Yes it’s that time again…
Time to start collating business and investment income details, ready for the next round of end of year accounts.

To support you with the virtual ways many of us work in, we have again made our client questionnaires available on our website; here is the link:
https://www.millerjohnson.co.nz/free-resources/client-questionnaires/

For paper copies, or support in determining the questionnaires relevant to you, please contact us.

And a few updates for end of year…

Earning more than $180,000 per annum?
From 1st April 2021, the top personal tax rate of 39% was introduced on annual income that exceeds $180,000.
Inland Revenue have warned that they will be taking measures to ensure that taxpayers do not avoid the 39% tax rate, and are planning legislation to cover off possible measures such as:

• Looking at distributions of profits to family trusts
• Retaining more than 20% of profits in a company where the income is substantially earned from the efforts of one person.  This is a significant widening of the net cast by attribution rules.

A note – 2022 provisional tax has been based on 2021 tax rates, so you may face a higher tax bill this year, especially if you have received personal dividends or interest income.  Let us know if you wish to review tax before 7 May, in order to reduce interest costs.
Reminder about rental properties, interest costs and selling: 
As previously advised, there are two significant things to remember this year for owners of residential rental investment properties:

1. This year, interest deductibility falls:
   • Claim 100% on interest paid up to 30 September 2021
   • Claim only 75% of interest paid between 1 October 2021 and 31 March 2022
     • This means you will have to give us the information in two lots
2. And that rental properties purchased after 27 March 2021 must now be retained for 10 years if you don’t wish to pay tax on the profits from sale.

 

Resurgence Support Payment – Review underway:

IRD are now reviewing the accounts of customers who have received the RSP, to ensure they met the eligibility criteria and have used the payments in line with the RSP terms and conditions.  For clients who have had us prepare the claims, we have checked eligibility as we made claims.  However, IRD still have the right to questions these claims, and will do so.
Remission of Use of Money Interest, Late Filing and Late Payment penalties:

IRD have indicated that they will continue to remit UOMI, late filing and late payment penalties in certain circumstances, due to COVID-19.  They are also open to tax arrangements being made to pay off outstanding taxes.
Bad Debt Write Off Extension:

IRD have extended the time for writing off bad debts for the 2022 income year to 30th June 2022.  This is subject to the following conditions:

• the taxpayer did not write off the debt by the end of the 2022 income year as a result of the impact of COVID-19, and
• the taxpayer takes into account only information that was relevant as at the end of their 2022 income year.

 

Making payments to IRD:

IRD will no longer accept payments at their offices.  They have advised options to pay tax are:
https://www.ird.govt.nz/managing-my-tax/make-a-payment/ways-of-paying

If you are making payments at the Westpac Bank, please ensure you have a bar code.  You can generate one here:
https://www.ird.govt.nz/managing-my-tax/make-a-payment/ways-of-paying/paying-at-westpac
Paying wages to staff?

If you are paying wages by AP, please note you will need to change from this week, as the ACC rate for employee-funded levies has changed from 1 April.
Small Business Cashflow Scheme “top-up” loan $10K:

Applications are now open and can be made through MyIR and applies to those businesses who applied and received the 1st Small Business Cashflow Loan.  Please let us know if you need assistance with this.

Businesses will have to prove at least a 30 percent decline in revenue, measured over a 14-day period in the 6 months prior to making this application compared with the same 14-day period of a year ago OR

• if revenue from the same period of a year ago was affected by COVID-19, compared with the same 14-day period of two years ago, or
• If your business or organisation was not in existence a year ago (or if (a) above applies, two years ago), compared with the same or similar period in the previous month.

Your 30 percent decline in revenue relating to the period referred to above is due to the impact of COVID-19 and you will hold information on file to verify this for audit purposes.
Due Dates for Repayment of the 1st Small Business Cashflow Loan – will be approaching:
Please note, the first 2 years of existing and new loans will be interest-free provided the loan is not in default.  Interest will apply at a rate of 3% per year on the remaining loan balance from the first day of the third year of the loan period.
COVID Support Payments can still be claimed:
For the 3rd CSP, businesses will need to show their income is 40% lower in a 7-day period any time between 21 March 2022 and 4 April 2022, compared to a typical week between 5 January and 15 February in either 2021 or 2022.

We note that all three CSP’s can be applied for until 5 May 2022 through MyIR.  Please let us know if you need assistance with this.

If you acquired a business after 15 February 2021 but before 17 January 2022 you can use the revenue that the business earned during a typical 7-day period in the alternative comparison period between 5 January 2021 and 15 February 2021 as long as you’re running the same sort of business as run by the previous owner.  The revenue earned by the business for the alternative comparator period could be the previous owners or yours – depending on when you started running the business.  For more information refer to
https://www.ird.govt.nz/covid-19/business-and-organisations/covid-19-support-payment/eligibility-for-the-csp/recently-acquired-businesses
Other COVID-19 Financial assistance still available: 
COVID-19 Leave Support Scheme
COVID-19 Short Term Absence Payment
These are applied through the Work & Income website

https://workandincome.govt.nz/covid-19/covid-19-support-for-employers.html
Wrap Up: 
It’s been another interesting tax year – a lot for everyone to digest, and some interesting moves by government and Inland Revenue.  While COVID measures continue, we have noticed that IRD have not extended the same leniency to other areas of tax.  Notable is the very clear threat to chase taxpayers who are earning more than $180,000, and we also see a general tightening up of their attitude.  We are still strongly recommending that clients give serious consideration to taking up Audit Shield insurance to cover costs of IRD investigations (excluding COVID related mattes).  We see these activities increasing.

So far, 2022 doesn’t look to be any brighter than 2021, with challenges for all, regardless of whether you are in an industry that is facing falling incomes, or one that is busier than ever.  Whatever the situation, we recommend that you ensure you have funds aside for tax, and contact us if you are experiencing challenges in your business or taxation affairs.  We may or may not be able to assist, but if you contact us with plenty of notice, there is a better chance we can make a difference than if we are called in after the event, so to speak.

As always, we look forward to working with you again this year.  We welcome feedback, as we want to provide the best service we can to our much-appreciated clients.