Tax Talk | Inland Revenue crackdown on property speculators
In the last couple of weeks, Inland Revenue have sent out letters to taxpayers who may have sold properties...
Tax affects everyone – whether you are a passive investor or a business starting up, emerging, established, expanding or mature. Our tax specialists have the knowledge and experience to provide you with practical, tailored solutions fit for purpose wherever you are in your business lifecycle.
Income |
Rate |
0 - 14,000 | 10.5% |
14,001 - 48,000 | 17.5% |
48,001 - 70,000 | 30% |
Over 70,000 | 33% |
Rate | |
Companies (including branches or permanent establishments of non-resident companies & unit trusts) | 28% |
Rate |
|
Trustees | 33% |
Beneficiary income (excluding minor beneficiaries) | Individual rates (see above) |
Minor beneficiaries (under age 16) with beneficiary income over $1,000 per trust | 33% |
Distributions from non-complying trusts | 45% |
Limited partnerships (LP) & look-through companies (LTC)) | >Partner’s or owner’s rates (see above |
Rate |
ESCT is deductible from employer contributions to superannuation schemes, including employer contributions to KiwiSaver.
Income plus Superannuation Contributions |
Rate |
0 - 16,800 | 10.5% |
16,801 - 57,600 |
17.5% |
57,601 - 84,000 | 30% |
Over 84,000 | 33% |
Rate | |
Employee contribution | 3, 4, 6, 8 or 10% |
Employer contribution | 3% |
Member tax credit |
50c for each $1 contributed by a member, to a maximum of $521.43 |
GST is charged at the rate of 15% on all taxable supplies made in New Zealand. To find the GST component of a GST inclusive amount, multiply by 3, then divide by 23. Non-resident businesses can be refunded GST paid on New Zealand purchases, in some cases.
The repayment threshold has increased to $20,000, with the repayment rate at 12%. Repayment holidays are one year in length for borrowers who go overseas and apply for one. Losses cannot be used against income to reduce a liability for student loan repayments.
Quarters 1 to 3 |
Quarter 4 |
49.25% (single rate) | 49.25% (single rate) or the alternate rate calculation (see below) |
43% (alternate rate) |
alternate rate calculation (see below) |
The alternate rate calculation applies the following rates.
Income plus Fringe Benefits |
Rate |
0 - 12,530 | 11.73% |
12,531 - 40,580 | 21.21% |
40,581 - 55,980 | 42.86% |
Over 55,980 | 49.25% |
Straight line or diminishing value can be applied on an asset by asset basis. Depreciation rates vary depending on estimated useful life. Assets costing $500 or less (subject to certain criteria) are deductible in the year acquired. The relevant thresholds for immediate deduction are:
Purchase Date |
Deductibility Threshold |
19 May 2005 to 16 March 2020 | $500 |
17 March 2020 to 16 March 2021 | $5,000 |
17 March 2021 and after | $1,000 |
Residential buildings are not depreciable. Commercial and industrial buildings are depreciable from April 2020.
Commercial fit-outs are depreciable. Residential fit-outs are nondepreciable, but chattels can be depreciated.
A tax credit of 15% is available on specified research and development spending from 2019/20 which is refundable in some circumstances.
The earners’ account levy is $1.39 per $100 of earnings (GST inclusive) for the 2020/21 income year and the minimum and maximum liable earnings are as follows:
Minimum |
Maximum |
|
Employees | $1 | $130,911 |
Self-employed people | $36,816 | $130,911 |
Allowed a deduction for approved charitable donations up to their taxable income.
Cash refund for one-third of donations of $5 or more to approved charitable organisations (provided the value of gifts made do not exceed their taxable income).
Available options are:
Latest Inland Revenue kilometre rates (per kilometre) are:
Vehicle Type |
First 14,000 kms |
After 14,000 kms |
Petrol or diesel | 76 cents | 26 cents |
Petrol hybrid | 76 cents | 18 cents |
Electric | 76 cents | 9 cents |
The number of times provisional tax is payable depends on the option used to calculate provisional tax and how many times GST (if registered) is paid. Examples of payment dates for the most common balance dates are below. If the due date is not a working day, then it moves to the next working day. Terminal tax dates shown apply to taxpayers linked to a tax agent.
31 March |
30 June |
31 Dec |
||||
2020 | 2021 | 2020 | 2021 | 2020 | 2021 | |
1st instalment | 28 Aug 2019 | 28 Aug 2020 | 28 Nov 2019 | 28 Nov 2020 | 28 May 2020 | 28 May 2021 |
2nd instalment | 15 Jan 2020 | 15 Jan 2021 | 28 Mar 2020 | 28 Mar 2021 | 28 Sep 2020 | 28 Sep 2021 |
3rd instalment | 7 May 2020 | 7 May 2021 | 28 Jul 2020 | 28 Jul 2021 | 28 Jan 2021 | 28 Jan 2022 |
Terminal tax | 7 Apr 2021 | 7 Apr 2022 | 7 Apr 2021 | 7 Apr 2022 | 15 Jan 2022 | 15 Jan 2023 |
Taxpayer & Provisional Tax Year |
Year of RIT Used |
Standard Uplift |
2020 | 2018 | 110% of RIT |
2019 | 105% of RIT | |
2021 | 2019 | 110% of RIT |
2020 | 105% of RIT |
Provisional tax can also be calculated using the estimation option, the GST ratio method (subject to certain criteria being met) or the accounting income method (subject to certain criteria being met). The year used in calculating the uplift is the year of the most recent filed income tax return.
Use of money interest on provisional tax will arise at times outlined below provided payment is made on time based on the standard uplift for the taxpayer and associates. Special rules apply in the first year of business.
Standard Uplift |
Estimate |
||
Actual RIT <$60,000 | Actual RIT >$60,000 | ||
1st instalment | n/a | n/a | ✓ |
2nd instalment | n/a | n/a | ✓ |
3rd instalment | n/a | ✓ | ✓ |
|
Prior to 28 August 2019 |
From 29 August 2019 |
Underpayments | 8.22% | 8.35% |
Overpayments | 1.02% | 0.81% |
|
Rate |
Minimum rate for residents | 10% |
Minimum rate for non-residents | 15% |
Non-resident entertainers | 20% |
IRD number not supplied (Company) | 20% |
IRD number not supplied (Individual) | 45% |
Schedular payments are payments for specific activities such as directorships, labour hire firm contractors, actors and commission sellers.
Recipients are able to choose their rate on the filing of an IR330C provided it is greater than the minimum rates above. Default rates apply where a rate is not chosen.
Rates for non-residents can apply to non-resident contractors performing services of any kind. Exemptions are available in some situations.
|
Interest |
Dividends |
Royalties |
Default | 0%, 15% | 0%, 15% or 30% | 15% |
Australia | 0%, 10% | 0%, 5%, 15% | 5% |
Canada | 0%, 10% | 0%, 5%, 15% | 10% |
China | 0%, 10% | 0%, 15% | 10% |
France | 0%, 10% | 0%, 15% | 10% |
Germany | 0%, 10% | 0%, 15% | 10% |
Hong Kong | 0%, 10% | 0%, 5%, 15% | 5% |
Japan | 0%, 10% | 0%, 15% | 5% |
Singapore | 0%, 10% | 0%, 5%, 15% | 5% |
UK | 0%, 10% | 0%, 15% | 10% |
USA | 0%, 10% | 0%, 5%, 15% | 5% |
Where a double tax agreement exists, the default NRWT rates may be reduced. Above are examples of rates for some common treaty partners (also including reduced rates where New Zealand rules permit). New Zealand’s extensive treaty network means specific rates are dependent on individual circumstances (please seek professional advice).
Individual Income Bands |
Rate |
0 - 14,000 | 10.5% |
14,001 - 48,000 | 17.5% |
48,001 - 70,000 | 30% |
Over 70,000 | 33% |
Companies | 28% |
Trusts | 17.5%, 30% or 33% |
Default (IRD number supplied) | 33% |
IRD number not supplied | 45% |
RLWT, generally at the lesser of 33% of the gain or 10% of the sale price, must be deducted from the proceeds of residential property sales made by offshore persons where the property was purchased on or after 29 March 2018 and has been owned for less than five years.
The vendor can file a tax return to recover any overpayment.
Income (worldwide) |
Income plus PIE Income/Loss |
Rate |
0 - 14,000 | 0 - 48,000 | 10.5% |
0 - 48,000 | 0 - 70,000 | 17.5% |
All others | 28% |
Both thresholds must be met for the rate to apply. Row 2 applies if Row 1 thresholds not met. Income is measured for either of the last 2 years.
|
Rate |
Non-resident investor | 0%, 1.44%, 15%, 28% or 30% |
Company, incorporated society or PIE | 0% |
Super fund and trustees | 0%, 17.5% or 28% |
Registered charitable trust | 0% |
Joint investment, partnership, or unincorporated society | 0%, 10.5%, 17.5% or 28% |
A foreign company controlled by New Zealand residents (being controlled more than 40% by one New Zealand resident, or more than 50% by two to five New Zealand residents). A minimum 10% ownership interest is required. The only income attributed is certain types of “passive income” where this is equal to or more than 5% of total income.
A foreign company not controlled by New Zealand residents, a foreign superannuation scheme or life insurance policy. A minimum 10% ownership interest is required. Taxed either as a CFC or as a portfolio FIF.
A foreign company not controlled by New Zealand residents, a foreign superannuation scheme or foreign life insurance policy. An ownership interest of less than 10% is required. Taxed using one of four methods:
A foreign superannuation scheme entered into by a non-resident is subject to separate rules when lump sum withdrawals are made from the scheme. Regular pensions and commutation payments are taxed as income.
Interest deductions can be restricted if both the New Zealand and worldwide group debt percentages are exceeded.
|
Inbound |
Outbound |
New Zealand group debt exceeds | 60% | 75% |
Worldwide group debt exceeds | 110% | 110% |
NRWT is deducted at 0% from interest paid by a New Zealand borrower to an overseas lender where the parties are not associated (or the funds originate from an associate), the borrower is an approved issuer and the debt instrument is approved by Inland Revenue. Instead AIL equal to 2% or 0% (for certain securities) of the interest payments is payable.
Quarter |
Rate |
1 January 2016 to 30 September 2019 | 5.77% |
From 1 October 2019 | 2.26% |
This rate is also used to calculate the value of a deemed dividend arising where funds are lent by a company to its shareholders.
Lack of Reasonable Care |
UnacceptableTax Position |
Gross Carelessness |
Abusive Tax Position |
Evasion |
20% | 20% | 40% | 100% | 150% |
These penalties may be reduced where a voluntary disclosure is made or the shortfall is temporary as well as for previous good behaviour.
Return Type |
Penalty |
Income tax | $50 to $500 |
Employer monthly schedule | $250 |
GST | $50 or $250 |
Date |
Penalty |
Day following due date | 1% |
Seven days following due date | 4% |
Each month following due date | 1% |
The 1% incremental late payment penalty is not charged in relation to GST from 1 April 2017 or income tax from the 2018 income year.