Business and Tax Updates October 2023: IBBZ Accounting

Summary:

As we approach November the day light savings are in, and summer is about to arrive. Summer: where the days are long, the sun is warm, and the memories are endless. Hoping we all will have the excellent summer months and upcoming break.

We want to provide you with some valuable insights and updates in the world of finance and accounting. 

Business Updates 

1. On 04 October 2023, the Monetary Policy Committee agreed to hold the OCR at 5.5% and inflation and the cost-of-living crisis continues to be a concern for most kiwis.

2. National won the elections defeating labour by a significant amount, and it looks like there will be a National and Act coalition. This comes after two terms of a labour government, and many are hopeful to see a positive change National propose the following policies:

 (source national.org.nz)

• Young serious offender Bootcamps

• Banning gang insignia

• Current Ute tax will be abolished.

• Keep the foreign buyer ban for all homes worth less than $2 million.

• Introduce a 15% foreign buyer tax for purchases of homes of $2 million or more by people who do not hold a resident class visa in New Zealand

• Ending depreciation on commercial building. This current change was introduced as a response to covid-19 and then make the change permanent. National will remove this tax break.

• Restore IETC (Independent Earners Tax Credit) $10 a week up to $520 a year. The lower limit of eligibility will be $24,000 and upper limit of eligibility will be extended to $70,000 with abatement starting from $66,000.

• From 01 April 2024 new GST rules will be applied to marketplace and ride share companies such as Air BNB, the national has promised to abolish the introduction of GST on electronic marketplace.

• Top tax bracket of 39% on over $180k and above remains unchanged. Tiered tax structure brackets are aligned to inflation. The change would mean the 10.5 per cent tax rate would apply to the first $15,600 of income, not $14,000 as it is currently. The 17.5 per cent rate would extend to $53,500 rather than $48,000. And rather than the 33 per cent tax rate starting at $70,000, it would increase to $78,100.

• Rental property tax changes. Fully restore interest deductibility for rental properties. This change will be phased in the following stages:

o Interest deductibility will to be kept at 50% in April 2024 (rather than reduced to 25%)

o Interest deductibility will be increased to 75% in April 2025 (rather than fully removed)

o 100% interest deductibility will be fully restored from April 2026.

o Remove Labour’s capital gains tax by stealth, by taking the Brightline test for rental properties back to two years, from existing 10 years by July 2024 This means properties acquired before July 2022 will not be subject to the Brightline test at sale.

Employment Law Changes

With the new Government in place, it is expected that 90 days trial period clause will be extended to all employers. Currently, the change was about to be made to restrict to employers with less than 20 employees. The new Government will also consider Repeal of Fair Pay Agreement Act 2022.

Tax Updates 

Professional directors and board members incorrectly registered for GST
The commissioner of IRD has concluded that a person who provides only directorship services is not eligible to be registered for GST. This statement comes after the commissioner has brought to light that some professional directors have incorrectly registered for GST, believing that they are carrying on a taxable activity. The commissioner will not require these taxpayers to retrospectively deregister they will however need to deregister by 30th June 2023 if they are not carrying on a taxable activity.

Bright Line Period Reset
It is likely that bright line period will be reset to 2 years. This to apply to disposals occurring on or after 1 July 2024. It means the properties acquired prior to July 2022 will not be subject to the Brightline test at sale.

Company Dividend Timming
There is a requirement that dividend to recognised when paid and this cannot be backdated. The resolution of directors (or shareholders under s 107 Companies Act 1993) to be there along with solvency certificate for directors. A dividend payment can be in cash or by credit to current account.