Business and Tax Updates August 2022: IBBZ Accounting

The weather is getting warmer, and spring is not too far. In business updates: RBNZ lifted the OCR and more hikes are coming along, the use of 2 factor authentication is suggested, and having wellbeing policy at workplace is recommended. In tax updates: supply of portable units for residential use were held as taxable supplies for GST purposes. The IRD has published guidelines for cash basis of financial arrangement rules, Bright line guide, and depreciation on building.

We are working to ensure 2022 tax returns are filed on time.

Business and Tax Updates July 2022: IBBZ Accounting

Use-of-money Interest (UOMI) Rules for Provisional Tax Payments

Loss Carry Back Scheme.

From 15-04-2020 almost all entities trust, companies, sole trader, partnership can carry back the anticipated losses to avail tax refund. The scheme is another measure taken by the Government to assist struggling New Zealand business to deal with economic impact of Covid-19. The bill Covid-19 Response (Taxation and Other Regulatory Urgent Measures) is enacted now.

The Government of New Zealand passed urgent bill (COVID-19 Response: Taxation and Social Assistance Urgent Measures) to deal with the economic turmoil created by COVID-19. This bill provides immediate response and relief to struggling businesses and individuals. The targeted measures aimed at providing relief to those that have been economically affected by the COVID-19 outbreak.

In a tax case Van Uden v Commissioner of Inland Revenue [2018] NZCA 487 the decision was delivered on 08th November 2018. High court decision was upheld in the favor of IRD explaining New Zealand Tax Residency and Permanent Place of Abode Test.

The decision confirms the interpretation of permanent place of abode as set out in Commissioner of Inland Revenue v Diamond [2015] NZCA 613. Permanent place of abode in New Zealand can be seen as “a home in New Zealand”

This case provides very good explanation on New Zealand Tax Residency and Permanent Place of Abode Test.

The permanent Place of Abode test overrides 183 days test for New Zealand Tax Residency.

 GST:  zero-rating of services related to land

Legislation

As amended, section 11A(1)(k) land related services provided to non-residents outside New Zealand at the time the services are performed are eligible for zero-rating, if they are:
• not directly in connection with land in New Zealand or
• not in connection with land in New Zealand and intend to enable or assist a change in physical condition, ownership or other legal status of that land or
• directly in connection to land outside New Zealand

On 01 Feb 2019 Tax working group headed by sir Michal Cullen has recommended the Government to introduce capital gain tax. The formal report is due to be released to the public on 21 Feb 2019. The government may consider the introduction from 01 April 2021

It is expected the scheme will be broad based with very little and no exemptions, excluding family home.

Sir Michael Cullen is the same person who was behind the introduction of GST in New Zealand. The GST scheme is a broad based with very little exemptions, almost everything in New Zealand attract GST. It makes New Zealand GST unique in the world. New Zealand is the only country in the world who has broad based consumption tax with no exemptions not even on essential items. GST collects significant revenue for the government.

New Zealand Tax Rules for Controlled Foreign Corporation CFC Income

A New Zealand tax resident may have a controlled foreign corporation, which is involved in business of rental. Different tax rules apply for such corporations.

The CFC rules were reformed in around 2009 to make New Zealand businesses compete globally and provide certain exemptions to them. If CFC is in a business of rental this can add some complexities in calculating the exemptions.

General rule of thumb is rental income is attributable income. However, certain exemptions are provided in the legislation.

Do you own or are looking to own residential real estate in New Zealand? Learn more about new tax on real estate

Speculation Tax – New Zealand New Tax on Real Estate

If you own or looking to own residential real estate, you should know about speculation tax. You should also be aware of the Government tax policy to address New Zealand housing affordability.