Tax Updates – 2019 Tax Year Changes
We have seen a number of tax changes over the last year or two – from both National and Labour. With a change in Government during the year, we have also seen some of the National legislated changes repealed by the Labour Government.
2019 Tax Year Changes Include:
Increase in the minimum wage – recent changes have included:
- Increasing the minimum wage from 1 April 2018
- For employees over the age of 18, and employed on a casual basis, the minimum rate including holiday pay will rise to $17.82/hour
- For paying employees under the age of 16, there is no minimum wage but all other standards and employment rights and obligations apply
- The Government has signaled that within the first 12 months of it’s term they will abolish starting-out rates and consider changes to the training wage. In the meantime, the rates will remain at 80% of the minimum wage
Provisional tax – recent changes have included:
- The increase in the safe harbour threshold from $50,000 to $60,000 and this has also been extended to non-individual taxpayers rather than just Companies and Trusts
- Taxpayers that do not qualify for the $60,000 safe harbour method, shortfall interest from the 1st and 2nd instalment of Provisional Tax has been removed (conditions apply) meaning that interest will only apply from the 3rd instalment
- The 1% monthly incremental late payment penalty has also been removed but the initial 1% and 4% penalties remain.
Provisional Tax – AIM
This new AIM method has been introduced! It’s a new method for calculating provisional tax that calculates payments on your level of taxable activity over that reporting period (GST period). AIM is only available to certain approved cashbook systems which current is very limited. In order to ensure the tax payments are as close to what the year end tax should be, adjustments need to be made at each GST period for Depreciation, Trading Stock, Livestock, Private Expenditure, Losses, Debtors and Creditors and Provisions (Shareholder Salary).
The Department are marketing this method actively at present but without seeing this in action, our initial thoughts are that you will make tax payments more frequently than you currently do and in order to calculate the liability, more of your time and effort will be required to arrive at the correct disclosure, e.g you will need to calculate stock accurately every two months rather than just at 31 March. And from an IRD point of view, they will have up-to-date trading information more frequently as essentially you will disclose every 2 months.
Repeal of National Government tax changes (Personal income tax)
- Reinstating the 2017 tax thresholds for personal income as follows (meaning the removal of possible tax savings)
- Reinstating the Independent Earner Tax Credit (IETC) and the same eligibility applying
Repeal of National Government tax changes (Working For Families WFF)
- Repealing the WFF tax credit changes legislated as part of the Budget 2017 Family Incomes Package
Labour Families Package – this package boosts income for low – medium income families by:
- Increasing payments of Family Tax Credits
- Raising the WFF tax credit abatement threshold
- Increasing the financial assistance for caregivers receiving an Orphan’s Benefit and Unsupported Childs Benefit
- Introduction of a Best Start tax credit (which replaces the Parental Tax Credit) helping families with costs in a child’s early years
- Introduction of a Winter Energy Payment to assist aged persons or those eligible for a social welfare benefit to stay warm over winter
- Implementation of changes to the Accommodation Supplement benefit.
Student Support – Increase in Student Allowance payments and Student Loan Living payments of $50/week for each and Fees-Free for new students (eligibility applies).
These are only a snapshot of the tax changes already implemented, there is a lot more detailed information that sits in behind the legislation.