till next time.