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IRD Business Tax Update - May 2020

Inland Revenue - Te Tari Taake

Business Tax Update


Issue 107
March 2020

Reminders


We have several planning calendars to help you meet your obligations. 

Remember: If a due date falls on a weekend or a public holiday, we can receive your return and payment on the next working day without a penalty being applied. But, for provincial anniversary dates, this only applies if you're in the province celebrating the holiday and only if you usually make tax payments over-the-counter.

 

Small business cash flow scheme (SBCS) loan

Applications are now open for the Small Business Cashflow (Loan) Scheme (SBCS) - a one-off loan to small to medium businesses impacted by COVID-19.

The SBCS is for businesses with 50 or fewer full-time equivalent employees, including sole traders and those that are self-employed. In most cases, eligible businesses will be entitled to a loan amount of $10,000 plus $1,800 per full-time-equivalent employee, to a maximum of $100,000.

The eligibility criteria is the same as for the Wage Subsidy Scheme (WSS) and you can apply even if you haven’t applied for the WSS. Please note you’ll have to declare you’re a viable business, use the money for core business operating costs and enter into a legally binding loan contract.

We recommend you talk to your financial advisor before applying.

The only way to apply is in myIR under ‘I want to’ and applications are open till 12 June 2020. Funds will be paid directly into your bank account within five working days once approved.

You must be legally allowed to borrow money for your entity to be able to apply for the SBCS loan. Please note your tax agent can not apply on your behalf.

For more details on how the scheme will work, eligibility criteria and a calculator to determine the loan amount that can be borrowed, go to ird.govt.nz/Covid19

 

Temporary loss carry-back

Businesses expecting to make a loss in either the 2019-20 income year or the 2020-21 income year can use that loss to offset profits they made the year before. In other words, they can carry the loss back one year to the preceding income year. This can be done before the loss year return is filed.

There are two ways to claim your loss carry-back.

  • Include the carried-back loss in your tax return – we will automatically refund any overpaid tax.
  • Ask for a refund of any provisional tax you have paid for 2019-20 if you are going to carry back a loss from 2020-21.

We can refund some or all of the tax already paid for the preceding year before the loss year has finished by enabling customers to estimate their loss.

If you choose to use the loss carry-back scheme you must first elect to participate in the scheme under the ‘I want to’ section of myIR. Refunds will be processed quicker for claims made through myIR.

Note: You do not need to have filed the loss year return to claim the loss carry-back.

For more information, how to claim and implications for shareholder employees go to ird.govt.nz/loss-carry-back

Log in or register for a myIR account today ird.govt.nz

 

Taxation and Social Assistance Urgent Measures

The recent COVID-19 Response (Taxation and Social Assistance Urgent Measures) Act 2020 included the following income tax changes.

Depreciation deductions have been reinstated for non–residential buildings from the 2020-21 income year.

The threshold for claiming a deduction for the full cost of a low-value business asset in the year it was purchased increases from $500 to $5,000 for assets purchased in the period 17 March 2020 to 16 March 2021. For any assets purchased from 17 March 2021 the threshold reduces from $5,000 to $1,000. Depreciation is still available for business assets over those values.

The residual income tax threshold at which provisional tax becomes payable increases from $2,500 to $5,000 for the 2020-21 and later income years.

The application date for the broader refundability rules for R&D tax credits is brought forward.

For a detailed explanation a special report on Covid-19 tax legislation is available at taxpolicy.ird.govt.nz/ publications

 

Website changes complete and Tax Technical site live

Our work to redevelop the Inland Revenue website is complete, with all content now housed on our new site.

This includes the first release of our new and improved Tax Technical website (taxtechnical.ird.govt.nz), which is the place to go to view all rulings, determinations, interpretation statements and more.

Over the past few months we’ve been beta-testing the site. Customer feedback received during this time helped us further improve this website before the official release.

We’ll make further improvements to the Tax Technical site throughout 2020.

 

Income tax returns due 7 July

Remember to file your tax return on time. The quickest and easiest way to file your income tax return is in myIR.


Advantages of myIR

  • You can file anytime, 24 hours a day, 7 days a week .
  • Most of your details will be automatically populated and calculated for you.
    You’ll receive immediate confirmation we've received your tax return.
  • You won’t need to worry about it arriving by 7 July through the post.

You can file the following returns in myIR

  • IR3 individual income tax return.
  • IR3NR non-resident individual income tax return.
    IR4 companies income tax return.
  • IR7 partnerships and look-through companies income tax return.
    IR8 Māori authority income tax return.
If you do not already have a myIR account, go to ird.govt.nz to register today - the ‘Register’ button is on the top- right corner of our website.

Go to ird.govt.nz/7-July to find more information and to file your return.


Paper returns


If you are filing an IR6 trust or estate income tax return or an IR9 clubs and societies income tax return, you will need to do the following:

  • print the return
    complete and sign it
  • send it to our postal address (printed on the return), ensuring it arrives by 7 July.
 

New rules for reporting residential property income

From the 2019-20 income year, you can now only claim deductions up to the total amount of income you earn from your residential rental property. You can no longer use excess deductions from your property to offset other income such as salary and wages.

The new residential property deduction rules (also known as the ring-fencing rules) apply to most residential rental properties. The rules do not apply to some residential properties such as your main home and residential properties that are subject to the mixed-use asset rules.


Completing your income tax return


The new rules mean that when you complete your 2019-20 income tax return, your total residential rental property deductions generally cannot be more than your residential property income.

If you have excess deductions (rental losses), this amount must be carried forward to the next year that you earn income from your residential property.

If you own more than one residential rental property and use the portfolio basis for them, you can offset deductions for all properties in the portfolio against income from all properties in the portfolio.


Filing a return in myIR


In the "Build your return" section of your income tax return, make sure both “Residential rental income” and "Other Rental Income" are selected. You need to manually select "Residential rental income".

Unless you have commercial rental income - leave the "Other Rental Income" box blank.


Filing a paper return


Complete the “Residential property” section in a paper return.

We encourage you to use the Residential property deductions - IR1226 worksheets to help you work out the amounts to put on your income tax return and where to enter them on the return. We also encourage you to use the Rental income - IR264 guide and the relevant income tax return guide. You can find these on our website.

For more information about the changes to residential property deduction rules go to ird.govt.nz/ring-fencing

 

Important Message for Research and Development Tax Incentive (RDTI) applicants

Before applying for your General Approval, RDTI applicants need to be familiar with the RDTI requirements. These are set out in the following guides.

Research and Development Tax Incentive: Guidance – IR1240
Research and development supplementary return guide – IR1060

An understanding of this guidance and the concepts is necessary before you complete the general approval applications.

Callaghan Innovation's R&D specialists will assess individual R&D activities. Make sure you provide enough technical detail so that there is no delay in the R&D assessors making their recommendation to us.

More information and resources, as well as a link to the guidance, is available on the RDTI Hub www.rdti.govt.nz

We are looking forward to the new normal - May 2020

With the news announced yesterday, although we have been operating during Level 3 we are looking forward to what Level 2 will bring. We look forward to seeing you back in our offices.

We have procederes in place to protect both you, our clients, and our staff.

 

This photo is a few of our staff who worked in the office during Level 3.

 

Cheyne Waldron, Chrissy Beck, Toni Wright, Charlotte Needham, Ashleigh New, Kim Brown, Casey Rolton

IRD Loss carry-back and Covid-19 SBCS

May | 2020   Issue no: 10

        

Kia ora koutou,

Recently the Government announced more tax changes to assist NZ businesses to manage the impacts of COVID-19. Legislation has now been passed to bring some of these changes into effect.

They include:

The Loss carry-back scheme and new discretion to vary requirement which we cover in more detail in this email.

The COVID-19 Small Business Cashflow Scheme (SBCS), where small to medium business owners, including sole traders and the self-employed, may be eligible for a oneoff loan if they have been adversely affected by COVID-19. We will update you with more details next week. You can also keep an eye on our website at www.ird.govt.nz/covid19

In this update we will also tell you about a new working from home determination.

Temporary loss carry-back scheme

Businesses expecting to make a loss in either the 2020 year or the 2021 year can use that loss to offset profits they made the year before. In other words, they can carry the loss back one year to the preceding income year. This can be done before the loss year return is filed.

There are two ways to claim your loss carry-back:

  • Include the carried-back loss in your tax return – we will automatically refund any overpaid tax
  • Ask for a refund of any provisional tax you have paid for 2020 if you are going to carry back a loss from 2021Note, that these loss carry-back refunds will be paid out to the bank account we have on record, including to where there are redirects in place. They will not be offset against other debt your clients may have due (except debt for income tax in the same period). So please continue to help your clients who have any other payments due - the usual payment options are available.Refunds will be processed quicker for claims made through myIR. Log in or register for a myIR account today.By when do I need to re-estimate my provisional tax?
  • You and your clients can re-estimate their provisional tax as many times as needed as long as you do so before the tax return for the year is filed or due, whichever is earlier.  
  • Note that your clients do not need to have filed the loss year return to claim the loss carry-back.
  • If your clients choose to use the loss carry-back scheme they (or you on their behalf) must first elect to participate in the scheme under the ‘I want to’ section of myIR.
  • We can refund some or all of the tax already paid for the preceding year before the loss year has finished by enabling customers to estimate their loss. Refunds will be processed a lot faster if you use myIR.

Subvention payments, profits paid as shareholder-employee salaries or dividends

The following situations cannot be reversed to take advantage of a loss carry-back:

  • company profits that have been paid out as a dividend or shareholder employee salary in the preceding year
  • a subvention payment made in a preceding year.

Shareholder-employees impacted by a 2020 loss carried-back claim

Shareholder-employees who have paid provisional tax on the basis they would receive a shareholder salary in the 2020 year may re-estimate their provisional tax if their company is going to claim a loss carry-back in 2020 which will reduce their shareholdersalary. Any overpaid provisional tax will be refunded.

Shareholder-employees must let us know they are going to re-estimate their provisional tax because of a loss carry-back by using the opt-in service in myIR (in the ‘I want to’ section of your income tax account in myIR account). They can then re-estimate their provisional tax up to the time their 2020 return is due or filed. In all other situations the last day for a provisional tax estimation is the 3rd provisional tax instalment date.

For more information go to www.ird.govt.nz/loss-carry-back  

For information on how to claim a loss carry-back go to www.ird.govt.nz/claim-losscarry-back  

Note, we’ll also be letting business customers know about these changes so they may also contact you.

New discretion to vary requirement

To help customers manage the impacts of COVID-19, Inland Revenue now has a discretion to vary a requirement when it would be impossible, impractical or unreasonable to comply as a consequence of COVID-19. Under this new discretion, we can extend a due date, deadline, time period or timeframe. It is also possible to modify a procedural or administrative requirement, such as the way that something must be done. In the next couple of days we anticipate we’ll have some decisions available on the website where we have already applied this discretion.

We’ll let you know when any change is made through our website and other communication channels as appropriate.

Go to www.ird.govt.nz/Updates/News-Folder/covid-19-new-discretion-to-vary-arequirement-under-an-inland-revenue-act for more information.

Working from home determination

Inland Revenue has issued a new determination which means employers can pay employees, who are working from home, up to $20 a week tax-free for expenses such as additional heating costs, without having to estimate or show what the employee's actual expenses were.

Employers can also now make a tax-free payment of up to $400 per employee for furniture costs, without having to work out actual expenses.

The determination is a temporary response to the Covid-19 pandemic and only applies to payments for expenses incurred between March 17 and September 17 2020.

This determination is not intended to suggest that employers must make such payments to staff who were working from home.

Go to https://www.taxtechnical.ird.govt.nz/determinations/miscellaneous/determinationee002-payments-to-employees-for-working-from-home-costs-during-the-covid-19pandemic for more information.

Please ensure this information is shared with your colleagues.                       

Ngā mihi

Corey Sinclair

National Leader

Community Compliance

COVID 19 MESSAGE TO CLIENTS - 24 MARCH 2020

MESSAGE TO CLIENTS 24 MARCH 2020

Bailey Ingham is Open for Business, though our doors are closed from 5pm today

The ongoing impact of the COVID-19 virus is having a huge effect on New Zealand society and the economy. At Bailey Ingham we are doing everything we can to prioritise the wellbeing of our staff, clients and communities to help contain the spread of COVID-19. Following the Prime Minister's announcement on Monday, our staff are working remotely for the time being, from Wednesday 25 March.

We have invested in our remote working capability over recent years and therefore it will be business as usual for our three offices as we continue to focus on providing an excellent level of service for our clients. Essential services such as payroll processing and PAYE and GST filing will continue as normal and we have a committed team of staff to assist all clients with advice and assistance.

We will continue to complete your GST returns and other work, but maybe in a slightly different manner. As you will not be able to drop records into the office, staff may request the content of these (details of some transactions) by email or phone.

We know that many of our clients are working through similar challenges to ours and that these are uncertain times for everyone. It is apparent, because of the large-scale influence that the virus is having on finances for almost all businesses in New Zealand, that the government announcements of financial support will only partly offset the problems in this area, and there will be job losses and businesses in financial difficulty. We will continue to provide assistance and are working closely with many businesses to assist with cashflow forecasts and business subsidy applications.

Information regarding the COVID-19 Economic Support Package is attached.

We wish you and your family the very best as New Zealand comes to terms with the ‘lock-down’ situation. We are here to help, please call or email if you require assistance at any time.

 

INFORMATION SHEET FOR BAILEY INGHAM CLIENTS

Re: COVID- 19 – Economic Support Packages for Businesses

The Government have announced a package to support businesses that are affected by the Coronavirus outbreak. The main two packages for businesses (as at 24 March 2020) are as follows:

  1. Wage Subsidy  

The COVID-19 wage subsidy will be paid at a flat rate of $585.80 a week for employees working 20 hours or more per week, or $350 a week for employees working less than 20 hours per week. The subsidy is paid as a lump sum and covers 12 weeks per employee. The subsidy is for wages only and is to help keep your staff employed and to ensure the future viability of your business. Businesses can only get this subsidy once. If you stop paying employees after you have already received a subsidy for the next 12 weeks, then you will have to pay some of that subsidy back.

This subsidy has been put in place for all businesses that are affected by COVID-19 and face laying off staff or reducing hours because of a drop in income. The main qualification is that your business must have experienced a minimum 30% decline in actual or predicted revenue over the period of a month when compared with the same month last year (there are some exceptions to this such as new businesses or businesses that have grown substantially over the past year). This drop in income must be directly related to COVID-19. In order to achieve the subsidy your business must make the best efforts to retain employees and pay them a minimum of 80% of their normal income for the subsidised period.

    2.   Leave Payment

The second payment available to businesses is the leave payment. From 17 March the COVID-19 leave payment has been available to support businesses and employees if they:

  • Need to self-isolate as determined by the Ministry of Health guidelines
  • Cannot work because they are sick with COVID-19
  • Cannot work because they are caring for dependents who are required to self-isolate or are sick with COVID-19

The COVID-19 leave payment will be available for 8 weeks. Employers will be able to apply for this more than once. It will be paid to employers who have eligible employees and they must pass the payment onto their employees in full. The COVID-19 leave payment covers full-time, part-time, casual employees and contractors. The COVID-19 leave payment will be paid at a flat rate of $585.80 to a person working 20 hours or more per week, or $350 to a person working less than 20 hours per week. Employers receiving the payment for those required to self- isolate can receive it for 14 days. As people may be required to self-isolate more than once then employers will be able to apply for this on an as needed basis.

Businesses and their employees can agree to use any form of paid leave (e.g. annual leave) to cover their period of self-isolation. However, employees are not required to have used all of their annual leave entitlements before they can receive this payment. The employee must have been legally working for their employer at the time of self-isolation and they must have been expected to work for the period of self-isolation. Self-employed people who are not earning at least the minimum wage are not entitled to the leave payment.

Applying for the Wage Subsidy and Leave Payment Subsidy

Applications should be done online at the website workandincome.govt.nz. Here is the link to the information page:

https://www.workandincome.govt.nz/products/a-z-benefits/covid-19-support.html#null

And here is the link to the Application form (employer): https://services.workandincome.govt.nz/ess/employer_applications/new

And here is the link to the Application form (no employees):

https://services.workandincome.govt.nz/ess/trader_applications/new

The application is made online and you will need to supply the business IRD number, business name and address, as well as names and IRD numbers of your employees. Contact details for your business and your employees must be given. Work and income will check if you do indeed qualify for one of the subsidies and they will contact you by phone should they require further information regarding the application. Please note that you will require a New Zealand business number which is a 13-digit number. Companies will already have a 13-digit number (search the companies office website for this) https://companies-register.companiesoffice.govt.nz/ However, many sole traders, partnerships and Trusts will need to apply for a New Zealand business number. The link for this is here:    https://www.nzbn.govt.nz/get-an-nzbn/get-your-nzbn/

The actual application form for the subsidies is relatively straight forward. It appears that no financial information is immediately required, however, WINZ will be contacting businesses, so it is important that you do have financial information or projections available to show that your income has been reduced by 30% to get the Wage Subsidy Payment. With the country going into lockdown mode, some businesses where employees are not able to work should apply for the Leave Payment first, and then the Wage Subsidy payment later on. Each business will be different.

      3. Tax Relief

In addition to the cash subsidy payments available, the government is also supporting businesses through areas of tax relief including a relaxation of the rules regarding use of money charges for late IRD payments. We always recommend, however, if you can’t make a payment to the Inland Revenue Department, that you contact them and make an arrangement to pay (prior to the due date).

Continue to file all returns such as PAYE and GST even if you can’t immediately make payment to IRD. There are other tax changes including an increase in the provisional tax threshold to $5000 (was $2500) and assets used for business can be written off fully in the year purchased during the 2021 financial year.

Please contact one of our friendly team should you require any confirmation regarding the above. As always, we are here to help you through this difficult time. If you have any queries or require more specific advice, please contact:

Cheyne Waldron   This email address is being protected from spambots. You need JavaScript enabled to view it.  Bridget Boshier This email address is being protected from spambots. You need JavaScript enabled to view it.

Layne Kerr This email address is being protected from spambots. You need JavaScript enabled to view it.   Kelly Bair This email address is being protected from spambots. You need JavaScript enabled to view it.

Robert Ingham This email address is being protected from spambots. You need JavaScript enabled to view it.   Jayne Adams This email address is being protected from spambots. You need JavaScript enabled to view it.

Tracey Hall  This email address is being protected from spambots. You need JavaScript enabled to view it.  David Bailey This email address is being protected from spambots. You need JavaScript enabled to view it.

Directors and Associates

Bailey Ingham Ltd

INFORMATION SHEET FOR CLIENTS - COVID 19

Re: COVID- 19 – Support Packages for Businesses

On Tuesday the government announced a $5 billion package to support businesses that are affected by the Coronavirus outbreak. The main two packages for businesses are as follows:

  • Wage Subsidy  

The COVID-19 wage subsidy will be paid at a flat rate of $585.80 a week for employees working 20 hours or more per week, or $350 a week for employees working less than 20 hours per week. The subsidy is paid as a lump sum and covers 12 weeks per employee. The subsidy is for wages only and is to help keep your staff employed and to ensure the future viability of your business. Businesses can only get this subsidy once and the maximum that can be paid to an individual business is $150,000.

This subsidy has been put in place for employers or self-employed businesses that are affected by COVID-19 and face laying off staff or reducing hours     because of a drop in income. The main qualification is that your business must have experienced a minimum 30% decline in actual or predicted revenue over the period of a month when compared with the same month last year. This drop in income must be directly related to COVID-19. In order to achieve the subsidy your business must have taken active steps to mitigate the impact of Coronavirus and your business must make the best efforts to retain employees and pay them a minimum of 80% of their normal income for the subsidised period.

  • Leave Payment

The second payment available to businesses is the leave payment. From 17 March the COVID-19 leave payment has been available to support businesses and employees if they:

  • Need to self-isolate as determined by the Ministry of Health guidelines
  • Cannot work because they are sick with COVID-19
  • Cannot work because they are caring for dependents who are required to self-isolate or are sick with COVID-19

The COVID-19 leave payment will be available for 8 weeks. Employers will be able to apply for this more than once. It will be paid to employers who have eligible employees and they must pass the payment onto their employees in full. The COVID-19 leave payment covers full-time, part-time, casual employees and contractors. The COVID-19 leave payment will be paid at a flat rate of $585.80 to a person working 20 hours or more per week, or $350 to a person working less than 20 hours per week. Employers receiving the payment for those required to

self- isolate can receive it for 14 days. As people may be required to self-isolate more than once then employers will be able to apply for this on an as needed basis. It can be paid for the entire period that the employee is sick with COVID-19 but the employer must apply every 14 days.

Businesses and their employees can agree to use any form of paid leave (e.g. annual leave) to cover their period of self-isolation. However, employees are not required to have used all of their annual leave entitlements before they can receive this payment. The employee must have been legally working for their employer at the time of self-isolation and they must have been expected to work for the period of self-isolation. Self-employed people who are not earning at least the minimum wage are not entitled to the leave payment.

Applying for the Wage Subsidy and Leave Payment Subsidy

Applications should be done online at the website workandincome.govt.nz. Here is the link: https://workandincome.govt.nz/products/a-z-benefits/covid-19-support.html#null

The application is made online and you will need to supply the business IRD number, business name and address, as well as names and IRD numbers of your employees. Contact details for your business and your employees must be given. Work and income will check if you do indeed qualify for one of the subsidies and they will contact you by phone should they require further information regarding the application. Please note that you will require a New Zealand business number which is a 13-digit number. Limited Companies will have a 13-digit number. However, many sole traders, partnerships and Trusts will need to apply for a New Zealand business number. The Work & Income NZ website has a link to apply for this. The actual application form is relatively straight forward. It appears that no financial information is immediately required, however, WINZ will be contacting businesses, so it is important that you do have financial information or projections available to show that your income has been reduced by 30%.

  • Tax Relief

In addition to the cash subsidy payments available, the government is also supporting businesses through areas of tax relief including a relaxation of the rules regarding use of money charges for late IRD payments. We always recommend, however, if you can’t make a payment to the Inland Revenue Department, that you contact them and make an arrangement to pay (prior to the due date). Continue to file all returns such as PAYE and GST even if you can’t immediately make payment to IRD. There are other tax changes including an increase in the provisional tax threshold to $5000 (was $2500) and assets used for business can be written off fully in the year purchased during the 2021 financial year.

Please contact one of our friendly team should you require any confirmation regarding the above. As always, we are here to help you through this difficult time.

Our offices

 

 

 

 

Our offices are located in Otorohanga, Taumarunui and Te Awamutu

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