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WE'RE BLOGGING TODAY

GOVERNMENT RENTAL PROPERTY TAX CHANGES

4/8/2021

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WEBINAR:

SUMMARY OF CHANGES

Changes announced today by the government: 
  • ​Bright-line test increased to 10 years (except for new-builds, which remain at 5 years); more info here
  • amending the "main home" exemption which would require tax to be paid on gains
    made for periods the property is not used as the owner’s main home (a "change of use" rule).
  • not allowing property owners to claim interest on loans used for residential properties as an expense against their income from those properties. This will start from 1 October 2021, and will be phased in over 4 years for existing properties. There will be an exemption for newly built homes. More info here
  • Ring-fencing rules applied to short-stay accommodation e.g Airbnb
​Note that this law is very much "being made up as they go along" so lots of things are unknown, or not even decided on yet.

HOW DOES THIS AFFECT ME?

At present, when you receive rents, you can offset expenses against that rental income to reduce the taxable profit.  A big part of this is interest paid on the rental mortgage/s.

If the expenses are more than the income (a "loss"), the Ring Fencing laws mean the loss can't offset non-rental income, and the loss instead is carried forward to the next year. If you have two or more rentals, the loss from one property can offset the profit from another (depending on how your affairs are structured).

However, under these new laws, the interest deduction will (over 4 years) be reduced, then finally removed.  Rental properties will make more profit, and for almost everyone: there will be a lot of tax to pay.

And of course, if you can't claim the expenses on interest, but still have to pay it... where does the money come from? You have to raise the rent.

WHAT SHOULD I DO?

  1. Don't panic! Most investors have losses from FY20 and FY21, which can be carried forward to offset future income. This would defer the tax impact for a couple of years, giving you time to make changes.
  2. Consider selling your existing rental and getting a "new build property." According to the Labour Party website, "If you invest in a new build property, you will be exempt from changes to the bright-line test and interest deductibility policy."
  3. Look at your budget. Expect that around March 2023 you will have 25% more to pay, then 50% more the following year, then 75% more, then 100% more for the period starting April 2025. You might end up being a provisional tax payer in a couple of years time.
  4. Look at raising the rents to help offset the reduction in interest expense that you can claim.
  5. Consider selling heavily-debt laden properties. Look for something more cash-flow neutral or positive. Check with us first to make sure you are not caught by the various tax laws.
  6. Check whether it is time for a restructure e.g. a change of shareholdings or sale or properties to a new entity etc: contact us. Just be aware that if something is done primarily for tax benefits, it is viewed by IRD as tax avoidance.
  7. Worth looking into commercial property, as it is not subject to these new rules.
  8. Also definitely worth getting into short-stay accommodation, because it is not subject to the interest deduction limitations - although other restrictive rules apply. (Talk to StayHub about how it could work; contact us to discuss your property/ies)

FAQ

Q: So what can I claim?
A: You can claim all the usual costs e.g. property management, repairs & maintenance, rates, insurance, legal etc. Re interest: It depends on timing. The following chart shows how much you can claim, depending on when you "acquired" the property:
Interest % claim by year
Q: How do I work out the tax impact?
A: The calculator below will help you work out the taxable income. The exact tax depends on many things e.g. owned personally or via a trust or LTC? How much wages you receive etc etc.​ Note that this calculator assumes you already own/have "acquired" the investment property/ies.
interest-deduction-calculator.xls
File Size: 52 kb
File Type: xls
Download File

Q: My rental was a new build. Does it still qualify as a new build under these laws?
A: If it is already built, no.  If construction is not complete: IRD have not said. We have to wait and see as they figure out the details. 

Q: When did I "acquire" my rental property?
A: For tax purposes, a property is generally acquired on the date a binding sale and purchase agreement is entered into (even if some conditions still need to be met). More info here. Note that for the purposes of the changes outlined here, a property acquired on or after 27 March 2021 will be treated as having been acquired before 27 March 2021, if the purchase was the result of an offer the purchaser made on or before 23 March 2021 that cannot be withdrawn before 27 March 2021.
​
Q: My property sale will be taxable due to the Bright-Line Test (BLT).  Can I claim the interest costs in that scenario?
A: No one knows. IRD say "The Government will consult on the detail of these proposals. Consultation will cover an exemption for new builds acquired as a residential investment property, and whether all people who are taxed on the sale of a property (for example under the bright-line tests) should be able to deduct their interest expense at the time of the sale."

Q: How do the "main home" changes work?
A: Actually, it reminds us a bit of how CGT works in Aussie. There is a great explanation at Stuff together with an example.  (Thanks Stuff.co.nz!)

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NEW TAX RATES NZ

10/18/2020

 
What will the new tax rates in NZ mean for you? Now that the election is decided, there will be a new tax rate to deal with in 2021: 39% on personal income exceeding $180,000 per year.
  • This applies to individuals only, e.g. an individual receiving a salary of $200,000 will pay an additional $1,200 tax each year
  • It does not apply to combined household income, e.g. if you earn $100,000 each as a couple, you won't pay any more tax 
  • All other rates and brackets unchanged
  • Any new taxes or further income tax increases ruled out for next term (if present government remains in power)
  • Applicable from next year
  • No changes are proposed to trust (33%) or company (28%) tax rates

These coming changes emphasize how important it is to have the right business and/or investment structures in place. There will be tax planning opportunities arising out of the difference between the trust tax rate (33%), the company tax rate (28%), the present top personal tax rate (33%) and the new top personal tax rate (39%). 

If you would like a review of your tax position and structure, please complete the contact form below or call us on 099730706 line 2

    PLEASE REVIEW MY TAX POSITION

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RESIDENTIAL TENANCIES LAW CHANGES EFFECT LANDLORDS

10/14/2020

 
The Residential Tenancies laws have changed. What effect does the "Healthy Homes Act" have on landlords? The Residential Tenancies Amendment Act will take effect in three main stages:
 
Phase 1: Law changes from 12 August 2020

  • Transitional and emergency housing: Accommodation provided for these purposes, which is funded by the government or part of a special needs grants programme, is exempt from the Residential Tenancies Act.
  • Rent increases: Rent increases are limited to once every 12 months. This is a change from once every 180 days (six months).
    Any rent increase notices given to tenants from 12 August must comply with the new 12-month rule. 
 
Phase 2: Law changes to take effect from 11 February 2021

  • Security of rental tenure: Landlords will not be able to end a periodic tenancy without cause by providing 90 days’ notice. New termination grounds will be available to landlords under a periodic tenancy and the required notice periods have changed.
  • Changes for fixed-term tenancies: All fixed-term tenancy agreements will convert to periodic tenancies at the end of the fixed-term unless the parties agree otherwise, the tenant gives a 28-day notice, or the landlord gives notice in accordance with the termination grounds for periodic tenancies.
  • Making minor changes: Tenants can ask to make changes to the property and landlords must not decline if the change is minor. Landlords must respond to a tenant’s request to make a change within 21 days.
  • Prohibitions on rental bidding: Rental properties cannot be advertised without a rental price listed, and landlords cannot invite or encourage tenants to bid on the rental (pay more than the advertised rent amount).
  • Fibre broadband: Tenants can request to install fibre broadband, and landlords must agree if it can be installed at no cost to them, unless specific exemptions apply.
  • Privacy and access to justice: A suppression order can remove names and identifying details from published Tenancy Tribunal decisions if a party who has applied for a suppression order is wholly or substantially successful, or if this is in the interests of the parties and the public interest.
  • Assignment of tenancies: All requests to assign a tenancy must be considered. Landlords cannot decline unreasonably. If a residential tenancy agreement prohibits assignment, it is of no effect.
  • Landlord records: Not providing a tenancy agreement in writing will be an unlawful act and landlords will need to retain and provide new types of information.
  • Enforcement measures being strengthened: The Regulator (the Ministry of Business, Innovation and Employment) will have new measures to take action against parties who are not meeting their obligations.
  • Changes to Tenancy Tribunal jurisdiction: The Tenancy Tribunal can hear cases and make awards up to $100,000. This is a change from $50,000.
 
Phase 3: Law changes to take effect by 11 August 2021 (but may take effect earlier if the Government agrees)

  • Family violence: Tenants who experience family violence will be able to withdraw from a fixed-term or periodic tenancy without financial penalty by giving two days’ notice and evidence of the family violence. If they are the only tenant, the tenancy will end.
  • Physical assault: If a tenant physically assaults the landlord, owner, or agent of the landlord, or family member of the landlord/owner, and the Police have laid a charge against the tenant, landlords can issue a 14 days' notice to terminate a fixed-term or periodic tenancy.
Contact us for advice or call now

COVID-19 STRATEGIES FOR PROPERTY INVESTORS AND BUSINESSES; GOVERNMENT STIMULUS

10/7/2020

 

WHAT CAN YOU DO?

PictureWe haven't yet found a garden centre that sells one of these
 1. MORTAGE HOLIDAY: In other news, with the OCR dropping to (and staying at) 0.25%, your bank should be passing on rate cuts for any floating loans, and it is worth looking at existing loans to see if you should break and re-fix or extend the term. Break fees are tax-deductible. Ask the bank or your mortgage advisor to do the calculations for you, or use this tool here. You might also want to look at a mortgage holiday, but just be aware that this will increase the loan,^ but it will buy you some time, so in the big picture, may be worth it. We suggest you only do this if you really need to.

Please see this detailed page with info about mortgage holidays, including links for all the major banks to apply for one. See also our blog post with 4 options for your mortgage to improve cash-flow right now


​2. INTEREST RATES: Check with your bank re break fees on your loans, and look at whether the math adds up to break and renegotiate one or some loans at lower interest rates.

3. RENTS: Rent increases are worth considering, as you can now only increase the rent once a year.


4. PAYMENTS: Of course, cash-flow is king, and in this environment, we suggest asking your suppliers if you can start paying in smaller regular installments, rather than bigger sums. This will help reduce the impact of having less cash coming in. EpsomTax.com group offer interest-free time payment plans to all customers as a matter of course; please contact us to arrange this now.

5. INVESTING: This might also be the time to look out for housing bargains - see this article about timing and buying.  If you can get a good deal on a cash-flow positive rental, that's going to introduce some $ into your portfolio. Heads-up: Banks are deluged with lending applications, so getting mortgage approval is slow

6. OTHER RESOURCES: Xero.com have provided a page with links to educational content. You don't have to be a Xero user to access all of it. Webinars include managing stress, resilience, business continuity and so on. 

​What good news is there for the coming weeks and months, in view of the COVID-19 pandemic and its effects on the economy? 

Government policy changes include:
  • Increasing the small asset depreciation threshold to $5,000 for the period 17/03/20 to 16/03/21.  It will return to $1,000 for 2021/22 onwards
  • Giving Inland Revenue the discretion to remit use-of-money interest (UOMI) for customers significantly adversely affected by COVID-19. Affects all tax payments due on or after 14 February 2020. (There are some conditions, see here for more info. For those who don't qualify; tax pooling is still a cost-effective option.)
  • Increasing the provisional tax threshold from $2,500 to $5,000 i.e. if your 2019/2020 income tax was under $5,000, you are not a provisional tax payer for 2021 year
  • Allowing 2% depreciation on commercial and industrial buildings from 2020/21. 
  • Giving wage subsidies or leave payments in some situations.* Find out more HERE. 
  • Business Finance Guarantee: loans for businesses with annual revenue up to $80 million can apply for loans up to $500,000, for up to three years. Click here for more info.
  • COVID-19 small business cashflow loans:  10k minimum loan, 1 year interest-free, no repayments till year 3, then 3% interest p.a.  There are some fishhooks if you miss a payment, so be aware of your responsibilities if you apply and are accepted. More info here.  Apply via the IRD website (use your myIR account)


* The wage subsidy and leave payments are NOT subject to GST - an Order in Council was passed to treat it as exempt (Section 5(6E)(B)(iii GST Act). The wage subsidy paid to the employer is not taxable; it is excluded income under section CX 47 of the Income Tax Act 2007; it is also therefore not deductible when paid by the employer as part of wages to employees. The payments made to employees are taxable for the employee and subject to PAYE, KiwiSaver deductions, Student loan etc in normal way. The same is true for self-employed persons: it is taxable income. NB: you only need to show a 30% revenue reduction for a single 4-week period to receive the full 12-week lump sum; you should be able to show that you took active steps to mitigate the financial impact of COVID-19, which could include drawing from your cash reserves (as appropriate), activating your business continuity plan, making an insurance claim, proactively engaging with your bank or seeking advice and support from either the Chamber of Commerce, a relevant industry association or the Regional Business Partner programme.

^ How it works is that the principal payments temporarily stop and the interest is added to the mortgage

Is Now a Good Time to Buy a Rental Property?

10/1/2020

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Are you thinking about buying a rental property but not sure if now is the right time to dive in?  

There’s nothing like a worldwide pandemic to give you wobbly legs at the thought of making a big financial investment! It may seem like a precarious time to buy a rental property due to Covid-19 and political uncertainty around landlord requirements. However, there are other drivers which may indicate that it is a good time to enter the property market or expand your portfolio.  Let’s take a closer look! 

The Housing Market

Despite the economic uncertainty caused by Covid-19, the New Zealand property market is still growing. International migration has decreased, however Kiwis are returning to and staying in Aotearoa in record numbers. 

According to the REINZ, in August median house prices across New Zealand increased by 16.4 percent. Furthermore, every region in the country has experienced an annual increase in median house prices.  There are still housing supply issues which is hot on the political agenda and demand for rentals are said to be strong. 

Interest Rates

The amount at which home loan interest rates are set is influenced by the Reserve Bank of New Zealand’s Official Cash Rate. As of September 2020, the Official Cash Rate was held at an all-time low of 0.25 percent.  These modest home loan interest rates make it a more affordable time to borrow funds. Consequently, term deposit rates are decidedly slim… 

LVR Ratio Restrictions

 In addition to low-interest rates, you currently will need to use less of your hard-earned savings to buy an investment property.  

Pre-Covid-19, the loan-to-value ratio (LVR), or the size of the deposit that lenders require you to provide in order to buy an investment property, sat at around 30 percent. In response to Covid-19, these LVR restrictions have been removed for one year in an attempt to make it easier for households and businesses to buy property

Legal Requirements for Landlords

Something to keep in mind when thinking about purchasing an investment property is any new and ongoing legal requirements on landlords. 

For example, the new healthy homes standards have been introduced for rental properties in New Zealand, to ensure tenants have access to warm, dry and safe homes.  These standards set specific and minimum requirements, including heating and insulation for rental properties. This means any property you purchase will either need to be up to specification when you buy it, or investment will need to be made to get it ready for tenants.

Final Thoughts

In reality, the decision on whether now is the right time to buy is always going to be ‘as long as a piece of string’. There are always going to be risks and potential threats.

However, lower interest rates, the temporary removal of LVR restrictions and ongoing demand in the housing market make it an attractive time to buy a rental property. Ultimately, the decision of buying a rental property needs to be right for your situation. Doing your research and seeking expert advice is going to help you make informed, long-term financial decisions that are right for you.  

Engage with us at EpsomTax.com to learn more about how you can minimise tax when investing in a rental property.  
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Rental Property: What Records Do You Need To Keep?

9/16/2020

 
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What records do you need to keep for your rental* property? Here is a general guide. Note that this list assumes you are using a property manager.  All costs are for the 12 months preceding 31 March:


​
RENTAL PROPERTY
  • Copy of Sale & Purchase Agreement (if 1st year)
  • Total Rent Received
  • Insurances, e.g. Landlord Protection, Mortgage Protection, House
  • Legal fees
  • Property Management fees (if applicable)
  • Rates – water and Council
  • Maintenance, including any purchases e.g. heat-pump
  • Rubbish collection (if you are paying for it)
  • Property improvements (detailed invoices please)
  • Any other fees or charges
  • Sale and purchase agreement
  • Valuation/s

HOME OFFICE
In our view, Home Office expenses can be claimed if you have rental property; however, as it is generally passive income (unless you are managing the properties yourself) we recommend a conservative claim, as follows:

  • Telephone – please separate out the costs of line rental, internet and tolls
  • Mobile phone costs
  • Stationery, e.g., printer ink, pens, paper etc
  • Visits to the rental property - please record the date of each trip you make to your rental property to check on it.
  • Any existing (if not claimed before) or new business related expenses e.g., computer, cell phone, iPad etc. Include make, model, date and cost
  • Any “home office” improvements (if in doubt, please keep records and we can verify these at year end)

MORTGAGE/S INFORMATION
For the rental property:
  • Full bank statements for the 12 months ending 31 March
  • Applicable interest rate
  • Balance remaining on mortgages as at 31 March
  • Any fees charged


If you'd like a downloadable copy, please see below.

Why keep good records? The better your records, the more expenses can be legitimately claimed, and the better the tax result is for you.  

records_you_need_to_supply_and_keep.pdf
File Size: 358 kb
File Type: pdf
Download File


* For guidelines on Business Expenses (non-rental property) please see this page.

​
Other FAQs you might have:
USING ACCOUNTANCYONLINE.CO.NZ/MY TAX QUESTIONNAIRE
HOW DO I DOWNLOAD TRANSACTIONS FROM MY BANK'S ONLINE INTERNET BANKING?
WHAT IS XERO.COM?
WHAT'S THE PROCESS FOR MY TAX RETURNS?

The IRD provides a guide here under the heading "Deductions You Can and Can't Claim." 
Please remember, all advice given is to be taken in the light of our  disclaimer. Image courtesy of patpitchaya at FreeDigitalPhotos.net

CAN I CLAIM MY HOLIDAY AS A RENTAL EXPENSE?

9/7/2020

 
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You have a rental property. Can you claim your holiday as an expense? If you spend time travelling as part of your business you can claim business travel as an expense. A good way to prove the business portion of your travel expenses is by keeping a diary of your travels.

In addition to keeping invoices, receipts and tickets you should also keep details of:
  • the date of the trip
  • your itinerary
  • the cost of car hire, and air, bus and taxi fares
  • the cost of accommodation, meals and incidentals
  • the time spent on business and non-business activities
  • letters of introduction
  • business contacts/cards
  • firms visited
  • business conducted/reasons for the trip/visit to firm

So how does the rental pay for my holiday?  
Well, the first thing is to remember that there is no such thing as a free lunch - or a free trip - unless you win a competition or have a wealthy benefactor!  However, there are such things as a tax-deductible trip, if not 100%, at least in part.

If you'd like to claim your holiday as a tax-deductible expense, then you need to
  1. be visiting your rental property which is in your holiday destination on on the way to it
  2. pre-plan all business activities related to it, i.e. set up your business appointments, e.g. real estate agents, insurance brokers, accountants, lawyers etc, before you go on your trip.  That makes it really clear why you are going.  Plus, keep records as per the list above.

Then, your LTC/trust/partnership etc can claim tax deductions for some or all of the trip and other necessary expenses: hotels, car, meals, travel etc. Note however that there are some gotchas:

That leather jacket is not tax-deductible
Let's say you are in Queenstown, and you see a nice leather jacket.  So, you buy it.  The trip is 100% tax-deductible, because it meets all the criteria above.  Can you claim the leather jacket?  No.  The guideline is "what is the nexus between this expense and the business activity?"  If there is no clear link or nexus, then the item is not tax-deductible. In this case, what does a leather jacket have to do with your rental property?  Nothing.  So it is clearly not tax-deductible. 

Don't go overboard with your expenses.  
Always remember that tax concessions allowed are based on what the hypothetical "reasonable" person would do.  A reasonable person would not eat out at the swankiest restaurant every night they were away.  They might do that once, but not every night.  So, don't get carried away.

Non-business parts of the trip are not deductible
Let's say that you arrive in another part of the country to inspect your rental property, meet with suppliers and possibly purchase another rental. You have a few days' worth of appointments set up, but you have planned to also take a few days to rest up as well.  The total trip is 10 days, with 3 days' business pre-planned, and the rest being vacation.  Therefore, you cannot claim the entire trip as a business expense. Instead, work out the proportion related to business (30%, in this example), and claim that percentage of the costs.

Can we claim for both of us then and the kids too?
Highly unlikely. Your children are likely not active working partners of your LTC etc, so you would have to make further adjustments to exclude costs related to their stay.  What about your spouse or partner?  Well, is your significant other a part of the business, e.g. a director of the company? A trustee of the trust (that owns the rental)? Are they actively involved in the taxable activities of the LTC? Is the firm/professional you are meeting at your destination expecting to meet both of you? Then likely yes you can claim.

Questions?  Please feel free to contact us.  And for clients, before you go away, please please please contact us. 


See also: what the IRD say. Image courtesy of photostock at FreeDigitalPhotos.net

WHAT BUSINESS EXPENSES ARE TAX-DEDUCTIBLE?

6/21/2020

 
What business expenses can you deduct in your income tax return? It depends on your business structure, but includes things such as:
  • ACC levies
  • accounting fees
  • bank charges
  • contractor costs
  • depreciation (wear and tear)
  • entertainment (be careful!)
  • home office expenses
  • lease or rental costs
  • legal fees
  • motor vehicle expenses e.g. WOF, registration, repairs, insurance, FBT
  • purchases (for business purposes e.g. stock, materials)
  • travel e.g. fuel, parking, business travel
  • stationery, printing and office costs
  • software e.g. Xero, MYOB
  • telephone and internet
This is not an exhaustive list, but you get the idea.  It's good to check out the resources here and if you are not sure if something can be claimed, or what percentage can be claimed, ask your accountant or contact us.

COVID-19 BUSINESS & TAX SUPPORT

4/15/2020

 
In addition to the measures announced (see this article and this article), the government recently announced several new measures (this article was updated 22/05/20:
  • a tax loss carry-back scheme.  
  • business tax loss continuity rules relaxed; see this page for more info. Rules to be clarified later this year
  • greater flexibility /discretion for IRD if businesses can't meet tax obligations*
  • business debt hibernation - click here for instructions and info
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TAX LOSS CARRY-BACK SCHEME
IRD say "Businesses expecting to make a loss in either the 2019/20 year or the 2020/21 year would be able to estimate the loss and use it to offset profits in the past year. In other words, they could carry the loss back one year. This change means we could refund some or all the tax already paid for the year they were in profit. It means firms could cash out all or some of their losses in 2019/20 or 2020/21. Without this change, firms would have to carry forward any loss to a year when they make a profit."

Points to note:
  • The loss carry back rules apply to ALL businesses whether trading individually or through a company.
  • You will be able to estimate your 19/20 (FY20) financial year provisional tax to NIL based on estimated 20/21 (FY21)  financial year losses. 
  • IRD will update their systems to allow the provisional tax already paid at 28 August and 15 January to be refunded.
  • You don't have to wait until FY21 accounts are finalised to access the losses.
  • If you think there's going to be a loss for this year, let us know and we will include a reasonable estimate of that in the FY20 calculations.
  • You do not need to rush to re-estimate your provisional tax before 7 May. Part of the proposed law change would make it possible for you to re-estimate it after the date of the final instalment. This will give you more time to work out any estimated loss for the 2020/21 income year. 
  • Just be aware that if you get it wrong, use of money interest will still apply; we are told a new rate will be announced soon.

Some caveats: 
​
If you are unable to pay this tax on time because of the effect of COVID-19 on your business, IRD expect that you will pay this tax as soon as practicable. In such cases our recommendation is that you contact IRD now to let them know you can’t pay the tax on time and negotiate a payment plan.  That will typically be an arrangement to pay the tax over a number of months (or fortnightly or even weekly), and possibly with a deferred payment start date.  As part of that process, although this is not specifically mentioned on the IRD website, a pre-requisite may be that you have applied to your bank for some help under the business finance support package underwritten by Government. The advantage of talking to IRD as soon as possible is that you will most likely qualify for remission of late payment penalties and interest.

If you would like us to talk to IRD on your behalf, please let us know at your convenience.  We will then contact you to discuss the best approach, and whether or not to use this or tax pooling.



* IRD can remit Use of Money Interest (UOMI) and penalties; criteria are:
  • tax is due on or after 14 February 2020, and
  • the taxpayer’s ability to pay by the due date, either physically or financially, has been significantly adversely affected by COVID-19.
The IRD Commissioner may exercise her discretion to remit the interest if the taxpayer has contacted the Commissioner as soon as practicable to request relief and has paid the outstanding tax as soon as practicable - right up until 25 March 2022.

To prove you've been "significantly affected", you'll likely need to provide at least three months’ banks statements and/or credit card statements, a list of aged creditors and debtors and probably profit and loss statements and/or balance sheet from your business.

Alternatively, you might also be able to apply to
  • pay the tax via installment (possibly with a deferred payment start date);
  • have IRD partially or fully write-off the debt due to serious hardship, with payment of the remaining tax by installment or a lump sum;
  • allow a partial payment, and write-off the balance.
You would need to provide similar proof, as mentioned above.

LOAN/ MORTGAGE OPTIONS COVID-19

3/30/2020

0 Comments

 
What are your options for managing your loan or mortgage during the COVID-19 outbreak?​

RESTRUCTURE / renegotiate

Depending on when you last fixed your loans, you may be able to get a lower rate now.  Look into what the bank's break fee would be (break fees are deductible on rental properties); chat to your mortgage advisor if the bank isn't playing ball.  Or if they are being greedy at a difficult time.

You might also be able to push the loan term out e.g. from 25 years to 30 years. Yes it will cost you more interest but will improve cash flow now by lowering repayments.

MORTGAGE HOLIDAY

It's not really a "holiday", but rather a "payment deferral." How does it work? While you don't have to make payments during the mortgage holiday, you still get charged interest. What's that going to cost? Well, it could be significant. If your loan is 500k, then it could add about 15k to it (assuming 4% interest p.a.). If you didn't increase your repayments once the holiday is over, you'd pay about 35k more on your loan!

So, think carefully about this. One thing you can do is request the 6-monthly holiday, then if you don't need all six months, end the holiday and renegotiate.

MORTGAGE HOLIDAY + VOLUNTARY REPAYMENTS

As above, but you keep making payments as you can afford them.  This will give you some relief but reduce the interest on the loan.  Or save money, and then whack it on the loan when you go back to work/cashflow returns to normal. Achieves a similar thing.

INTEREST-ONLY MORTGAGE

Instead of paying principal and interest, look at paying interest-only.  There should be no break-fee for this at the moment.  Just keep in mind that if property values drop, you could end up owing more than the property is worth.  It has happened, but is unlikely.
You may be able to extend the term of your loan, which would lower repayments.  Of course, you will pay more interest in the long-term, but it will help immediate cashflow.
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    Garreth Collard

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