Many of these changes implemented by the Government will help with your business cashflow and will also assist with the economic recovery from COVID-19.
Depreciation on Commercial Buildings
This applies form 1 April 2020 on all commercial and industrial buildings. It does not apply to residential buildings (ie long term rentals and short-term rentals like Air B&Bs). This will encourage investment in new and existing buildings by creating a tax deductible claim to offset profits and reduce tax payments.
Increasing Provisional Tax Thresholds
If your tax bill at year end is above $5,000 from the 2021 tax year, you will become a provisional tax payer. The previous threshold was $2,500. This means there will be more smaller businesses that can delay their tax payment until 7 April the following year to retain that cash for longer.
Low Value Assets threshold increase
From 17 March 2020 – 16 March 2021, low value assets under $5,000 can now be deducted in full in the year of purchase, instead of being deducted over the life time of the asset. The threshold will be dropped to $1,000 from 17 March 2021 and permanently stay at this level. Claiming these low value assets in full means your profit will be lower and give you a decrease in your year end tax bill.
Use of Money Interest and Penalties Remission
IRD can now remove interest and penalties for businesses who have late paid their taxes. This applies to all taxes (PAYE, GST, INC etc). This is for all tax payments due from 14 February 2020. Filing of tax returns must still be done on time.
New IRD initiatives – 15th April 2020:
Flexibility of statutory tax deadlines
IRD will have discretion to change the due dates for filing tax returns and making tax payments.
Changes to Tax Loss Continuity rules (2021 Tax Year)
A “same or similar business” test will now be used for companies wanting to raise capital through ownership investment. Currently if a company has more than a 51% change in ownership it cannot keep its tax losses. These rules will allow the company to retain and carry the losses forward.
Tax Loss carry-back scheme (2020 Tax year onwards)
If you have a loss in a particular tax year, you can offset this against the profits of a prior year. This means you will receive a refund of the tax that was paid in the previous profitable year – carrying the loss back one year.
If you are struggling to make your student loan payments, you can now apply to reduce the required repayment amount.
Home office reimbursements for employees
If employees are working from home, you can pay them a non-taxable allowance. Up to $5 per week for phone usage and up to $15 per week for general costs to help cover internet, power etc. These are deductible for the business owners paying the allowance, and non-taxable for the employee receiving it.