​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.

​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. 

If so and it was brought on or after March 27th 2021, you may be subject to the newly proposed extended 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.

​The government has proposed any new builds will continue to follow the 5 year bright-line period. 
 
However, at this stage consultation is underway to determine what can be considered as new builds. 

The date you purchase the property determines whether the bright-line period is 5 or 10 years.
 

• 5 Years: Property purchased between 29 March 2018 and 26 March 2021
• 10 Years: Property purchased on or after 27 March 2021
• The date the property's title is registered with Land Information New Zealand (LINZ) 
• Properties purchased in another country, begins on the date the transfer was registered under that country's laws.
• Properties purchased where the title has not yet been issued, begins when you sign the agreement to purchase the land.

​Any properties purchased before 1st October 2015, or if the property is your main home, held in a trust, inherited or used as a residential business or farmland is exempt from the bright-line test.

​Use this flow chart to find out where your property sits:

Check out the IRD Bright-Line Test Proposed Changes and Labour's reasoning behind the change Get The Facts About Bright-Line Test

What's best for your business? Within the Covid levels there are a range of financial support options to get you through.

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.

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

1. No exposure to Use of Money interest if you pay what your software tell you to.
2. No Penalties , if you take reasonable care with your record keeping.

What are the other benefits of Accounting Income Method?

1. Refunds are available throughout the year and can be transferred to other tax account ( e.g GST or PAYE)
2. Refunds will be automatic and quick so ensure to enter your correct bank account information.

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. 

​
​