18 Mar 2025
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Tax Talk | Tax changes and small business cashflow loans reminder
With 1 April fast approaching, there are several tax rate changes taking effect that you should be aware of. In addition, the due date for repayment of loans under the pandemic era small business cashflow scheme is fast approaching – with nasty consequences if on time repayment is not made.
Time to read: 3 mins
Threshold changes – tax
The government decreased personal income tax rates with effect from 31 July 2024. However, due to this tax cut taking effect after a third of the year had elapsed, the government decided to keep the fringe benefit tax (FBT), employer superannuation contribution tax (ESCT) and PIE thresholds unchanged for the entirety of the year ended 31 March 2025. Instead, the new personal tax rate thresholds will only change with effect from 1 April 2025. The purpose of this was for simplicity, as the blended personal tax rates would have given rise to rates effective for only one year, which would have created undue compliance costs to business for limited benefit.
On 1 April 2025, the thresholds will be:
FBT
|
Rate |
Old threshold |
New threshold |
|
11.73% |
Less than $12,530 |
Less than $13,962 |
|
21.21% |
$12,531 to $40,580 |
$13,963 to $45,230 |
|
42.86% |
$40,581 to $55,980 |
$45,231 to $62,450 |
|
49.25% |
$55,981 to $129,680 |
$62,451 to $130,723 |
|
63.93% |
Above $129,680 |
Above $130,723 |
ESCT
|
Rate |
Old threshold |
New threshold |
|
10.5% |
Less than $16,800 |
Less than $18,720 |
|
17.5% |
$16,801 to $57,600 |
$18,721 to $64,200 |
|
30.0% |
$57,601 to $84,000 |
$64,201 to $93,720 |
|
33.0% |
$84,001 to $216,000 |
$93,721 to $216,000 |
|
39.0% |
Above $216,000 |
Above $216,000 |
PIE thresholds
|
Rate |
Old threshold |
New threshold |
|
10.5% |
Less than $14,000 in taxable income and less than $48,000 in taxable and PIE income |
Less than $15,600 in taxable income and less than $53,500 in taxable and PIE income |
|
17.5% |
Between $14,001 and $48,000 in taxable income and between $48,001 and $70,000 in taxable and PIE income |
Between $15,601 and $53,500 in taxable income and between $53,501 and $78,100 in taxable and PIE income |
|
28.0% |
All other resident individuals |
All other resident individuals |
As mentioned above, the income tax cuts were reflected using blended rates for the year ended 31 March 2025. This means that anyone receiving items such as bonuses, pay increases and similar after 31 July 2024 may have had less tax withheld on them than was required, resulting in the possibility of an unexpected year-end tax bill.
There has also been a formula change to FBT to ensure none of the tax cuts are clawed back by the usual FBT calculation in the year ended 31 March 2025 given the temporary difference between the FBT and income tax thresholds.
Threshold and rate changes – ACC
The government have announced the following threshold changes for ACC in the coming years:
|
Year |
Levy Rate (including GST) |
Maximum earnings |
|
1 April 2024 to 31 March 2025 |
1.60% |
$142,283 |
|
1 April 2025 to 31 March 2026 |
1.67% |
$152,790 |
|
1 April 2026 to 31 March 2027 |
1.75% |
$156,641 |
|
1 April 2027 to 31 March 2028 |
1.83% |
$160,244 |
This will mean that, come 1 April, your pay cheque will be slightly lower due to the increased ACC levy.
Employer levies are calculated using different levy rates, and these applicable rates are also likely to change.
Small Business Cashflow Scheme
During the COVID pandemic years, Inland Revenue were tasked with providing loans to small businesses under the small business cashflow scheme. One of the conditions of the loans was that the amount had to be repaid in full within five years. With the five-year anniversary of these loans fast approaching, Inland Revenue have started following up businesses who made use of the scheme to ensure the loans are repaid in full and on time.
If repayment of the loan is not made, interest at the standard use of money interest rate (10.88% per annum) will be charged. It is also worth noting that, legally, the amount due is defined as tax under tax legislation and therefore the tools available to Inland Revenue to pursue late payment of taxes will be available here. This can include accessing bank accounts, requiring third parties withhold from payments made to you and in extreme scenarios, commencing liquidation proceedings.
If you have any queries about taxes in general, or if you need assistance in budgeting for repayment of loans borrowed under the small business cashflow scheme, please contact your Baker Tilly Staples Rodway advisor who will be glad to help.