You cannot copy content of this page

Welcome to FSP Tax-News
Your daily New Zealand tax news service
Continuously updated through the day

New Zealand Explains Latest COVID-19 Tax Reliefs

Posted on 08-11-2020

New Zealand’s Inland Revenue Department has released a special report explaining in detail the tax relief measures in the COVID-19 Response (Further Management Measures) Legislation Act (No 2) 2020.

The four taxation matters included in the new Act introduce amendments to:

  • The powers for the Commissioner of Inland Revenue to vary due dates and
    deadlines;
  • Support the implementation of the research and development loan scheme;
  • The ability for the Commissioner of Inland Revenue to remit use-of-money
    interest for some provisional taxpayers; and
  • The qualification periods for the in-work tax credit.

The first measure enables the Commissioner of Inland Revenue greater flexibility in providing relief by modifying due dates, timeframes, or other procedural requirements for taxpayers impacted by COVID-19.

Where taxpayers comply with a modified timeframe or requirement made under this
power, they will be treated as if they complied with the relevant requirement that is set
in legislation. It is effective from March 17, 2020, in relation to requirements arising from this date.

The second measure is intended to support businesses to continue research and development programmes at risk in the current economic conditions.

The research and development loan scheme is open to all research and development-performing businesses regardless of size.
However, businesses are required to prove that they have suffered a significant loss in
revenue or lack access to finance. The research and development loans scheme applies similar eligibility
criteria to those used for the COVID-19 wage subsidy scheme. The loan can only be
spent on research and development activity, and businesses are required to account for this.

Amendments to the Income Tax Act 2007 ensure that expenditure funded by the loan
scheme is subject to the normal income tax deductibility rules and that the loan does
not affect a person’s entitlement to research and development tax credits. Without
the amendment, expenditure funded through the research and development loan scheme would likely
be ineligible for the tax credit, contrary to policy intent.

The third measure allows Inland Revenue to remit use of money interest (UOMI)
accrued on an amount of terminal tax payable for the 2020-21 tax year where the
taxpayer failed to pay the relevant portions of the amount by the provisional tax dates
because their ability to reasonably accurately forecast their residual income tax has
been significantly adversely affected by COVID-19. It will apply for
UOMI accrued for the 2020-21 tax year.

Finally, amendments to the Income Tax Act 2007 will allow families to continue to receive
the in-work tax credit (IWTC) for a period of up to two weeks when an earner transitions
between jobs, are unpaid for a period, or leave their employment.

New Zealand’s Inland Revenue Department has released a special report explaining in detail the tax relief measures in the COVID-19 Response (Further Management Measures) Legislation Act (No 2) 2020.

The four taxation matters included in the new Act introduce amendments to:

  • The powers for the Commissioner of Inland Revenue to vary due dates and
    deadlines;
  • Support the implementation of the research and development loan scheme;
  • The ability for the Commissioner of Inland Revenue to remit use-of-money
    interest for some provisional taxpayers; and
  • The qualification periods for the in-work tax credit.

The first measure enables the Commissioner of Inland Revenue greater flexibility in providing relief by modifying due dates, timeframes, or other procedural requirements for taxpayers impacted by COVID-19.

Where taxpayers comply with a modified timeframe or requirement made under this
power, they will be treated as if they complied with the relevant requirement that is set
in legislation. It is effective from March 17, 2020, in relation to requirements arising from this date.

The second measure is intended to support businesses to continue research and development programmes at risk in the current economic conditions.

The research and development loan scheme is open to all research and development-performing businesses regardless of size.
However, businesses are required to prove that they have suffered a significant loss in
revenue or lack access to finance. The research and development loans scheme applies similar eligibility
criteria to those used for the COVID-19 wage subsidy scheme. The loan can only be
spent on research and development activity, and businesses are required to account for this.

Amendments to the Income Tax Act 2007 ensure that expenditure funded by the loan
scheme is subject to the normal income tax deductibility rules and that the loan does
not affect a person’s entitlement to research and development tax credits. Without
the amendment, expenditure funded through the research and development loan scheme would likely
be ineligible for the tax credit, contrary to policy intent.

The third measure allows Inland Revenue to remit use of money interest (UOMI)
accrued on an amount of terminal tax payable for the 2020-21 tax year where the
taxpayer failed to pay the relevant portions of the amount by the provisional tax dates
because their ability to reasonably accurately forecast their residual income tax has
been significantly adversely affected by COVID-19. It will apply for
UOMI accrued for the 2020-21 tax year.

Finally, amendments to the Income Tax Act 2007 will allow families to continue to receive
the in-work tax credit (IWTC) for a period of up to two weeks when an earner transitions
between jobs, are unpaid for a period, or leave their employment.