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New Zealand Enacts COVID-19 Support Bill

Posted on 03-30-2020

New Zealand has enacted The COVID-19 Response (Taxation and Social Assistance Urgent Measures) Bill to support businesses and individuals cope with the COVID-19 outbreak.

The main measures contained in this Bill are:

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, the change will temporarily increase the threshold of the value of assets which can be deducted in the year the asset was purchased. The threshold will increase 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 proposes to allow 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

This would allow Inland Revenue 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 proposals in the Bill include:

  • removing the hours test eligibility requirement for the in-work tax credit;
  • ensuring GST does not apply to payments of the COVID-19 wage subsidy and leave payments;
  • reducing the winter energy payment rates to their current levels from 2021 after a temporary increase in 2020; and
  • allowing people on a temporary visa to qualify for Working for Families if they are receiving an emergency benefit.

New Zealand has enacted The COVID-19 Response (Taxation and Social Assistance Urgent Measures) Bill to support businesses and individuals cope with the COVID-19 outbreak.

The main measures contained in this Bill are:

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, the change will temporarily increase the threshold of the value of assets which can be deducted in the year the asset was purchased. The threshold will increase 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 proposes to allow 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

This would allow Inland Revenue 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 proposals in the Bill include:

  • removing the hours test eligibility requirement for the in-work tax credit;
  • ensuring GST does not apply to payments of the COVID-19 wage subsidy and leave payments;
  • reducing the winter energy payment rates to their current levels from 2021 after a temporary increase in 2020; and
  • allowing people on a temporary visa to qualify for Working for Families if they are receiving an emergency benefit.