Are you ticking these important items off your end-of-year tax checklist this month?
1. Rules to keep cash flowing – If money is a bit tight as the financial year draws to a close, here are some important tax measures focused on providing and enabling cashflow, according to Craig Nevatt, Director of Drumm Nevatt & Associates (“DNA”):
● If your cashflow has been significantly impacted by the economic effects of COVID-19, you may be able to apply for relief from use of money interest and penalties, or enter into an instalment arrangement for payments due to IRD. IRD’s ability to remit use of money interest in such circumstances applies to tax payments due up until March 24 2022.
● Keeping an eye on tax losses, as the Government introduced a same or similar business test that allows tax losses to be carried forward. This may become useful if you’re wanting to raise capital for your business in the future.
● Consider the Small Business Cashflow (Loan) Scheme being offered by the Government through IRD where certain conditions are met. This provides loans for businesses with 50 or fewer full-time staff of up to $20,000 plus $1,800 per full-time employee (dependent on the number of employees) with the first 2 years being interest-free.
2. Asset threshold lowering – Put aside time to review your asset expenditure. Identify any assets (valued up to $1,000) that you need and buy them before the end of the tax year
3. Earn over $180,000 a year – Review your business and investment structure with us. The marginal tax rate of 39% applies to all employment income over $180,000 a year.
4. Keeping subsidy records is crucial – While COVID-19 related wage subsidies and resurgence support payments are non-taxable, keep accurate records of any subsidy or payment you received and which staff member it was paid to.
5. R&D loss tax credit – Start-up companies are able to cash-out their tax losses arising from eligible research and development (R&D) expenditure, and avoid carrying the losses through to the next income year. The credit can only be for:
● Eligible R&D business expenditure
● Up to 28% of your tax losses from R&D activity
● Companies that are tax residents in New Zealand
● Dates on or after 1 April 2015. The rules around R&D expenditure are detailed and eligible R&D expenditure will require approval from IRD
6. Staff reimbursements and allowances – Make sure you have a good record of any paid to employees for expenditures. Remember:
For telecommunications devices and plans, staff reimbursements are tax exempt up to $5 per week. If reimbursement is above this amount, the exempt amount is 25% if the device or plan is used partly, 75% if used mainly, or 100% if used exclusively for employment purposes.
WFH payments claimed from 1 October 2021 allow an additional $15 per week, per employee, to be exempt income for other WFH expenditure.
Tax-exempt payments for use of furniture or equipment when WFH can reimburse the depreciation of the item.
Important dates to keep in mind for the end of the financial year
● March 28 provisional tax instalments due for people and organisations who use the ratio method. (This is when your provisional tax is based on a percentage of your tax income)
● March 31 income tax return due for clients of tax agents and official end of the financial year
Get in touch with us today.
“Our company encourages transparent communication, friendly service, and attention to detail for each client that walks through our doors,” says Craig Nevatt.
Contact Drumm Nevatt and Associates
Phone: 64 9 534 4382
Address: Ridge House, 69 Ridge Road, Howick Auckland
Phone: 64 7 576 2194
Address: 23 Myres Street, Otumoetai, Tauranga