When: From April 2019
What: Employers and people who are self-employed will on average pay 6.9 percent less for their ACC Work Account levy over the coming two years.
Why: This reduction comes after standard public consultation.
What you need to do: Nothing. If you’re a small business owner, ACC will update your levies for you.
Note that if you’re self-employed, ACC is also changing the way you’re levied. In future, the income from your tax return will be used to calculate your levy for the same year.
How your CoverPlus levy is changing
Previously, ACC levied self-employed people during the levy year, based on their previous year’s earnings.
From the 2020 Levy Year and onwards, ACC will be levying self-employed people after the levy year has finished, based on their actual earnings.
This means you’ll receive your 2020 CoverPlus invoice starting around July/August 2020 instead of July/August 2019 like you might be used to. It won’t be based on your previous year’s earnings, instead it will be based on your actual earnings, filed with IR, for the year ending 31 March 2020.
CoverPlus Extra is based on an agreed level of cover. It’s not impacted by this change and will still be invoiced in advance.
If you join or leave CoverPlus Extra part way through the 2020 levy year, you’ll still receive a CoverPlus levy for the remaining part of the year. This will be calculated and sent to you once ACC have received your earnings from IR.
When: 1 April 2019
What: Any employee who’s been affected by domestic violence can request paid leave from their employer — up to 10 days per year. This leave is separate from annual, sick, and bereavement leave.
Why: So that people affected by domestic violence can have time to deal with the effects of that violence. These people can also request short-term flexible working arrangements.
What you need to do: Employers will need to consider the following requirements:
What: To encourage businesses to spend more on research and development, a new R&D tax incentive has been introduced in New Zealand. Guidance as to what sort of R&D will be eligible will be released in coming months.
The R&D tax incentive includes a credit rate of 15 percent, a $120 million cap on R&D expenditure and a minimum R&D spend threshold of $50,000 per year.
Who: Businesses investing in eligible R&D activity or businesses that contract out R&D to approved providers.
When: The R&D tax incentive will apply to the 2019/20 income year. For most businesses, this means R&D spend from 1 April 2019 may be eligible for the incentive. You’ll want to start recording spend now and over the course of the financial year so your records are ready to file at the end of the next tax year.
What’s next: The Taxation (Research and Development Tax Credits) Act 2019 was passed into law in early May 2019. There is draft guidance available now from Inland Revenue which will be finalised in the coming weeks. More information about eligibility and how to claim the tax credit will be available in the coming months.
Why: Even though the guidance is not yet finalised, we’re telling you this now so that you can keep records of any investment in R&D that you make over the next few months that may be eligible for a credit.
Bright line test – family trust
As you know, the bright line test does not apply to the family home. Similarly, if the family home is contained in a Family trust and the main settlor and family live in it, the bright line test does not apply.
However, if the home in the trust is made available to another member of the family and the settlor has a separate home, the bright line test does apply.
If the house is rented for part of the time and used as a home for part of the time, such as when the owner goes overseas for a protracted period, look at the percentage applicable to each. For example, the house is purchased on 1 April 2018. The owners live in it until 1 August 2018 when the owners go to Australia to take up a lucrative two year contract. The house is rented for the two years (or most of it) and then the owners return and live in it for a further five months. At that stage, they decide to sell. Do the arithmetic. The owners lived in the house for four months and later for five months, a total of nine months. The tenants lived in the house for two years. The house was therefore predominantly a rental and the bright line test applies.
Similarly, an Air B&B is caught under the bright line test if the predominant use is Air B&B as opposed to being a main home.
Bright line test only applies to “residential property”. A property isn’t residential if it is mainly used for business or as farmland.
There are three steps in purchasing a property:
Similarly, when selling a property you have the same three steps. For the standard purchase the bright line period runs from the third step of purchasing to the first step of selling. If it didn’t, the date of sale could be manipulated.
Choosing the right structure for rental property
Consider: asset protection, estate planning, taxation, compliance costs. The following table could help with your decision:
|Tax effective – profit||Bad||Good||Bad||Good|
|Tax effective – loss||Neutral||Neutral||Neutral||Neutral|
If you are not yet familiar with online banking now is a good time to start learning.
Kiwi Bank is the first bank giving notice that they are phasing out cheques, and we expect other banks will follow suit in due course.
As advised in our previous newsletter, we have made some changes to our billing process for streamlining and efficiency reasons. These changes apply to most software subscriptions, and some GST clients.
In most cases software subscription charges such as Xero, BankLink, MYOB, are now being invoiced to you quarterly in arrears and have been separated out from your other work. For example, the June subscriptions invoice covers charges from April to June 2019.
Johnston Associates has decided to provide more regular information via social media channels – namely Facebook and LinkedIn. We will continue to publish our quarterly newsletter, but you will find more regular and timely information through these channels.
So choose your preferred outlet by clicking on one of the buttons below, and don’t forget to follow us!
Disclaimer – While all care has been taken, Johnston Associates Chartered Accountants Ltd and its staff accept no liability for the content of this newsletter; always see your professional advisor before taking any action that you are unsure about.