COVID-19 - Tax Changes (19 March 2020)

General rules 

The most important thing (for now at least) to consider is the general rules for managing tax payments.  

If you are unable to pay your tax, then there is already a standard process to delay or seek write offs for interest, penalties and/or core tax.   

Please contact us if you have any concerns. 

Provisional tax threshold changes 

Currently, taxpayers with a residual income tax of NZ$2,500 or more are required to pay provisional tax throughout the year.  

This threshold will be increased to NZ$5,000 from the 2020/21 tax year, meaning that less businesses (and individuals) will need to front the cash to meet their provisional tax obligations.  It’s important to note that this is only a deferral. 

Low value asset change 

Currently low value assets (under $500) are deducted in the current year and higher value assets are depreciated (i.e. the expense is claimed over multiple years). 

As a temporary measure, assets costing up to $5,000 will be eligible for an immediate deduction for the 2020/21 income year. From the 2021/22 income year, the existing NZ$500 threshold for an immediate deduction will be increased to NZ$1,000 on a permanent basis. 

This is an incentive to spend more in the 2020/21 tax year. 

Depreciation on commercial buildings 

Depreciation deductions at 2% diminishing value will be re-introduced for commercial and industrial buildings from the 2021/22 income year.  

The depreciation deductions will be available to all sectors and will apply on a permanent basis.  

Building owners will be able to adjust provisional tax payments immediately in anticipation of the additional deductions that will become available. 

Working for families 

The government has removed the “hours” test from the In-Work Tax Credit from 1 July 2020. 

End of year filing targets 

There is not a lot of detail, but we understand that end of year filing targets will be relaxed. 

Remission of use of money interest 

Businesses and individuals who are adversely affected by COVID-19 and who can demonstrate the inability to pay tax by the due date may be eligible for a use-of-money interest write-off.  

The relief will apply to all tax payments including provisional tax, PAYE and GST due on or after 14 February 2020.  

This measure will last for two years, unless extended by the Government. Details on objective tests to be applied will be released by Inland Revenue in the coming days.