Tax changes to track
Going to the IRD website and typing in
‘‘Covid-19’’, I get 328 results. This is an indication of the number of recent changes made to our tax system.
For example, under the heading ‘‘Business Continuity Package’’, I find that:
* The IRD has greater discretion to write off ‘‘use of money interest’’ for customers affected by Covid-19. * The provisional tax threshold has increased from $2500 to $5000.
* The small asset depreciation threshold has been increased from $500 to $5000 for the
2020-21 financial year, and will reduce to
$1000 for the following years.
* Depreciation on commercial and industrial buildings has been reinstated.
Under the heading ‘‘Temporary loss carry-back scheme’’, I find:
* Businesses expecting to make a loss for the
2020 or 2021 year can offset the loss against the previous year. This applies to sole traders, companies and trusts but only if those companies and trusts did not allocate all their income to shareholders and beneficiaries in the previous year.
Under ‘‘Wage subsidy: Issues for employers’’, I see that:
* The subsidy is ‘‘exempt income’’ for the employer.
* The employer cannot claim a tax deduction for wages paid out of the wage subsidy. * The employer will not be liable for GST on the subsidy.
Under ‘‘Tax issues for self-employed customers’’, I find that the subsidy, although not subject to GST, is taxable income to the self-employed.
The wage subsidy is not subject to ACC levies, though. To avoid ACC levies, the subsidy has to be declared as ‘‘other income’’ in the IR3 tax return.
Under ‘‘Employment allowances and reimbursements’’ we find the rules for reimbursing employees for expenses incurred in carrying out their job, such as for furniture, equipment and telecommunications costs while working from home.
The list goes on. To avoid confusion it is always wise to get advice from a chartered accountant or financial adviser before making a financial commitment.