Tax Changes 2023 Impacting Small Business

Summary:

As we approach the beginning of the new financial year, the Inland Revenue Department (IRD) has proposed many changes that will be implemented in April 2023.

While there are no major tax overhauls, these changes still have the potential to affect many taxpayers and businesses alike.

Our team at IBBZ have researched and analysed the amendments to provide you with the key updates you need to know to stay on top of your tax requirements.

As we approach the beginning of the new financial year, the Inland Revenue Department (IRD) has proposed many changes that will be implemented in April 2023.

While there are no major tax overhauls, these changes still have the potential to affect many taxpayers and businesses alike.

Our team at IBBZ have researched and analysed the amendments to provide you with the key updates you need to know to stay on top of your tax requirements.

Easier GST deductibility for Small Businesses

The first and arguably the most substantive amendment is a change to the GST apportionment rules. The Act will now allow a full deduction for goods/services acquired for $10,000 or less and with the principal purpose of making taxable supplies. The principal purpose is the main, primary, or fundamental purpose, it does not always equate with more than 50% taxable use. The proposed changes to GST apportionment and adjustment rules would reduce compliance costs imposed on businesses and promote fairness.

When goods/services are not acquired with the primary purpose of making taxable supplies, the registered person will be unable to claim an input tax deduction or apportion input tax over the taxable and non-taxable period.

When the goods/services acquired are acquired for more than $10,000 then the registered person will continue to use apportionment based on their estimated percentage use for making taxable supplies and adjustments being made at the end of each year.

This exemption is limited to goods as it is meant to apply to tangible assets such as land, building and vehicles. This is because these tangibles are likely to have a minor amount of use in making taxable supplies as opposed to intangibles such as intellectual property which are likely to have exclusive or mainly taxable use when acquired.

Ease on Disclosure Requirements for Small Trusts

The criteria which determine whether a trust is non-Active have changed.

Non-Active trusts are now no longer required to file returns or comply with trust disclosure rules.

A trust is non-Active for the 2021-2022 tax year if (1) Reportable Income was under $1000 (2) There have been no deductions (3) There have been no transactions which involve giving income to someone (3) There are no transactions that provide a benefit which is subject to FBT to a current or former employee.

If a trust is eligible to be non-Active, there are three filing options:

1. File a return and supply limited disclosure information: Under this option, a return is filed, and, in the return, it should be selected that the trust is not required to comply with the trust disclosure rules. Along with this, the variation recording spreadsheet, provided by IRD, should be completed and details of any person who has made a settlement on the trust disclosed. No further Action is required.
   
   
2. Complete the spreadsheet provided by IRD and not file a return: Under this option, a return is not filed to IRD and instead the variation recording spreadsheet, provided by IRD, is completed. Under option 2, a non-Active trust declaration will need to be completed before 30 June 2023.
   
   
3. File a return along with full disclosure information: Under this option, a return will be filed as usual.