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IBBZ Accounting Business and Tax Updates May 2023
Business and Tax Updates May 2023: IBBZ Accounting
Summary:
With the end of May approaching, lets revisit some key updates and developments for the month.
Business Updates
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The Reserve Bank of New Zealand (RBNZ) monetary policy have lifted the Official Cash Rate (OCR) from 5.25% to 5.5% due to continuation of high inflation levels which was reported at 6.7% during Q1 of 2023.
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As economic activity has fallen, house prices are at record lows, yet interest rates and the cost of living is a growing concern for kiwis.
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The higher rates are encouraging kiwis to save more and therefore consumption and borrowing has also decreased. Businesses are also affected as they are less inclined to invest.
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The annual budget has been released with special focus on the cost of living. The budget places emphasis on easing the cost of living for young families. This is through free public transport fares for children up to 12 years and 50% for those up to 24. Along with this, 2-5 year old children will be provided with 20 free ECE hours giving parents the choice of part time work.
Tax Updates
Trustee Tax Rate
With the release of the 2023 budget, there isn’t much tax reform except a higher trustee tax rate. The rate previously being 33% has now been aligned with the highest income tax rate of 39%. This new rate means that trustees will now be taxed at this rate. Only 5% of trustees are expected to be affected by the new rate and this will generate the government around $317 million annually.
Taxation of Backdated Lumpsum Payments
The project looked into taxation of backdated payments; ACC (Accident Compensation Corporation) and MSD (Ministry of Social Development) and provided options for both.
- For ACC, the recipients average tax rate for the past 4 years should be applied to the payments OR a rate of 10.5% applied if the payment is their only income.
- For MSD, the formula method should be used.
Charity Remedials
The definition of a charitable trust has been simplified and deregistration tax will ensure that when assets are disposed to another charity they are subject to income tax.
2023 Flood Rollover Relief
Following the North Island flooding, temporary tax relief has been provided to enable profits and depreciation recovery income arising from insurance or compensation to be deferred, provided the assets are replaced.
IBBZ Update
We have been in contact with many of you for the 2023 tax returns. We have scheduled a job for all clients over the next few months. If your job is urgent, and we have not made a contact, please get in touch with us. We are also working on writing a book on Solution to Cash Flow Issues Faced by Small Business more about in coming months.
