COVID-19 Response Taxation Bill through all stages
On 25 March 2020, the COVID-19 Response (Taxation and Social Assistance Urgent Measures) Bill (No 237-3) was introduced into Parliament under urgency and passed through all stages, and has received the Royal assent.
The policy proposals in this omnibus Bill are all aimed at assisting the Government’s response to the economic impacts of the COVID-19 outbreak including targeted measures aimed at providing relief to those that have been economically affected by the COVID-19 outbreak. The Bill introduces amendments to the following legislation:
- Income Tax Act 2007
- Tax Administration Act 1994
- Goods and Services Tax Act 1985
- Social Security Act 2018
- Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020, and
- Commissioner’s Table of Depreciation Rates.
The main features of the Bill include the following:
Depreciation on non-residential buildings restored
Depreciation deductions for non-residential buildings have been reintroduced. This is intended to support businesses’ cash flow in the near-term and assist with the broader economic recovery by stimulating business investment in new and existing buildings.
Provisional tax threshold increased
The threshold for having to pay provisional tax has increased from $2,500 to $5,000. The increase in the tax threshold will remove smaller businesses from the provisional tax regime.
Immediate low-value asset write-offs for more assets allowed
Taxpayers are currently able to deduct in the year the asset was purchased the full purchase price of assets that cost less than $500. However, for assets over $500 deductions for the purchase price are spread over the life of the asset. This $500 threshold has been temporarily increased to $5,000 for assets purchased in the 12 months from 17 March 2020. The $500 threshold will be permanently increased to $1,000 for assets purchased from 17 March 2021.
Refundability of research and development tax credits brought forward
It is proposed to bring the application date of broader refundability for the R&D tax credit forward by one year, to the 2019/20 income year, to help businesses retain their R&D capability during the COVID-19 outbreak.
Use of money interest waived
Inland Revenue will be allowed to remit interest on a late tax payment if the taxpayer’s ability to make the tax payment on time was significantly adversely affected by the COVID-19 outbreak. The ability to remit interest will apply only to tax payments that were due on or after 14 February 2020.
Greater information sharing allowed
The rules governing Inland Revenue’s ability to share information with other government departments have been amended. Inland Revenue will be allowed to share information with other government departments to assist those agencies in their response to the COVID-19 outbreak.
Wider access to the in-work tax credit
The in-work tax credit (IWTC) is an income-tested cash payment of $72.50 per week ($3,770) per year) to working families with children. To be eligible families must be normally working at least 20 hours a week (sole parents) or 30 hours a week (couples). The Bill removes the work hours eligibility requirement from the IWTC. This means that working families who have a reduction in working hours as a result of COVID-19 do not lose their eligibility for the IWTC.
Working for Families tax credit entitlement for emergency benefit recipients
Current emergency benefit recipients with dependent children who are on a temporary visa do not qualify for Working for Families (WFF) tax credits. This is because they do not meet the residence criteria for WFF. However, people on a temporary visa, who would not otherwise meet the WFF residence critieria, will qualify for WFF if they receive an emergency benefit from the Ministry of Social Development.
GST on COVID-19 related payments
The Goods and Services Tax (Grants and Subsidies) Amendment Order 2020 added the COVID-19 wage subsidy and the COVID-19 leave payment to the schedule of non-taxable grants and subsidies in the Goods and Services Tax (Grants and Subsidies) Order 1992 from 24 March 2020. However, as the wage subsidy and leave payments have been paid out from 17 March 2019, the Bill proposes that GST not apply to payments of the COVID-19 wage subsidy and leave payments from 17 March until the amendment Order came into force. This ensures consistent GST treatment of these payments regardless of when they were made.
Winter energy payment
The winter energy payment (WEP) is assistance paid to help eligible people meet their household heating costs during the winter months. The rates for WEP have been doubled by Order in Council to $900 per year for single people with no dependent children and $1,400 per year for couples and people with dependent children. However, this increase in the WEP rates is intended to be temporary and apply for 2020 only. The WEP rates will be restored from 2021 onwards to their current rates of $450 per year for single people with no dependent children and $700 per year for couples and people with dependent children.
Commentary on the Bill
A fuller explanation of the policy items is provided in a commentary on the Bill that is available here.
Source document: taxpolicy.ird.govt.nz
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