What are the current guidelines?At present residential investment property owners can claim interest on loans related to the property as a claimed expense. Thereby reducing the amount of tax needed to be paid. What are the pROposed changes?While the government is still in consultation on the precise details of the proposed change, what we do know from 1st October 2021 the proposal is set to restrict and eventually, overtime, remove the interest deductions on residential property income.
Brought any residential properties this year?If so and it was brought on or after March 27th 2021, you may be subject to the newly proposed extended Bright-Line test. What is the New Zealand’s Bright-Line Test?Anyone who sells a residential investment property within 10 years of being purchased may have to pay income tax on any financial gain from the sale. This income is classed as personal income and would be taxed as per the marginal tax rate.
This also applies to NZ tax residents who buy overseas residential properties. What's best for your business? Within the Covid levels there are a range of financial support options to get you through.  Resurgence Support Payment (RSP)Available during Levels: 2, 3, 4 Does your revenue drop every time there’s a change in COVID-19 levels? RSP is a payment available to support business or organisations that are facing a reduction in revenue created by COVID-19 alert level increases. Are you eligible? If you have been in business for at least 6 months and have experienced a drop of 30% in revenue over a 7-day period after an alert level increase, not just covid in general, you may be eligible for this support payment. What do you need to know? RSP is not an automatic payment support, the government will decide whether to activate if the alert level increases from level 1 for at least a week. This payment is not a loan, so does not need to be repaid. The payment must be used to help cover business expenses such as wages and fixed costs. Applications will remain open for 1 month after the return to Alert Level. Wage Subsidy SchemeAvailable during Levels: 3, 4 Worried about how you are going to pay your staff when in lockdown? Wage Subsidy March 2021 was made available to help employers pay staff and continue employment which would otherwise be impacted by February 2021 alert level changes. Are you eligible? If you are a business or self-employed and have experienced a 40% drop in revenue over a 14-day period between 28 February 2021 and 21 March 2021 due to the alert level increase you may be eligible. What do you need to know? The Wage Subsidy was made available between 4 March 2021 to 21 March 2021. You needed to be able to show that the revenue drop was due to the change in alert level, not just COVID-19 in general. Short-Term Absence PaymentAvailable during Levels: 1, 2, 3, 4 Uh, Oh, COVID-19 test downtime? If you or your employees require a COVID-19 test and miss work or are unable to work from home while waiting for the results the Short-Term Absence Payment may be what you need. Are you eligible? To be eligible, workers need to be unable to work from home and need to miss work while waiting for the test results. What do you need to know? Available to employers and self-employed workers, at all alert levels. Must be used to pay employees following the public health guidance for awaiting COVID-19 test result. Small business cash flow loan scheme (SBCS)Available during Levels: 1, 2, 3, 4 Worried about your cashflow? SBCS is a Loan provided by the government to provide cashflow support to those that have been impacted by COVID-19. Providing assistance of up to $100,000 to small businesses, sole traders and self-employed, who employ 50 or fewer full-time employees. Are you eligible? You must show at least a 30% drop in revenue due to Covid-19, measured over a 14-day period in the past 6 months What do you need to know? Applications have been extended and open until 31 December 2023. Loan is to be paid back, interest free, within two years, after this period an interest rate of 3% for a maximum term of five years. Tax and ACC supportAvailable during Levels: 1, 2, 3, 4 Struggling with your tax obligations? If due to COVID-19 you are finding it a struggle to pay your tax obligations, Inland Revenue has support schemes and options in place to help, click the link below. Worried about ACC payments? ACC levy invoices for 20/21 financial year, usually sent out in July, will now be sent out in October. More information about delayed invoices and guidance to help is available below. Business debt hibernationAvailable during Levels: 1, 2, 3, 4 Need help managing business debt? Business debt hibernation helps business and trusts affected by COVID-19 manage their debts. This government initiative helps you set up an arrangement to pay your creditors. While this arrangement is being set your creditors can’t enforce their debts. Effectively providing up to a month of protection. What do you need to know? Unfortunately, this is unavailable for Sole traders. Applications remain open until 31 October 2021. This business debt hibernation decision tool may help you decide if it’s a good option for your business: Business finance guarantee scheme (BFG)Available during Levels: 1, 2, 3, 4 Are you after a loan? Business Finance Guarantee loans that can help businesses access credit for cashflow, capital assets, and projects related from impacts caused by COVID-19. What do you need to know? Due to a change in the scheme, businesses can now use the loan to modify their premises to accommodate different alert levels or meet changing demands. As per usual loan conditions, borrows are still liable, and debt must be paid back with interest. Find Out MoreAs always there are eligibility requirements that must be meet for you to receive financial support. I’m here to help, contact me if you have any questions or want to explore your options.
For a general guide on each of the above head over to the Business Govt. NZ website.  The legislation introduced last year was designed to simplify and integrate tax processes with day-to-day business. The result is a new option for managing provisional tax through accounting software, the ‘Accounting Income Method’ (AIM), which will be available to start on April 17, 2018.
What is AIM ( Accounting Income Method)? Accounting Income Method is a new provisional tax option for small businesses with annual turnover under $5 million. How does it work? MYOB, Reckon or Xero calculates the payment by using the information in your accounting software. The system will calculate provisional tax if your business is making profit. The calculation will include basic tax adjustments for depreciation, Shareholder Salary, Private Use expenditure, Debtors and Creditors, Provisions, Trading Stock and Prior Year Losses. Two key benefits of Accounting Income Method
What are the other benefits of Accounting Income Method?
Use AIM if your business turnover is 5 million, growing and the sales are unpredictable or fluctuating. Partnerships, Maori Authorities, Superannuation funds, Trusts and Portfolio Investment entities. Keep up to date with tax changes. Follow us on Facebook to learn more. |
AuthorCristina Canard is the principal accountant at Apex Accountancy Ltd. Cristina keeps up to date with all the relevant tax changes in New Zealand. Archives
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