Ticking items off your end-of-year tax checklist this month?

Make sure you don’t forget income received from COVID-19 business support. And consider whether further tax relief measures could be appropriate.

1. Rules to keep cash flowing - If money is a bit tight as the financial year draws to a close, here are four tax measures focused on providing and enabling cashflow:

   • If your cashflow has been significantly impacted by the economic effects of COVID-19, you may be able to apply for relief from use of money interest and penalties, or enter into an instalment arrangement for payments due to Inland Revenue. Inland Revenue’s ability to remit use of money interest in such circumstances applies to tax payments due up until 24 March 2022.

   • Keeping an eye on tax losses, as the Government introduced a same or similar business test that allows tax losses to be carried forward. This may become useful if you’re wanting to raise capital for your business in the future.

   • Consider the Small Business Cashflow (Loan) Scheme being offered by the Government through Inland Revenue where certain conditions are met. This provides loans for businesses with 50 or fewer full-time staff of up to $10,000 plus $1,800 per full-time employee (therefore dependent on the number of employees) with an interest rate of 3%, with no interest applying if the loan is repaid within 2 years.

2. Asset threshold lowering - Put aside time to review your asset expenditure. Identify any assets (valued up to $1,000) that you need and buy them before the end of the tax year. It’s also a good time to ensure records are up to date on any commercial buildings as depreciation for tax purposes is available on commercial buildings for the year ended 31 March 2022.

3. Earn over $180,000 a year? - If you’re one of the 75,000 Kiwis impacted by the 39% marginal tax rate, review your business and investment structure with us. The marginal tax rate applies to all employment income over $180,000 a year. It includes extra pay earned in the course of employment, such as bonuses, back pay, redundancy, and retirement payments. It is timely also to review dividend payments.

4. Keeping subsidy records crucial - While COVID-19 related wage subsidies and resurgence support payments are non-taxable, keep accurate records of any subsidy or payment you received and which staff member it was paid to or business expense it was applied to, to ensure non-taxable treatment applies and also in case the Ministry of Social Development asks to review your records down the track.

5. R&D loss tax credit - Start-up companies are able to cash-out their tax losses arising from eligible research and development (R&D) expenditure, and avoid carrying the losses through to the next income year. The credit can only be for:

   • eligible R&D business expenditure

   • up to 28% of your tax losses from R&D activity

   • companies that are tax residents in New Zealand

   • dates on or after 1 April 2015. The rules around R&D expenditure are detailed and eligible R&D expenditure will require approval from Inland Revenue. So, if you’re looking to claim under these rules, you will need to start looking at this sooner rather than later, and keeping records of such expenditure as it occurs.

6. Staff reimbursements and allowances - Make sure you have a good record of any reimbursements and allowances paid to employees for expenditures. Remember:

   • For telecommunications devices and plans, staff reimbursements are tax exempt up to $5 per week. If reimbursement is above this amount, the exempt amount is 25% if the device or plan is used partly, 75% if used mainly, or 100% if used exclusively for employment purposes.

   • WFH payments claimed from 1 October 2021 allow an additional $15 per week, per employee, to be exempt income for other WFH expenditure.

   • Tax-exempt payments for use of furniture or equipment when WFH can reimburse the depreciation of the item. The payment will typically be for the cost of the asset and the payment will still be deductible to the employer. Note the low-value asset threshold of $1,000 will apply here.