News & Thinking
Tax relief measures for COVID-19
The Government has introduced various initial tax concessions to help with meeting your tax obligations.
The terms of the relief are not yet passed into legislation
However some of the relief measures introduced in the Bill, passed under urgency on the 25th March are:
1. Inland Revenue MAY waive interest charges (UOMI) on tax payments (including provisional tax, PAY and GST) due on or after 20 February 2020 if your ability to make a tax payment on time has been significantly adversely affected by the COVID-19 outbreak.
The eligibility criteria to apply for a waiver of UOMI are likely to be:
- You have been significantly affected by COVID-19 which has impacted your ability to pay tax on time;
- You would need to show income has reduced by 30% compared to the same month 12 months earlier;
- You have explored other options for financial support, such as talking with the bank about additional finance or re-negotiated other loans/overdrafts. Tax financing through tax intermediaries is one of these options in appropriate circumstances.
Taxpayers can contact IRD to register interest in having UOMI waived.
2. Increasing the threshold for having to pay provisional tax from $2,500 to $5,000 which allows more small taxpayers to delay paying their taxes. If you expect your tax liability to be below $5000 you may have until 7th February 2022o pay your tax, instead of having to pay in instalments throughout the year. You may need to estimate your provisional tax liability to be able to use this relief measure.
3. If you own commercial property (including hotels and motels) you may now depreciate the building at a diminishing value rate of 2% – previously this was 0%;
4. If you acquire fixed assets at a cost of $5,000 or lower you may write off those assets in the year of purchase in the 2020-2021 tax year – this is designed to stimulate business purchases and lower compliance costs. The limit will decrease to assets costing $1,000 for the 20201-2022 income year onwards;
5. The work hours eligibility requirement for receiving the In Work Tax Credit (IWTC) has been waived meaning working families who have a reduction in working hours as a result of COVID-19 do not lose their eligibility for the IWTC;
6. A proposal to allow people on a temporary visa, who would not otherwise meet the Working For Families (WFF) residence criteria, to qualify for WFF if they receive an emergency benefit from the Ministry of Social Development.
7. The COVID-19 wage subsidy and the COVID-19 leave grants paid out from 17 March 2020 will not be subject to GST, unlike other Government Grants received.
Other ways to meet your tax obligations or reduce your tax liability
- You may be able to use the services of a tax intermediary to finance your tax payments if your cash flow is tight – we can refer you to an intermediary and help you understand the options available;
- If you have already paid provisional tax for the year and expect your tax liability to be reduced due to COVID-19, you may be able to estimate or re-estimate your provisional tax liability and may be able to get an early refund of overpaid provisional tax if it has been overpaid – the best way to do this is through MyIR. We expect contacting Inland Revenue via phone or email will be challenging as demand will be high.
- IRD may allow you to pay your tax in instalments to ease cash flow.
For information on what home office expenses may be deducted if you are working from home, read our latest tax article here.