Tax relief summary in COVID season
In COVID season, government has announced various reliefs and incentives to support and help businesses to stay afloat in this environment. In this article, we summarise the cashflow and tax deduction concessions the government and Inland Revenue have released to date.
On our end, in response to COVID-19, we are developing and will be releasing recorded and live webinars to teach taxpayers on how to prepare income tax returns. This way, taxpayer can reduce costs and assign the saved funds to other priorities. In our first series, we will develop videos for preparing individual income tax returns, Goods & Services Tax, PAYE & Fringe Benefit Tax.
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1. Increase in provisional tax threshold
Threshold for provisional tax will increase from $2,500 to $5,000 for the 2021 income year.
2. IRD’s remission of penalties and interest on late tax payments
Inland Revenue shall remit interest and penalties for payments due after 14 February where it is late due to the effect of COVID-19. However, a remission request needs to be made to Inland Revenue.
3. Reinstatement of depreciation deduction for commercial buildings
Depreciation deductions for commercial and industrial buildings is restored from 0% to 1.5% for straight line method and 2% for diminishing value method for the 2021 income year.
4. Increase in low value asset threshold
Low value asset threshold will increase from $500 to $5,000 for the 2021 income year (and back to $1,000 from 2022).
5. Cashing out Research & Development tax credit earlier
Wider refundability of research & Development tax credit have been advanced from 2021 year to 2020 year.
6. Losses carry back for businesses
Loss carry back scheme has been introduced for losses expected in the 2020 and 2021 income years.
For companies, please note the following:
- Sufficient imputation credit account balance is needed (i.e. refund amount cannot exceed imputation credit account balance);
- 49% shareholder continuity for the period the losses are utilized to the period the losses are generated; &
- are required with shareholder-employees due to potential deemed dividend and fringe benefit tax impacts.
7. Lump sum wage subsidy
Wage subsidy can be applied by businesses who have suffered decline in revenue of a minimum 30% in actual or forecast over the period of a month when compared to the same month last year. There are various declaration to be made along with the application.
The subsidy is paid as a lump sum and covers 12 weeks per employee. Payments are $585.80 for full time employee and $350 for part time employee per week per worker. A further 8 weeks have been extended but a key eligibility criteria is decline in revenue of a minimum 50% instead of minimum 30%.
8. Interest free loan for small businesses
Government can lend an interest free loan for one year to small businesses that are affected by COVID-19 to a cap of $100,000. Eligibility criteria is similar to lump sum wage subsidy.
After one year, a 3%/pa interest rate will apply to outstanding amount of the loan. The loan must be repaid within 5 years but no repayment is required within 2 years.
It is evident there are continuous support and financial assistance from government agencies and Inland Revenue to help you and your business stay afloat. It’s important to get in touch with relevant people early. Inland Revenue can help you and your business, provided you get in touch with them early. We can also discuss options available for you and your business should a crisis hit. Feel free to contact us at firstname.lastname@example.org or call us at +64 22 061 6521.
Disclaimer: Our team is dedicated to helping you continue with business as usual, as much as you can. Information on government help is changing constantly and within hours of articles being added, the specifics may be out of date or only partially accurate. While we endeavor to keep this website accurate and current, our top priority is providing our clients with dedicated and relevant personal advice. If you need specific and up-to-date information, please seek help from your usual advisor directly.
No liability is assumed by NZ International Tax & Property Advisors Ltd for any losses suffered by any person relying directly or indirectly upon any article within this website. It is recommended that you consult your advisor before acting on this information.