Did we get your attention?? If you read just one newsletter this year this should be it. They are all good of course but pay special care to this one.
Information is rife regarding Corona Virus and the government’s response which can be overwhelming. If there is anything you need to know regarding income tax implications just ask us – well Julia is the expert. Information is changing constantly so we have come up with a special newsletter with snippets important to you and your business. We call it Corona 101 – what you need to know:
OUR RESPONSE TO COVID-19
We are concerned with the impact of COVID-19 on our business community. This is a tough time for many of us and we have already touched base with a number of our struggling friends. We are taking a number of steps in response to COVID 19 which include:
- Keeping ourselves informed. We are all over this virus like a rash (hope that is appropriate). We are updating ourselves daily. Julia is our Corona champion. So, we can give you the best advice and help when you need it.
- We are assisting with tax arrangements. If you are struggling to pay your tax on time then let us know. We can negotiate with IRD to spread the cost. In some cases you may be able to have some core income tax written off due to hardship.
- We are keeping our workspace safe. We are just a small office and our rural setting means we are quite isolated. But we are taking all the necessary precautions with clean hands (I have to wash mine after I have patted the donkeys) and no handshakes (sorry – don’t be offended – hopefully a raised eyebrow or air-shake will work).
- Spreading the cost. If you are having trouble paying accounting fees we can spread the cost for you through the use of Smart AR. Please contact us if you are having trouble paying. Going forward we are happy to put you on monthly fees to spread the cost. Just let us know.
- Preparing income tax returns for the year end 31 March 2020 as fast as possible. We have beefed up our team this year – there’s 5 of us Number Up crunchers (see what I did there?). So, if you believe your income will be substantially down for the year end 31 March 2020 please get your info to us asap. We will aim to have the tax prepared before 7 May so we can decrease your final 2020 provisional tax payment and manage your provisional payments for the year ahead. We will have end of year checklists to you shortly.
- If you are expecting a refund we will have your tax return turned around very quickly once you have supplied your information to us. Please note that we need to wait for IRD to process any March withholding income or wage income you may have received so we may not be able to complete your return until after 20th April.
- We know these can be tough times. We are here to chat confidentially. We can even come and see you if you want to discuss anything privately. We also endorse the Xero Assistance Programme which is a free and confidential well-being support & counselling service. This free assistance is available to the wider Xero community including Xero clients (starter, standard & premium subscribers) and their families and employees. You can find out more XAP here.
- We are wanting to support our business community, many who are experiencing tough times. If you would like to provide vouchers we can purchase these from you to gift to other members of our community. We are also looking at running some (small scale) events that would support local operators from our community. If you are interested please email me on firstname.lastname@example.org
- To qualify for subsidies and assistance you need to confirm that your income on a monthly basis is 30% less than it was for the same month in the previous year. We can provide you with reports to confirm that your level of income has declined by 30% or more.
- With the economic uncertainty it is a smart time to be prudent with spending. We can work with you to prepare budgets and provide tax planning for the year ahead.
COVID-19 WAGE SUBSIDY & LEAVE PAYMENT
The wage subsidy and leave payment scheme is administered by the Ministry of Social Development which means you need to apply for this assistance directly. We can’t apply on your behalf but we can help you if you have any questions or need assistance. Please note that you are required to disclose employee information when applying for the wage subsidy. Under the privacy act, you are required to have your employees consent to disclose this information.
- If you have suffered a minimum 30% decline in actual or predicted revenue over a month compared to the same month last year you may be entitled to a wage subsidy.
- You need to make your best efforts to retain employees and pay them at least 80% of their normal pay.
- If you qualify you are entitled to $585.80 for people working 20 hours or more per week and $350 for people working less than 20 hours per week.
- The subsidy is paid as a lump sum and covers 12 weeks per employee. This subsidy can be claimed only once. So, you need to make sure you get it right.
Some useful links for you:
The applications are made online by you (not us) but we can help you if you want to drop in. The feedback we have received so far is that it is a relatively simple process.
What To Do
There hasn’t been any information around how the subsidy applies to shareholder salaries. Our suggestion is to (i) talk to us if you are unsure if your income has declined or looks like it will decline by 30% – we’re accountants – we can work it out – its what we do, (ii) include shareholder salary income in your application – ask us about this and (iii) get your applications in as soon as you can
Leave payment is available to people who are required to self isolate, can’t work because they are sick due to the virus or who have to look after dependents. Affected employers, contractors, sole traders and self employed all qualify for the leave payment.
The leave payment entitlement is $585.80 for a person working at least 20 hours per week or $350 for a person working less than 20 hours per week.
The leave payment is paid to the employer who is required to pass the full payment to the affected person.
The leave payment entitlement is for the full period of isolation or sickness but needs to be applied for every 14 days. There is an eight week period from 17 March 2020 that the leave payment covers.
A potential snag here is that if you or your company is making losses you will most likely not be entitled to a leave payment – self employed people not earning at least the minimum wage are not eligible for the payment.
What To Do
Again – you are required to make the application online for this (not us). It’s supposed to be a painless process but please drop in if you have any problems.
COVID-19 CASHFLOW AND TAX RELIEF
Cashflow and Tax relief is administered by IRD. We have authority to act on your behalf with IRD so please discuss with us first if you are applying for cashflow or tax relief from IRD.
The IRD are proposing to write off use of money interest (UOMI) for any tax payments due after 14 February 2020 for those who can show that they have been significantly adversely affected by COVID-19.Note that this is a proposal only and therefore legislation has not yet been passed. You could have UOMI written off for a maximum of two years. You would still be required to pay your core tax debt in full.
There are some key criteria around this:
- Income must have decreased by at least 30% from the same month last year.
- Other options must be explored – that means that you would need to ask your bank for lending first or attempt to negotiate overdraft facilities.
Please click here for more information.
We don’t actually see this as being hugely beneficial but it can enable you to pay tax debt back faster. If you expect that you will struggle to pay your upcoming terminal tax due by 7 April or provisional tax due by 7 May please contact us.
What To Do
If you are struggling to pay your tax on time our suggestion is:
- You contact us before 7 April 2020.
- Make an arrangement to pay the tax over a period of time which ideally is no more than two years.
- Commit to paying as much of the tax due as you possibly can by 7 April.
- Get your information for the year end 31 March 2020 to us as soon as you can. If your net income for the year is lower than the previous year there will be an opportunity to decrease the final provisional tax payment which is due by 7 May.
CHANGES TO INCOME TAX THAT COULD HELP YOU
Provisional tax threshold increasing from $2,500 to $5,000 from 1 April 2020
From 1 April 2020 if your tax payable is less than $5,000 then you will not be required to pay provisional tax for the year ahead. There may be opportunities to split income amongst shareholders to keep you under the threshold. The danger here though is that you will have more terminal tax to pay at the end of the year because you are not paying tax throughout the year. This may help with cashflow in the current year but beware that there may be a tax bill at the end of the year.
Asset threshold increasing from $500 to $5,000
From 1 April 2020 the asset threshold will be set at $5,000. Currently it is $500. That means that you will be able to fully claim up to $5,000 in the year that you purchase the asset (as opposed to depreciating the asset over a period of time). So, if your business needs assets and has the ability to pay for them then the tax year ahead can offer significant tax advantages. From the following year the threshold will lower to $1,000. Our suggestion is that if you need to purchase any assets for more than $500 then wait until after 1 April to make the purchase.
Depreciation on Commercial and Industrial Buildings
From 1 April 2020 you will be able to claim depreciation on commercial and industrial buildings at 2% per annum. That will be a significant tax advantage. Note that depreciation will be calculated on only the building and fit-out portion (not the land) and will be calculated based on the cost to you (not the market value).
Removal of hours test for In Work Tax Credit from 1 July 2020
Presently – if you are entitled to family tax credits – there is an in work tax credit entitlement of $3,770 per annum if one parent is working at least 20 hours per week if you are a single parent family or one parent is working at least 30 hours per week if you are a two parent family. From 1 July 2020 there will not be a need to work a minimum amount of hours. This will be a great benefit for those operating businesses that are in a loss situation or are making small profits that would see the owners earning less than minimum wage. In the past IRD have withheld credits because they believe minimum hours have not been worked due to lack of income.
IMPORTERS AND EXPORTERS
We are seeing a big impact to our clients due to recent events and are taking a lot of calls and emails on a daily basis. We are here to support you, answer your questions and help where we can. If we do take a little longer than expected to get back please be patient. If you have any questions please let us know.
Q. What did the policeman say to the neighbor when he interviewed him about the missing vegetables?
A. If you hear anything then lettuce know.
What? Did you think you were going to get through newsletter without a decent joke? Come on.