Tax Adjustments/Package available for indviduals and businesses under the Covid-19 Crisis Environment

The NZ Government has been using the tax system to provide assistance to people and businesses to deal with the Covid-19 Lockdown.  We have outlined the benefits announced to date below.

There is a full summary of the initiatives in the file below as of 23/04/2020.

To get updated information, check out https://www.ird.govt.nz/roles/tax-agents/covid-19.

27th March 2020 Legislation

▪ The COVID-19 Response (Taxation and Social Assistance Urgent Measures) Bill was passed on 27th March 2020, and enacted the following measures:

▪ Reintroduction of depreciation on commercial buildings;

▪ Increase in the provisional tax threshold;

▪ Up-front deduction of low value assets threshold increase;

▪ Research & Development Tax Credit refundability;

▪ Use of Money Interest relief; 

▪ Information sharing;

▪ In Work Tax Credit eligibility criteria;

▪ Working for families tax credit entitlement for emergency benefit recipients;

▪ GST on COVID-19 related payments (related to the wage & leave subsidies administered by MSD)

▪ Increase in the winter energy payment

15th April 2020 Announcements for Small Businesses

The Government has announced a suite of new measures to provide relief for businesses during the COVID-19 pandemic. These include:

▪ Greater flexibility for taxpayers in respect of statutory tax deadlines;

▪ Changes to the tax loss continuity rules;

▪ A tax loss carry-back scheme;

▪ Measures to support commercial tenants and landlords; and

▪ Further business consultancy support.

11th March 2020 – Business Tax Package – Information below is form https://www.ird.govt.nz/Updates/News-Folder/tax-relief-coronavirus

·       Giving Inland Revenue the discretion to remit use-of-money interest (UOMI) for customers significantly adversely affected by COVID-19.

·       Increasing the provisional tax threshold from $2,500 to $5,000 from 2020/2021.

·       Increasing the small asset depreciation threshold from $500 to $1,000 – and to $5,000 for the 2020/21 tax year.

·       Allowing depreciation on commercial and industrial buildings from 2020/2021.

Writing off use-of-money interest

The New Zealand Government has announced on 17 March 2020 that it is proposing to give Inland Revenue the ability to write-off the interest we charge for late payments, also known as use-of-money interest (UOMI).

This is proposed for payments due on or after 14 February 2020.

Once legislation is passed, it is likely you’ll need to let us know you have been significantly affected by the COVID-19 outbreak and that you’re unable to make your payments by their due date.

Provisional tax estimates

You may be able to make an estimate or re-estimate of provisional tax, if your circumstances have changed due to the COVID-19. We can arrange early refunds if provisional tax has been overpaid.

Unable to pay your tax

If you're having difficulty paying outstanding tax, we can help you set up an instalment arrangement. You can apply in myIR.

You can also apply for a write-off due to serious hardship when you know you won't be able to pay the full amount.

Late filing and late payment

Extensions to filing dates for some income tax returns may be available. Extensions can't be granted for GST and PAYE returns, but any penalties for late filing may be remitted.

Under limited circumstances penalties for late payments incurred due to the effects of the COVID-19 may also be remitted. 

Certificate of exemption

If you're currently involved in contract work where schedular payments are to be deducted, such as forestry or bush work of all kinds, fishing boat work for profit-share, you may be entitled to a certificate of exemption.

17th March 2020 – Individual Tax Package – Information below is from

·       Wage subsidy (details provided in end March Moneyworks newsletter). For more information check out this web page https://www.ird.govt.nz/covid-19/covid-19-wage-and-leave-subsidies

·       Removing the hours test from the In-Work Tax Credit (IWTC) from 1 July 2020.  – Find out more here - https://www.ird.govt.nz/covid-19/covid-19-families

15 April 2020 – Businesses Tax Package: Information below is from https://www.ird.govt.nz/Updates/News-Folder/covid19-business-changes

Temporary loss carry-back scheme

This temporary change should be introduced in a bill in the week beginning 27 April.

Businesses expecting to make a loss in either the 2019/20 year or the 2020/21 year would be able to estimate the loss and use it to offset profits in the past year. In other words, they could carry the loss back one year.

This change means we could refund some or all the tax already paid for the year they were in profit. It means firms could cash out all or some of their losses in 2019/20 or 2020/21. Without this change, firms would have to carry forward any loss to a year when they make a profit.

Taxpayers do not need to rush to re-estimate their provisional tax before 7 May. Part of the proposed law change would make it possible for them to re-estimate it after the date of the final instalment. This will give them more time to work out any estimated loss for the 2020/21 income year.

Between now and 27 April, officials will consult with tax advisors to ensure the law and administrative guidance is as clear as possible.

While we aren’t able to answer questions before the law passes, we encourage businesses to raise with us any issues they want to see addressed in the legislation or administrative guidance. You can email us at loss-carry-back-issue@ird.govt.nz

We will not respond to each individual email, but we'll attempt to answer questions in the published guidance.

Permanent loss carry-back scheme

The Government proposes a permanent loss carry-back scheme, applying to the 2021/22 and later income years.

There will be public consultation about this measure in the second half of 2020.

Changes to the tax loss continuity rules

The Government proposes relaxing the tax loss continuity rules. It intends passing legislation before the end of March 2021, and for it to apply to the 2020/21 and later income years.

Currently, if a company has more than a 51% change in ownership it cannot keep its tax losses.

The introduction of a ‘same or similar business’ test, means a business could carry forward losses. To meet the test, the business must continue in the same or a similar way it did before ownership changed. This test is modelled on Australia’s rules.

Some companies will be looking to raise capital to keep afloat now and to recover in the future. Raising capital may result in a change to the existing shareholder structure.

Relaxing the rules will ensure companies in this position could carry losses forward to offset income when they return to profit.

Being able to carry forward losses makes the business more valuable to investors. The rules should improve access to capital for businesses.

We understand that some businesses and investors will want to know now if the proposed changes will apply to them, however we need to take time to work with the tax community to make the law clear. There will be public consultation on the proposed changes in the second half of 2020. It is important the law changes prevent loss trading.

Allowing Inland Revenue to change due dates

The Government proposes giving Inland Revenue discretion to temporarily change dates, timeframes and procedural requirements outlined in a number of Acts administered by them. This provision will apply to businesses and individuals affected by COVID-19.

We will publish further guidance in the coming weeks after targeted consultation with tax advisors.