Six tax changes that can help you and your business survive COVID-19

28 April 2020

As part of the measures to combat the impacts of COVID-19 on both the New Zealand economy and New Zealanders personally, the government has introduced a wide range of stimulus packages.

Included in these measures are several tax changes that have now passed into legislation.

1. Depreciation on non-residential buildings restored

Depreciation deductions for non-residential buildings have been reintroduced. Depreciation will be allowed for the 2021 income year, so for most clients from 1 April 2020. The diminishing value rate is two percent and the straight line rate is 1.5 percent. This is a permanent measure that will apply to existing buildings and new buildings. The depreciation rate for residential buildings remains zero percent.

As part of the reinstating of depreciation on buildings the provision that allowed a commercial building owner a deduction for fit-out that had not been separated out from the building before the 2010/11 year has been repealed.

Both non-residential and residential buildings have some specific definitions so please refer to your adviser for those details.

2. Immediate low-value asset write-offs for more assets allowed

The low-value asset write-off threshold has been increased from $500 to $5,000 for assets purchased in the 12 months from 17 March 2020.

The $500 threshold will be permanently increased to $1,000 for assets purchased from 17 March 2021.

3. Refundability of research and development tax credits brought forward

It is proposed to bring the application date of broader refundability for the Research & Development (R&D) tax credit forward by one year to the 2019/20 income year. The corporate eligibility rules and the wage intensity rules have also been removed and the $255,000 cap has been replaced with a cap based on labour related taxes. This should enable more business to access the R&D tax credit refunds.

Anyone already part way through a claim should revisit to see if the claim can be increased.

4. Use of money interest waived

IRD can remit use of money interest charged on a late tax payment if your ability to make the tax payment on time was “significantly adversely affected by the COVID-19 outbreak”. The ability to remit interest applies to tax payments that were due on or after 14 February 2020. You must ask for the relief as soon as practicable and have made the payment as soon as practicable.

5. Provisional tax threshold increased

The threshold for having to pay provisional tax has increased from $2,500 to $5,000. This applies to the 2020-21 and later income years.

6. Definition of Full-time Earner for Family Scheme Income

The definition of “full-time earner” used to determine family scheme income has been amended to remove the minimum work hour requirements to be eligible for the In-Work Tax Credit and changed to just “earner”. An earner means a person who, for a week:

  • Is employed during the week; or
  • Has a spouse, civil union partner, or de facto partner (the partner) during the week and the partner or both of them are employed during the week.

It also includes a person who is unable to work due to being incapacitated but would otherwise be employed if not for the incapacity.

If you require any assistance understanding how the new tax legislation applies to you or your business, contact the Business Advisory team.

The views and opinions expressed in this article are those of the author/s and do not necessarily reflect the thought or position of Findex NZ Limited.

April 2020.