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:

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.

According to Wikipedia*, "phishing is the attempt to obtain sensitive information such as usernames, passwords, and credit card details (and money), often for malicious reasons, by disguising as a trustworthy entity in an electronic communication.[1][2]"

Quite often they look like a legitimate email from IRD (about a tax refund, or warning of tax owing), or an email from a provider like Office365 or Apple. More info here at netsafe.org.nz*. 

There are often several clues; please see the copy of example emails below.

• IRD will never email you to tell your account has been hacked, that you owe tax, that you are due a tax refund, that the Police are after you, blah blah blah. 
• Phishing emails often have spelling mistakes or unusual grammar (although not always)
• The email address is not one that matches the organisation, or it is close but not quite right e.g. it is from ird.co.nz instead of ird.govt.nz; e.g. we received a message supposedly from Microsoft, but the email address was messagealert@ another organisation

Here is one phishing email we received recently. It looks rather convincing, but there are a couple of clues in the email that it is not from a legitimate source

1. Grammatical error in the opening line: "receive" instead of "received"
2. Email address is odd
3. We were not expecting anyone to send a confidential document, so this is out of character
4. Unusual grammar in the body: "secured document" instead of "secure document"
5. Odd closing line: "We hope to continue serving you"

Here is another example of a phishing email.  Note again the clues that it is not "legit":

• email address is not from Apple
• email shows it is sent "on behalf of" someone else
• grammatical errors e.g. "problems with your account Apple", "if you ignored this email", "disabled the next 48 hours.. .", space between account and the exclamation mark
• incorrect use of capitals e.g. "Officially Permanently"

• Be cautious about emails asking you to update or verify your details online
• Be cautious of emails saying you’ve won prizes from competitions that you don’t remember entering
• Be cautious of emails that try to get you to act quickly by threatening you with legal action or loss of an account
• Ignore any emails asking you to provide personal information like passwords, or banking information
• Remember legitimate organisations like banks will never ask you to send them your password
• Only open email attachments when you’re expecting them, even if you know who the sender is
• If you’re unsure if an email is from a legitimate organisation, you can contact them to ask. If you do contact them, make sure you go through their official contact channels – don’t use the phone numbers, websites or email addresses included in the email

See more tips on this page at netsafe.org.nz

What should I do if I need help or advice?
You can contact Netsafe:

• Email queries@netsafe.org.nz
• Call them toll free on 0508 NETSAFE (0508 638 723)
• Online report form at netsafe.org.nz/report

Their helpline is open from 8am – 8pm Monday to Friday and 9am – 5pm on weekends.

* We have quoted information from Wikipedia (licence terms) and Netsafe (licence terms). Use of this information does not constitute an endorsement of EpsomTax.com by either organisation. This information is not provided for commercial purposes, but strictly in an attempt to help promote community awareness of fraud and how to prevent it and protect yourself.

You will be sent an email with a link.  Click on the link to view the document. This will open in a web browser on your device. To view the document, click on it.

Click on the email link once again, scroll to the bottom of the page and click on the green approve button if you are happy with the contents.

From the 2018 income year (that is, 1 April 2017 onwards), the safe harbour threshold has been increased! Hooray, I hear you say. It's gone from $50,000 to $60,000. It has also been extended to non-individual taxpayers e.g. companies. 

What does this mean? Use of Money Interest (UOMI) will only be payable from terminal tax date* for natural persons and non-individuals where their residual income tax liability is less than $60,000 and the following requirements have been met:
​
The taxpayer must have:

• Paid all provisional tax instalments under the standard# methods on time,
• Not estimated their Residual Income Tax (RIT), and
• Not used the GST ratio method.

There are a couple of other points: The requirement that they must not have held an RWT exemption certificate at any time during the year has been removed. Oh, and there is an anti-avoidance rule as well, so that you can't manipulate your incomes to fall within the safe harbour provisions.

See this article for the 2020 changes to provisional tax. Basically, you'll have to pay provisional tax if you had to pay more than $5,000 tax at the end of the year from your last return. $2,500 was the threshold for years before the 2020 return

* Terminal tax date is either 7th February if you do not have an accountant or tax agent OR 7th April if you have an accountant or tax agent who has an extension of time on your behalf.... more info
# Standard method is last years residual income tax + 5%, OR your residual income from two years ago + 10% (only if you haven't filed last year's return yet)... more info

Why is a chattels valuation necessary?
Typical valuations assign a valuation to chattels of $10-15,000. However, they often miss many depreciable items, such as driveways, fences, decks, paths, hot water cylinder, letterbox, garage door motor etc. 

When you obtain a chattels-specific valuation, typically the value of the chattels for a new home is $45-50,000+ and for one built in the 1980’s $25-30,000. Even if your chattels valuation comes out at only $30,000 then the value for the tax refund will be around $10,000. The higher the chattels value, the more depreciation can be claimed, which means less tax to pay or larger tax refunds. 

Are there any exceptions?
The only exception to the chattels valuation, is if it was a rental already owned by you or another entity you controlled, and you had already filed a tax return for that property at least once. In that case, we can’t “re-value” the chattels. 

​What will it cost and who does this?
We know of only one firm: ValuIt. Visit their website www.valuit.co.nz or call 0508 482 583 to book a valuation. Please note, we receive no financial incentive or otherwise for recommending them. However, we encourage you to do this without delay, as they are very busy and it can often be 2-3 weeks before someone can get to see your property.

Further reading
Depreciation: Simple Overview (video)
6 Minutes on Depreciation (video)
Depreciation Clawback and Your Rental Property
Depreciation of Chattels in Your Rental Investment Property
​Valuation of Chattels - Why Necessary

First, open your sheet on your iPhone or iPad. 
Next, touch the three dots at the top right-hand corner

Then, choose Send a Copy
​Touch Excel

Lastly, email to us or share to your Google Drive or Dropbox.com, then share to office@epsomtax.com

What does this have to do with your tax? Well, we might have asked you to supply information, clarify a request etc etc. We know you're busy!  But we don't hear from you promptly. Instead, it drags on and on.

Frankly, that doesn't help you, us, anyone!

So, what we ask is this
1. stop for a moment,
2. send through the info,
3. get their tax refund sooner!

Moral: Stop and sharpen your axe. Work smarter, not harder!

You've established that there are good economic reasons for changing the shareholding in your LTC that owns rental residential property. You and your life partner are the shareholders. What things do you need to consider so that you don't get hit with a nasty (and unexpected) tax bill?

Let's say that the company owes the shareholders $150,000. This is tracked in the Shareholders Current Account, and is a liability (debt) of the LTC.

Bob has 99 shares, and Mary has 1. Bob will sell/transfer 49 of his shares to Mary so that they each have 50 shares.  Let’s say at the moment, Bob and Mary are owed $75,000 each by the company.  

The LTC has made losses so is technically “insolvent”. The ramification of this is that as 49% of the shares are transferred there is a deemed disposal of 49% of the both advances being a total of $73,500  at a market value of zero (due to the company being insolvent).

Under special tax rules the $73,500 is initially deemed to be income of the LTC to be taxed to the owners in proportion to their shareholding (Bob $72,765 and Mary $235).  Under recently-amended income tax rules, this income will not be taxed to the extent it is in proportion to shareholding. In this example Bob has debt of 50% for a shareholding of 99% and Mary has debt of 50% for a shareholding of 1%. Under the new rules he will be taxed on 49% of the debt being $73,500 and Mary will not have taxable income.

In this scenario, the de minimis* threshold of $50,000 would be exceeded when Bob transfers his shares (as the deemed income is $73,500). This same issue arises when either the LTC status is revoked or the company is wound up.
 
Going forward, ideally all LTC shareholder debt should be in proportion to shareholding. Between family members this can be achieved by way of an assignment of debt as that is another way of presenting what is happening. Then going forward debt should be transferred along with shareholding so the debt stays in proportion.

Is the cost of any of the LTC’s depreciable assets more than $200,000 each?  If so, you then need to ask: Is the value of the accumulated depreciation on assets per shareholder more than $50,000 (the "de minimis" threshold)?  If so, then there could be tax implications.

Be aware that changing shares now (or ownership % in a partnership) partially starts the 10-year Brightline Test again. 
 
For example, if you moved 5 shares (of a total of 100) from you to your wife, then sold the property within 10 years of that change, then 5/100 (5%) of the sale profits (sale price less fees less original purchase price = sale profits) would be classed as taxable income (for the person who “sold” the shares).
 
So, if the gain was $100,000, 5% is $5,000. So in this scenario, $5,000 would be taxable income.

Please contact us for advice. You may also want to read this related blog article "Are Tax Benefits a Good Reason to Make Changes?"

* "de minimis" is a Latin expression meaning about minimal things, normally in the locutions de minimis non curat praetor ("The praetor does not concern himself with trifles") or de minimis non curat lex ("The law does not concern itself with trifles") a legal doctrine by which a court refuses to consider trifling matters.

We often get asked "how much longer will IRD take?"  How can you check on the progress of your tax return at IRD? Are they processing it? Is there a problem?

​Well, there is a free, simple and easy way you can check yourself:
1. Create a myIR account.
​
Make sure the address in the bar at the top starts with https://www2.e-services.ird.govt.nz. This is to make sure you haven't ended up at a fake website. There should also be a little padlock showing in the title bar at one end.

Generally you will be wanting to find out how the processing of your personal tax return is going, so choose this option (see graphic, pics are not current but content is the same)

2. Next, enter your IRD number and then click Continue.

3. Then, enter your details and click Continue.

4. Check the details, and tick the box, then click Continue.

5. Voila! You will receive an email confirmation. You are now ready to view your info using myIR, including the status of your tax return processing.

What is Tax Pooling for?
Tax pooling is used when you've underpaid your provisional tax - or if you haven't paid it at all

Why don't I just pay my tax to IRD direct?
If you find you've underpaid tax, or paid it late, IRD generally charge penalties. And interest. And interest on penalties. And interest on that. As you can imagine, it adds up pretty quickly. 

When you pay IRD via Tax Pooling, IRD views the payment as if it was paid on-time. So, no penalties. The Tax Pool company also charges much less interest than IRD.

So, how does it work?

1. Get a quote from a Tax Pooling intermediary e.g. Tax Management NZ, via your accountant
2. You pay TMNZ
3. They pay IRD
4. IRD views the tax as if paid on time
5. Voila! Everyone's happy

​Do I have to pay it on a set date then?
TMNZ have something called FlexiTax, so you can pay as much as you like as often as you like.

Can I pay tax from past years this way?
Yes, TMNZ can help with provisional tax for the current tax year and one just completed. 

What if I get audited or make a voluntary disclosure: can I fund my tax this way too?
TMNZ can also help with other tax years and types, provided there has been a notice of reassessment issued by Inland Revenue as a result of an audit or voluntary disclosure. 

How do the Tax Pool people make their money?
They charge interest, naturally, but it is a lot less than what IRD charge. Usually, just a little over 1/2 of IRD standard rates.

Where do they get the money from?
Well, big corporates like the banks overpay their provisional tax. In the past, they would overpay it to IRD, and get a miserable interest rate. Companies like TMNZ came along and said "Hey, we'll give you a better rate than IRD." So, they said "OK."  Then TMNZ, in turn, on-lends it to the little guys like us, and they pay their bills out of the difference.

Is this legit?
Yes. The service is government-approved and operates under legislation set out in the Income Tax Act 2007 and Tax Administration Act 1994. 

Is the money safe?
Yes, all payments made to TMNZ are made into bank accounts administered by an independent trustee, Guardian Trust. With more than 125 years’ experience in New Zealand, Guardian Trust oversees the tax pool account at IRD in which payments are held. They authorise all payments and tax refunds, as well as transfers to taxpayer accounts. At no stage do TMNZ have any contact with, or access to, your payments.

Questions?
Please see the document below, or contact us.

We recommend TMNZ for all your tax pooling needs. Visit tmnz.co.nz to find out more.