April sees the start of a new financial year for many businesses and a number of changes have been introduced that will affect employers moving forward.
On the 1st April the minimum wage rate was increased from $16.50 an hour to $17.70 an hour. The starting out and training wage also increased from $13.20 an hour to $14.16 an hour. The Government has also set indicative minimum wage rates of $18 an hour from the 1st April 2020, increasing to $20 an hour from the 1st April 2021.
Employees must be receiving at least the minimum wage rate for hours worked, even when employees are on a salary. This may mean that an employee’s pay needs to be topped up at certain times of the year if extra hours are worked. Non cash benefits such as the provision of accommodation on the farm that form part of an employee’s employment package, are included when calculations regarding minimum wage are made.
Payday Filing became mandatory on the 1st April. Awareness of Payday Filing is very high and most businesses that we have been dealing with are well equipped for the changes that are taking place. Payroll software is proving popular as it is linked to IRD’s systems to allow the payroll information to flow directly to them. Payroll software also allows employers to keep track of employees days off (annual leave entitlements), public holidays worked (and days in lieu owed) and payslips are automatically emailed to employees after each pay run.
On the 1st April the Domestic Violence/Victims Protection Act 2018 came into force on the 1st April. This imposes new obligations on employers. On the 6th May new legislation covers rest and meal breaks under the Employment Relations Amendment Act 2018. Also on the 6th May 2019, ninety day trial periods for new employees will only be available to employers with fewer than twenty employees.
Changes in the Pipeline
There has been much spoken and written about the possibility of a capital gains tax on residential property. Proposals have also been made regarding the ring fencing of losses from residential property investment. The Government’s tax working group is still working through the details, but it is clear that the tax breaks from residential property that investors have had in New Zealand for many years, are coming to a close. Another of the proposals of the tax working group is to increase the threshold for when provisional tax applies from the current level of $2,500 of residual income tax to $5,000 a year, which will be advantageous for many small business owners on lower incomes.
Providing Accommodation as a Business
The Inland Revenue Department have produced a number of consultation documents to explain the tax implications of renting out your home, or a room in your home, with a focus on Airbnb and similar operators. This includes short stay accommodation, boarders and other types of accommodation. In general, if you are making a profit from renting out your house or a part of your house, then this needs to be declared in your tax return as income each year. Costs and expenses incurred in providing this accommodation can be claimed.
Heading into winter the feed situation on farms has improved with some good early Autumn rain. The payout forecast looks positive for dairy farmers, while drystock farmers will also be hoping that prices hold up well over the next twelve months. Kiwifruit and other industries are seeing a real resurgence.
Banks and financial institutions are closely monitoring their customers results and financial position, and more than ever, it is important to plan and forecast for the year ahead to ensure that good progress is being made for all types of farming businesses.