Updates in & around tax & IRD
Changes for reporting of Investment income from April 2020 (2021 year) – Payers will now be required to return earnings information electronically to the IRD on a monthly basis. These changes affect investment income including interest, dividends, PIE, taxable Maori authority distributions and royalties paid to non-residents.
Payers need to provide to IRD an IRD number, date of birth and address, and no longer need to issue year-end certificates for those that have provided their IRD numbers.
Recipients will need to ensure that payers have your correct IRD numbers (individual or investments held jointly will require all IRD numbers so that the split between taxpayers is correct). It will be critical that the correct IRD numbers are used in order to get income disclosures right. Note: the non-declaration rate increases to 45% when a recipient does not provide their IRD number to the payer.
Bright-line property rules – recent IRD feedback indicates a number of Bright-line tax issues starting to appear. Currently this is a manual process for detection but they are not going un-noticed. IRD numbers will, from 1 January 2020, be a Land Information NZ (LINZ) requirement for all property transactions.
A reminder: if you purchased and disposed of a residential property you might be caught (purchased before 1 October 2015 – Bright-line does not apply; purchased between then and 28 March 2018 – Bright-line applies if sold within 2 years; and purchased on or after 28 March 2018 – Bright-line applies if sold within 5 years). There are 3 main exclusions being—your main family home; inherited property; or you’re the executor or administrator of a deceased estate.
Ring fencing residential property rental losses from April 2020 (2021 year) – IRD have recently released correspondence to all taxpayers who have residential rental income (241,000 emails and 135,000 letters) advising them of the changes around no longer being able to offset against other taxable income.
Making sure you are on the correct tax code – Changes to the tax system effective 1 April 2019 has resulted in letters being issued recently to employees and employers where IRD believe employees (receivers of PAYE sourced income) are on an incorrect tax code. An alternative to using an incorrect tax code is to apply for a Tailored Tax Code which is an annual process.
A recent situation has come to light where we understand IRD have been making direct contact with Ministry of Social Development (MSD) in regards to incorrect tax rates being used for those who receive a NZ Super/Veteran’s pension. We now understand that direct contact with MSD has since been put on hold. If you believe your tax rate has changed and is incorrect please contact us directly.
It is best to discuss these rules further with Lance or Michelle if you are concerned you might fall within the rules.
Changes for landlords and tenants came into enforcement from 27 August 2019 including:
- Tenant liability for damage – This allows the protection for landlords holding tenants liable for damage by them (including guests of tenants) up to the cost of damage, which can be a maximum of 4 weeks rent or the landlords insurance excess, whichever is lower for unintentional damage. Intentional damage or damage that constitutes an imprisonable offence will remain fully recoverable.
- Insurance disclosure – This requires landlords to provide an insurance disclosure for a new tenancy in regards to if the property is insured and the level of excess for all relevant policies. This information must also be made available on request in the future. A financial penalty payable to the tenant of up to $500 if a landlord fails to provide this information.
- Contamination of premises – This allows landlords to be able to test for methamphetamine in rental properties. To do so, 48 hours notice must be provided (but not more than 14 days) before entering, for boarding houses the notice period is 24 hours before entering. Landlords must advise the tenant what they are testing for and share test results within 7 days of receipt. There is also the requirement that a residential property not be available when it’s known to contain contaminated substances above the prescribed level, doing so could result in a financial penalty of up to $4,000.
- Unlawful residential premises – This requires landlords to meet all legal requirements at the commencement of all tenancies. Failing to do so may force the landlord to repay some or all rent, excludes a tenant from being liable for rent arrears, damages or compensation; or a financial penalty payable to a tenant of up to $4,000. Tenants will also be able to give 2 days notice to end a tenancy due to unlawful residential premises if unlawful at the beginning of a tenancy and remain unlawful.
