2017 tax and law changes in a nutshell

There have been a raft of legislative and administrative changes recently introduced that will affect businesses. We are flagging these changes to you, and suggest that for advice particular to your business situation you contact a Moore Stephens Markhams advisor.

 

Transforming GST

Inland Revenue is rolling out changes to how New Zealanders file and manage their GST as part of ongoing business transformation. More than half New Zealand’s businesses now file their GST through Inland Revenue’s secure online service myIR, or direct from their accounting software. If this includes your business, you may have noticed there’s a new myGST tab on your myIR account. This will provide access to all your GST information.

Taxpayers are now able to use this to register for GST, register as a preparer of tax returns, amend GST returns and accounts, file and pay GST at the same time, set up payment plans, and track GST payments and refunds online.

This is on top of the recent changes for some taxpayers who are now able to prepare and send GST returns to Inland Revenue from their accounting software.

If you would like to talk about how your GST is currently being managed and how the changes might work in practice for you, please contact us.


 

Faster GST refunds

It is now compulsory for Inland Revenue to provide GST refunds by direct credit to a taxpayer’s identified account, resulting in faster GST refunds. Obviously, it’s important that Inland Revenue has your correct banking details. If you would like us to confirm your current account details are held, please let us know.

From here on, Inland Revenue will only make GST refunds by cheque if there are no customer’s bank details held or if there are extenuating circumstances, such as hardship.


 

Use of money interest

There is a change that applies from the 2018 income year (i.e. from 1 April 2017 for standard balance date taxpayers).  This removes use of money interest from the first two provisional tax instalments (for those who pay in three instalments) and who continue to use the standard method to calculate and pay provisional tax (commonly referred to as the ‘uplift method’).

Businesses (including companies) and individuals with residual income tax of less than $60,000 and paying provisional tax in three instalments using the standard method will not be subject to use of money interest.


 

Changes proposed for motor vehicles

Currently close companies providing a motor vehicle for the private use of shareholder-employees must pay FBT on the value of the benefit provided. This value is based on the availability of the vehicle rather than its actual private use and this means higher FBT compliance costs for close companies.

New option for close companies
The recently introduced legislation changes this for the 2018 tax year (i.e. from 1 April 2017 for standard balance date taxpayers). Under the new rules close companies that provide one or two vehicles to shareholder-employees could elect to use the motor vehicle expenditure rules instead of paying FBT. This would mean that, like sole traders and partnerships, close companies could measure the business use of a motor vehicle and calculate the tax deductions allowable for motor vehicle expenditure based on business use.

New method for calculating business use to claim deductions
Also introduced is a new simplified method of calculating business use for vehicles. The new option would allow you to choose to calculate your business usage and resulting deductible expense differently. The new method does not have a ceiling (currently the ceiling in place is 5,000 kilometres of business use).


 

Home office

There is a new alternative option for calculating home office applying from 1 April 2017 (for standard balance date taxpayers). Under the new option, home office deductions can be determined by using a two-step calculation. The first step involves taking the ratio of the area of the premises used for business purposes to the total area and multiplying this by a specified rate set by the IRD. The second step then requires the mortgage interest, rates and rent paid for the year to be multiplied by another specified rate set by the IRD and adding this to the amount calculated in the first step. Depending on your circumstances, this new option may be beneficial to you and we will discuss this with you if it applies to you.


ACC Earner Levy Rate

The Earner Levy Rate for the 2018 tax year will remain at $1.39 for every $100 of liable earnings.


ACC Earner Levy maximum liable earnings

The maximum liable earnings for the ACC Earner Levy will increase from $122,063 to $124,053 for all pay periods ending on or after the 1st of April 2017. Any income above $124,053 will not be subject to the ACC Earner Levy.


 

Student loans

The annual student loan repayment threshold has increased to $19,136, from $19,084. This is the level above which student loan deductions payments apply. The student loan deduction rate remains at 12 percent. The repayment threshold is broken down into a pay period amount as follows:

If you’re paid Your repayment threshold is
Weekly $368 increased from $367
Fortnightly $736 increased from $734
Four weekly $1472 increased from $,1468
Monthly $1,594.66 increased from $1,590.33

Fortunately, ACC maximum earnings and student loan thresholds will be automatically applied to your payroll calculations if you use payroll software. Therefore no changes are required by you (provided you are up to date with your software upgrades).

If you are using a manual payroll processing system, you will need to refer to the online tax tables – which can be found here (for the 2018 year) or use the IRD calculator that can be found here.

 

Published May 2017.

The information provided has been written in general terms and should not be relied upon to provide specific information relevant to your situation.  Please contact a Moore Stephens Markhams advisor for further information.

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