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No Interest Deductions on Residential Properties

For residential rental properties purchased after 27 March 2021 that are not new builds, you will not be able to claim any interest deductions. Interest incurred on a new build that is bought for investment purposes is still able to be claimed as an interest deduction. There is limited detail on what qualifies for a new build, although it appears to include properties that are acquired within a year of the Code Compliance Certificate being issued. From 1 October 2021, residential property invest...

Minimum Wage Increase

From 1 April 2021, the adult minimum wage will increase from the current rate of $18.90 per hour to $20.00 per hour.The starting-out and training minimum wage rates will also increase on 1 April 2021, from $15.12 to $16.00 per hour remaining at 80% of the adult minimum wage. There are 3 types of minimum wageThe adult minimum wage – applies to employees aged 16 years or older who are not starting outworkers or trainees.The starting out minimum wage – applies to workers who are:16 and 17 ...

Common Expenses for Contractors

We are often asked “what expenses can be claimed as a deduction against contracting income?” To claim a deduction, there must be a nexus between the expense incurred and the income being earned.  If there is no nexus, the expense is unlikely to be deductible (and would be considered private expenditure).Common expenses incurred by contractors include the following. Vehicle/Fuel CostsWith vehicle/fuel costs, there are two options available:Actual costsKeeping a logbookKeep track of the a...

Low Value Asset Threshold

Prior to 17 March 2020, if an asset was purchased that cost more than $500, the asset was capitalized, and no immediate tax deduction was available. Depreciation (the write down of the asset over the assets life, calculated at a specific rate set by the IRD) was allowed as a tax-deduction each year. Any asset below the $500 threshold was able to be claimed as a deduction in full.When the Covid-19 pandemic arrived, the government responded by temporarily increasing the low value asset threshold f...

Depreciation on Commercial Buildings

In 2011, the government changed legislation to remove depreciation being claimed on all buildings. Due to Covid-19, the government have done a U-turn on this decision and from 1 April 2020, have reintroduced depreciation on commercial and industrial buildings. The applicable depreciation rates are 2% diminishing value and 1.5% straight line. Depreciation is being reintroduced to encourage investment into buildings, support short term cash flow and promote long-term economic recovery.Re...

New Trust Act 2019 - Part 2 - Prepare Now

Welcome to part 2 of our Trust Act updates – what you need to do now to prepare for the new Act. Part 1 of our series of articles, covered an overview of the new Act and can be read here.The new Act commences from 31 January 2021 and its application will be different for each trust depending on the nature, assets, and purpose for the trust.Please contact us now if you would like to discuss the purpose of your Trust with us, ensure it meets your needs moving forward (in conjunction with th...

Companies 28% Tax Rates

A company has a tax rate of 28%. This is a flat tax rate and applies to all company profits.So, why not structure your business, investments, or contracting in a company and only pay tax at 28%? Individuals marginal tax rate is 33%, so would you not be 5% better off and pay less tax (only 28% compared to 33%)?For individuals earning more than $70k pa and paying the highest marginal tax rate (33%), companies may not provide tax savings. They may however, delay paying a further 5% tax. This m...

New Trust Acts 2019 - Part 1 - An Overview

Accountants have received guidance about the new Trust Act 2019. This new law (the first in more than 60 years) will affect everyone who is involved with a Trust. The new trust law will be effective from 31 January 2021 and includes clarification of the existing trust laws and some significant changes.Many clients have trusts and are also trustees of trusts. However, some trustees may not be aware of their role and duties as a trustee, recording keeping and disclosure requirements. If you have a...

39% Top Marginal Tax Rate

The Labour Party has announced that if re-elected, they would introduce a new marginal tax rate of 39% for an individual’s income over $180,000. The 39% tax rate would only apply to income over $180,000 and the remainder of an individual’s income will be taxed at current marginal tax rates. Labour believes this change will only affect 2% of the population (who earn more than $180,000) and explain that it will help maintain balance as they continue to manage the impact of Covid-19. How will ...

Cashflow Forecasting

This service may be fully funded by the regional business partners network. If your business qualifies, you can get our COVID-19 specific business support services (up to $2500 per service). The funding will not last forever, so let us know that you are interested, and we will connect you with our Growth Advisor so that it is fast-tracked.To help speed up the process make sure you register with the Regional Business Partners Network – this only takes 5 minutes: Register your bus...

Business Continuity Planning

This service may be fully funded by the regional business partners network. If your business qualifies, you can get our COVID-19 specific business support services (up to $2500 per service). The funding will not last forever, so let us know that you are interested, and we will connect you with our Growth Advisor so that it is fast-tracked.To help speed up the process make sure you register with the Regional Business Partners Network – this only takes 5 minutes: Register your bus...

Update on Finance Applications

We are experiencing a record low interest rate environment, currently below 2.55% pa. This makes borrowing money cheap and attractive for capital expansion such as a new rental property, capital equipment, buying a new business, funding growth, or consolidating debt. However, banks are being more restrictive for new lending and looking at each application in depth. We noticed this trend from the banks last year when interest rates dropped below 3%. Since Covid-19 the banks have tightened their l...

Temporary Loss Carry-Back Scheme

IRD have introduced a loss carry-back scheme to support customers during the current uncertain economic environment.Businesses making a loss in either the 2020 year or the 2021 year can use that loss to offset profits they have previously made. The loss is carried back to the preceding income year.In the preceding income year, tax is paid on profit. With the loss carried back, tax that has already been paid on prior year profits, may be refunded.This scheme does not apply to residential rental p...

Covid-19 Wage Subsidy Extension

The wage subsidy has been extended to support employers and self-employed who have been significantly impacted by Covid-19. It is available to all businesses (including the self-employed, contractors and sole traders). The extension is available after the current wage subsidy ends; from 10 June 2020 until 1 September 2020. Key details:To qualify for the wage subsidy extension an employer of self-employed business owner must have experience a revenue loss of at least 50% for the 30 days before ap...

Covid-19 FAQ - Wage Subsidy, Holiday Pay & More

We have recently had a high number of questions relating to the wage subsidy, holiday pay during lockdown (Easter), reconciling Xero and taxes related to the Covid-19 subsidy. Our Frequently Asked Questions (FAQ) below contain answers based on the information available now.We have previously outlined key information on the leave scheme and wage subsidy already and this article continues to elaborate on some of the details.The full (updated) wage subsidy declaration can be found here I received a...

COVID-19 Proposed Tax Changes

The government has announced a $12bn economic stimulus package to assist with Coronavirus. Here are some of the key tax proposals These changes are yet to be passed through law and some of the specific information is yet to be finalised. Most changes are proposed to have an effective date of 1 April 2020. We will continue to provide more information as it becomes available.If you would like to discuss how these may affect you, please don’t hesitate to contact us. Inland Revenue has the discret...

Upcoming Tax payments due: 7 April 2020 and 7 May 2020

2019 terminal tax payments are due on 7 April 2020. All our clients will now have received notification via email or phone if you have a payment due. If you are currently experiencing cash flow difficulties to meet these payment (related or unrelated to Coronavirus) please let us know as soon as possible. There are options available as outlined below. 2019 Terminal Tax Payments due 7 April 2020 – Options Available Payment arrangement with IRD This allows you to pay off the tax over time in re...

GST Zero Rated Property Transactions

We regularly review land transactions where either the purchaser or vendor are GST registered, but the other party is not. This inconsistent nature of each parties GST status may result in some uncertainty over the price of the land and have potential significant consequences. This article outlines the GST status of contracts based on different circumstancesWe normally experience these types of transactions when:purchasing or selling lifestyle blockspurchasing new properties from GST registered ...

Back to back loans & interest deductibility

When a business borrows money to earn taxable income, the interest cost will be tax deductible. The key test is the “use” of the borrowed money, rather than the purpose of borrowing. There must be a clear nexus between the interest incurred and the production of taxable income. In determining the use of the borrowed money, the “flow” of money is traced.  Security The security provided for the borrowing does not determine tax deductibility. For example, if a business borrows money to...

Companies with Losses Carried Forward

Companies may have losses carried forward from a prior year. Losses may have resulted from losing money in a previous business venture, one-off signature expenditure (e.g., significant repairs and maintenance on a property), or during the start-up phase of a new business.This article will explain what losses carried forward are, how they can be utilised, and in some situations how it may be appropriate to utilise the losses over more than one year.  What are tax losses carried forward? If a...

Proactive ways to manage your tax

Benjamin Franklin said there were only two things certain in life: death and taxes. What if there was a better way to manage paying tax on your terms that suit you?Tax Pooling is a system, that allows taxpayers to pay provisional tax when it suits, while ensuring that Inland Revenue (IRD) receives the tax it’s owed on time.Taxpayers can customise payment arrangements so they can pay tax when they have cash, or delay payments if they have temporary cash-flow shortfalls.Tax pooling pre...

Differences Between Cash and Profit

Cash is king! Do you make a profit, have tax to pay but wonder where your cash is going?There has been increasing discussions about the economy potentially slowing down. Experience shows that those in a strong cash position have opportunities available in a downturn; normally due to others bad fortunes or over-extending themselves. Those struggling to meet payroll, pay supplier invoices or stuck with old stock they cannot move have more risk.This article uses several real-life examples to explai...

Helping Your Child Into Their First Home

We have recently had several conversations about helping children into their first homes. Some parents have an inter-generational view of wealth and like to pay it forward by providing an early inheritance.There is no one size fits all approach for this process, or any family succession strategy. Individual specific advice is recommended.This article explores options available to help your children into their first home and outlines some risks to considers.If the child has a partner and they int...

Cryptocurrency Tax Update - March 2019

Overview Cryptocurrency tax is currently being reviewed by IRD and different tax interpretations, such as financial arrangements are being applied and discussed. Financial arrangement tax treatment may apply to some cryptocurrency tokens and will depend on the specific characteristic of each individual token. We have summarised cryptocurrency tokens into four distinctive categories and discussed how financial arrangement tax treatment would apply to each category of token. Each tax payer’...

Combined Business & Personal Travel

Business travel often provides a great opportunity to add a few extra days to explore a new location or rest and relax and enjoy some time away from home. This article outlines the tax-deductibility for business travel that includes a personal element. ...