IRD are currently looking at legislative changes due to COVID-19. Following are some of the changes coming in for businesses, as these are currently under legislation, there may be some adjustments before it is passed, but here are some of the points that maybe of interest. For more information please visit https://www.ird.govt.nz/covid-19/business-and-organisations
As of 1 April 2020, the government will reintroduce depreciation deductions for commercial and industrial properties at the rate of 2% per annum. In addition, the Government has indicated that new deduction claims will be available for seismic strengthening to be included in the legislation.
When the property is sold, depreciation recovered will have to be accounted for where applicable.
The threshold for Low Value Assets has increased from $500 to $5,000 from 17 March 2020 – 16 March 2021. This means you can purchase an asset to the value of $5,000 and claim the full amount as a business expense immediately rather than depreciation spreading the cost of the asset out over the life of the asset.
This will only apply to 16 March 2021. Then this amount will be permanently set at $1,000.
The Provisional Tax Threshold for the 2021 financial year onwards has increased from $2,500 to $5,000. The 2020 tax year will only generate a provisional tax assessment for the 2021 financial year if the residual income tax is over $5,000. This is intended to be a permanent change.
Remitting of any interest and penalties due to late payments of GST and other taxes made to the IRD will be considered on a case by case basis by request once the debt has been paid in full. If you were unable to make a tax payment on time because of the economic effects of the COVID-19 outbreak, IRD will consider relief. This relief would only be available at their discretion, they may request documentation and bank statements to verify your financial position.
If you are having trouble making payments, please get in contact with us as soon as possible so we can put measures in place
With new tax debt Inland Revenue will consider instalment arrangements, deferred payment start dates,partial write-off due to serious hardship, and payment of the remaining tax by instalments.
Pre COVID-19 debt instalment arrangements that you are unable to maintain due to financial hardshipcaused by Covid-19 can be requested to be renegotiated. You should contact your accountant or Inland Revenue as soon as possible to discuss what new payment options would be applicable.
IRD has removed the work hours requirement from the IWTC eligibility criteria. This was set at 20 hours a week (sole parents) or 30 hours a week (couples). This means that working families who have a reduction in working hours as a result of COVID-19 do not lose their eligibility for the IWTC.
The employer will not be liable for GST on the subsidy received from MSD
Wage subsidies and self-isolation leave subsidies should be processed as a normal wage. All deductions of PAYE, KiwiSaver, Student Loans, Child Support etc. are made as normal.
The wage subsidy will be used to offset the wage expense for the period covered.
Many self-employed people will receive the subsidy in the 2020 tax year, but (in most cases) only 1 or 2 weeks of it relates to the 2020 tax year.
These payments qualify as ‘compensation’ and can therefore be returned in the income year which the income being replaced would have been derived, they are not subject to GST.
This subsidy is not subject to ACC and must be declared as other income in the IR3 return, todifferentiate between income types.