Tax & Government Support - Update

Inland Revenue System Shutdown

The final phase of Inland Revenue’s Business Transformation programme goes live on 28 October 2021. This phase will include improvements to the MyIR function with a new layout that will make it easier to see important information and taxpayers will be able to undertake certain tasks directly from the MyIR homepage. 

The project will also see an update to the functionality when using devices, whether it is mobile, tablet, or desktop.

This final stage of transformation will mean that Inland Revenue systems will be unavailable from 21 October to 28 October. Taxpayers will be unable to access accounts or file returns over this time.

As a result of the project, the Government has provided taxpayers with an extension of one week to file and pay taxes that are due on that date.

This includes GST returns due for the period ending 30 September 2021, and provisional tax payments falling due. The Government will allow until 4 November 2021 to pay and file for those taxes due.

If you are struggling to make payments as a result of the current lockdown and need a deferral, then please contact your RSM advisor and we can assist with liaising with Inland Revenue on any arrangements needed.

FBT rates – Welcome change proposed

In a Supplementary Order Paper (“SOP”) issued on 12 October 2021, the Government has indicated an additional FBT rate will apply to pooled benefits. This is as a result of the fall-out from the increase in the top personal tax rate to 39%. 

As at 1 April 2021 when the top rate increased to 39%, the flat FBT rate also increased from 49.25% to 63.93%! This left employers with little choice to either pay FBT at the top rate, or face increased compliance costs from undertaking detailed calculations for employees each year.

The Government has seen sense!  But this should have occurred earlier when the top rate was signalled to increase at 1 April 2021. 

The SOP will introduce legislation that will allow employers to use a flat FBT rate of 49.25% for fringe benefits provided to employees with all-inclusive pay under $129,681, and a flat rate of 63.93% for those over.

All-inclusive pay picks up after tax employment income and fringe benefits. The above amount of $129,681, is the after-tax equivalent of gross employment income of $180,000.

This should avoid a compliance burden and cashflow crunch for businesses, particularly SMEs, who will have no or very few employees earning over $180,000.

This will be enacted in early 2022 and is intended to apply retrospectively from the 2021-2022 income year. The legislation will be enacted prior to the final quarter wash-up falling due for the 2022 income year.

RSM welcomes this change. It is a positive outcome for SME employers, although in hindsight, this is something the Government should have enacted at the time of the 1 April 2021 tax rate change coming into force.

GOVERNMENT SUPPORT AVAILABLE 

Wage Subsidy

Applications for a fifth round of the Government’s August 2021 Wage Subsidy Scheme (WSS #5) are now open to eligible businesses and self-employed people for a two week period from 9.00am Friday 15 October 2021 until 11.59pm Thursday 28 October 2021.

Applications remain open while one or more regions remain in Alert Level 3 or higher.

Those eligible can apply online for the August 2021 WSS #5 via the Work and Income website.

Each subsidy pay-out features weekly payment rates as follows:

  • $600 for employees that work 20 hours or more per week (full-time rate)
  • $359 for employees that work less than 20 hours per week (part-time rate).

To be eligible, businesses must meet the 40% revenue decline test attributed to the effect the continuation of Alert Levels 3 and 4 from 17 August 2021 has had on their business:

  • For most businesses this will be at least a 40% decline between 28 September 2021 and 11 October 2021 inclusive (this is the revenue test period), compared to a typical 14 consecutive days of revenue in the six weeks immediately before the move to Alert Level 4 on 17 August 2021 (this is the default comparator period), or
  • if the business has highly seasonal revenue, they must have at least 40% decline over the revenue test period compared to the same 14 consecutive days in 2020 or 2019 (this is the seasonal comparator period), provided they can demonstrate that the seasonal nature of the business makes it harder to meet the 40% revenue decline using the default comparator period than if the business was not of a seasonal nature

When looking at the revenue comparison, do not include any payments from this subsidy, other COVID-19 wage subsidy schemes, Short-term Absence Payment, Leave Support Scheme, Essential Workers Leave Support scheme, Resurgence Support Payment and the Small Business Cashflow scheme.

Resurgence Support Payment (“RSP”)

In addition to the Wage Subsidy Scheme, businesses can also apply for the Resurgence Support Payment (RSP) if eligibility criteria are met.

Applications opened 8:00am on 24 August for businesses that have experienced at least a 30% decrease in revenue. The RSP allows businesses to receive up to $1500, plus an extra $400 per employee up to a maximum of 50 full-time employees.

Receiving other Government COVID-19 support such as the wage subsidy does not affect eligibility for the RSP. Unlike the wage subsidy which has a fixed application time period, RSP application for all RSP periods remains open until a month after New Zealand goes to level 1. 

Please be aware that for RSP, income that is received passively – such as interest and dividends, and all forms of residential and commercial rent – is excluded from the measurement of revenue. So, for example - if you have rental income and your 30% revenue drop is only from this source of income, you will not be eligible for the RSP.

Tax Treatment

For the wage subsidy, IR has released a guidebook IR1251 containing guidance as to how to treat the wages subsidy for various scenarios covering individuals e.g. shareholder/employee etc.

READ GUIDE HERE

For the RSP;

  • The payment must be used to cover business expenses such as wages and fixed costs.
  • Payments received under the RSP are not subject to income tax
  • Expenditure funded by payments under the RSP is not deductible
  • GST-registered businesses will return GST on payments received under the RSP
  • These businesses will be able to claim input tax deductions for expenditure funded by payments under the RSP.

Need further help?

Please contact us if you would like to discuss your application or have further questions. 

Would you like to discuss this topic further?

Please email us to submit a question or click on the author below to directly discuss this article

CONTACT us