Thursday, May 28, 2020
New Zealand's new 2020 Budget, announced on May 14, highlighted recently enacted tax measures and announced the creation of a new NZD50bn COVID-19 Response and Recovery Fund (CRRF).
Among other things, the Fund will provide for an eight-week extension to the Wage Subsidy Scheme, beyond the initial funding announced on March 17.
Further, New Zealand is providing tax support to businesses and individuals through the following measures, included in the COVID-19 Response (Taxation and Social Assistance Urgent Measures) Bill:
Restoring building depreciation
This is to support businesses and encourage investment in new and existing building by reinstating depreciation deductions for non-residential buildings.
Increasing the provisional tax threshold from NZD2,500 (USD1,500) to NZD5,000
The change allows people to delay paying their provisional tax. They can wait until February 7 in the year following the year they file their return before they have to pay, instead of having to pay in installments throughout the year. It allows them to retain cash for longer. It will benefit an estimated 95,000 people.
Allowing immediate low-value asset write offs
To encourage spending, New Zealand has temporarily increased the threshold of the value of assets which can be deducted in the year the asset was purchased. The threshold has been increased from NZD500 to NZD5,000 for assets purchased in the 12 months from March 17, 2020, before reducing to NZD1,000 from March 17, 2021.
Bringing forward broader research and development refundability
The amendment brings forward planned refundability measures by one year, to the 2019–20 income year.
The new Research and Development Tax Incentive, available for the 2019/20 tax year, features a credit rate of 15 percent. In general, to be eligible for a tax credit, a person must spend at least NZD50,000 on research and development in a given year. The maximum amount of expenditure that is eligible for a tax credit is NZD120m, unless a person has obtained the Commissioner's approval to exceed the cap.
Under the changes, included in The Taxation (KiwiSaver, Student Loans, and Remedial Matters) Bill, which received Royal Assent on March 23, research and development tax credits have been made more broadly refundable, with a cap based on the payroll taxes paid by a firm in each year. Specifically, the changes are intended to provide a cash-flow boost to businesses not yet making a profit.
Allowing use of money interest to be waived
The Bill allows Inland Revenue to cancel interest on a late tax payment if the taxpayer's ability to make a payment due on or after February 14, 2020, was significantly adversely affected by the COVID-19 outbreak.
Allowing greater information sharing
Inland Revenue has been empowered to share information with a wider group of government agencies to assist the efficient and effective delivery of the Government's COVID-19 response.
Social support measures
Further, the social assistance measures in the Bill include: