Up until now, taxpayers were charged Use of Money Interest when their taxable income increased by more than 5% on the previous year.
That even applied when you paid your correctly calculated provisional tax payment.
I often referred to it as the “crystal ball” method of taxation where without one, you were bound to be hit by interests which was recently being charged in excess of 9%!
In certain circumstances, you will now be exempted from MOST of that.
Providing you pay the provisional tax payments we calculate for you on or before the due dates, the Use of Money Interest calculation will only be made from the final provisional tax payment date.
However, Australians trading through company structures may now be exempt from Use of Money Interest, thanks to the extension of the “Safe harbour” threshold.
Safe Harbour Threshold
Previously, the safe harbour threshold only applied to individual taxpayers.
So it is exciting for Australians carrying out business in New Zealand who typically trade using a company structure, that companies will now be exempt from the Use of Money Interest regime providing your residual income tax is less than $60,000.
Contractors Can Now Elect Their Own Withholding Tax Rate
If you have engaged contractors to help you out in New Zealand, they can now elect their own withholding tax rate.
Even if they haven’t currently been subjected to withholding tax payments, they can opt in to this change providing they have the payer’s consent.
Many are likely to prefer this as it will reduce their tax burden at the end of the year.
It is important that the differentiation between contractors and employees are different in New Zealand for tax purposes. The obligation is on the payer to get things right so it might be a good idea if you read my blog post on differentiating between a contractor and an employee.
Incremental Late Payment Penalties
Along with interest charges, late payment penalties also included a 1% incremental late payment penalty charge.
Inland Revenue has announced that this will be removed from GST, provisional tax and income tax effective 1 April 2017.
Self Correction Threshold
Correcting for minor errors made in GST and income tax returns, previously required for every adjustment of more than $500, will now be required if adjustments are more than $1000. Click here to read my blog post on this announcement.
The information in this article is indicative of NZ tax rules and changes and not intended to be complete for all intents or purposes and does not constitute advice. It is recommended that you obtain professional advice, suited to your particular circumstances, from us before acting on anything you read.