Tax Talk | Income tax treatment of accommodation provided to employees
Inland Revenue has released an operational statement in relation to employer-provided accommodation and...
In this issue of Tax Talk we catch up on a few smaller tax changes that we have seen over the last month
Time to read: 3 mins
Inland Revenue updated the kilometre rate for business use of vehicles for the 2021 income year on 27 May 2021. The updated rates are as follows:
|Vehicle type||Tier One rate||Tier Two rate|
|Petrol or diesel||79 cents||27 cents|
|Petrol hybrid||79 cents||16 cents|
|Electric||79 cents||9 cents|
These rates can also be used by employers to calculate reimbursements or allowances for the business use of vehicles by employees. Please note that the Tier One rate this year is less than before, and so we recommend updating applicable calculations sooner rather than later.
Also note that the Tier One rate can only apply to the first 14,000 kilometres of usage. If, for example, a vehicle is used 25% for business purposes and 75% for private purposes, then only the first 3,500 kilometres of business usage can be reimbursed at the Tier One rate, with the balance needing to be reimbursed at the Tier Two rate.
Other kilometre rates, such as those published by the AA, can also be used. Alternately, actual calculations can also be undertaken.
Inland Revenue has updated the square metre rate for the 2021 income year (year ended 31 March 2021 for standard balance dates). The 2021 square metre rate is $44.75 per square metre. This rate can be used to calculate the deduction available for a home office instead of needing to apportion each individual item of expenditure. Note, this does not include mortgage interest or rent, which must continue to be apportioned.
Full apportionment can still be undertaken, if desired.
Applications for the Business Finance Guarantee Scheme, a scheme introduced by government to encourage banks to lend to businesses by providing an 80% guarantee to the loan, come to an end on 30 June. This is not to be confused with the Small Business Cashflow Scheme where funds were directly lent by the government. If your business wishes to borrow funds under this scheme, we suggest commencing your application soon as a considerable level of paperwork is required to be submitted.
To date, there have been four iterations of the wage subsidy. Generally, the wage subsidies have been well received as a way of keeping jobs safe during lockdown periods.
With the immediate danger having now passed, there has been increasing government audit activity in relation to the wage subsidy. While in the short term this has been relatively light handed, with growing revenue pressures on government, we expect it will ramp up with particular focus on whether all the criteria were met by applicants. We recommend thoroughly reviewing whether your business did meet all the criteria for the wage subsidies applied for and ensuring this evidence is easily accessible.
In addition, if you are self employed or an independent contractor and directly received the wage subsidy from the government, then you will need to include the subsidy received as a separate line item in your IR3 income tax return.
If you require assistance in relation to any of these matters, Baker Tilly Staples Rodway have a number of specialists that would be more than happy to assist you with the queries or tax advice in relation to matters above.
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