A snapshot of recent tax changes and proposals
At this time each year a number of tax changes are made. Where we believe tax changes are relevant to our clients and impact on your business we try to keep you in the loop. These are only a snap shot, so we recommend where these may be applicable to you, we discuss these further to consider the full implications of the change, taking into account your specific business circumstances.
Tax changes recently enacted
Payroll — Payday filing – From 1 April 2019 all employers are now required to supply employment income information at each payday rather than submitting the monthly Employer Monthly Schedule form as you have previously done. Correction to payroll errors – Effective from 1 April 2019, this change allows corrections to be made by either amending the lodged return or correcting the error in a subsequent return.
Investment income — Reporting requirements – Effect from 1 April 2020, all payers of interest, dividends, royalties, PIE income and Maori authority distributions are required to file returns frequently with more detailed information and electronically to the IRD (voluntary from 1 April 2019). Interest income details are already being passed onto the IRD by most payers. For a receiver of investment income, the IRD should now have details as payments are made. Non-declaration rates – Effective from 1 April 2020, the non-declaration rate will increase from 33% to 45%, this will be the case when a taxpayer has not provided an IRD number to payers of interest.
IRD automatic refunds — Effective 1 April 2019, the IRD will now automatically release any tax credit balance if they cannot identify any debt due or reason why that credit balance exists provided there is an assessment for that period. Taxpayers do have 20 days to return an amount that has been refunded, without any implications.
This has created concern as credits are being released that are not expected and could lead to further implications such as penalties and interest for any unpaid tax. Refunds could be as quick as being released within 24 hours.
IRD pre-populated tax disclosures for individuals — Effective 1 April 2019, the IRD will automatically populate a return disclosure if the taxpayer only has “reportable” income. That is: PAYE earnings, Schedular payments, benefits, NZ Super, interest and dividends. If the IRD is satisfied the disclosure is correct they will proceed with an assessment and either issue the refund or send a demand for the tax shortfall.
This has also created concern as that pre-populated return disclosure may not be correct. It could be missing financial information, has not allocated the investment income accurately or it may not have allowed time for us to consider an inter-entity distribution. Most of our clients will be required to lodge a tax return as their income falls outside of the reportable income requirements. It is the taxpayers responsibility for accuracy of all returns at all times.
Donation tax credits — Effective 1 April 2019, Donations can be submitted electronically through myIR as well as by paper and can be uploaded during the financial year. Processing of tax credits will remain at year end. For a Donation rebate to be claimed the rules remain the same – it must be an approved organisation where no direct benefit has been obtained, must for $5 or more, and you must be a NZ resident. The level of the tax credit will also be limited by your taxable income; the claim will be 33.33% of the total donation or your taxable income (whichever is lesser).
Kiwisaver — Effective 18 March 2019, changes to Kiwisaver now allow for over-65 year olds to join KiwiSaver. For participants over 65, their Employers are not obliged to contribute by way of Employer Contributions but may do so voluntarily and the Government contribution will not be available. The lock-in period has been removed which required a minimum five year contribution period after commencement of a Kiwisaver account for those aged over 65. The “contribution holiday” period will change it’s name to a “savings suspension” along with reducing that period down from five years to one year. There has also been the addition of new KiwiSaver contribution rates being 6% and 10% (3%, 4%, and 8% remain available).
Boarders — There have been changes to how we determine the tax treatment for boarders. The rate where boarding income needs to be disclosed for tax purposes reduces from $266/week (for first two boarders) and $218/week (for each subsequent boarder) to $183/week (up to four boarders). There are two methods available to work out the tax disclosure, being the Standard Cost Method (up to 4 boarders) and the Actual Cost Method, along with the ability to include Transport Standard Costs when the tax payer is required to provide transport.
Short-stay guests – A similar calculation method has been introduced for Short-stay guests that stay for no more than 100 room nights per year. (eg. Airbnb)
Mixed Use properties – These rules still apply for properties that are used both for income earning and privately. (eg. Bookabach)
Motor vehicle mileage rate changes — Where a reimbursement is calculated for the business use of a private motor vehicle the rates have increased from 76c/km to 79c/km up to 14,000km in a year. Where the business related use exceeds 14,000kms then the rate is 30c/km for a petrol or diesel vehicle.
Error correction for Income Tax, GST and FBT returns — Effective 18 March 2019, the threshold amounts have been relaxed in order to be able to make changes in a subsequent return when an error has been identified, if the tax amount for a single return is $1,000 or less; and if the error is not material (total errors are less than $10,000 and less than 2% of taxable income or output tax liability). If these thresholds are not met then taxpayers need to continue to amend the assessed return(s).