Repairs to residential rental properties are tax deductible (conditions apply) and will reduce your overall income for tax (including salary, business income, etc) for your income received up to 31/3/2019.
A tax law change will soon take effect and this means that expenses incurred from 1/4/2019 onward will not be able to reduce your “OTHER” income (from salary or your business), but will need to be carried forward and can only be claimed against future RENTAL income. This advice is written for tax payers with a 31/3/2019 tax year end.
This new restriction is called “ring fencing”.
Therefore, we advise that if you are considering doing repairs, and if you are likely to have a rental loss, that it will probably be advantageous to carry out and claim these repairs before 31/3/2019 so that they can be claimed in this tax year.
We also recommend discussing any planned repairs with us directly because there can be exceptions, and we want to ensure the best outcome for all our clients.
Please not that the related tax claim only applies where individuals, partnerships and most “Look Through Companies” own a residential rental property.
The ring-fencing rules do not affect residential properties that are owned by Trusts, companies that are not Look Through Companies, and properties that are “Mixed Use Assets”.
By way of further explanation:
“Look Through Companies” allocate their losses for use in their shareholders tax returns versus non Look Through Companies retain their tax losses.
“Mixed Use Assets” (MUA) are assets (eg a beach house) that are used partly for private use and partly to earn rental income. Accordingly MUA expenses need to be apportioned between non tax deductible (private use) versus tax deductible.
GST is short for Goods and Services Tax, and is just that: a tax on goods provided and services rendered.
The current GST rate in NZ is 15%.
It is applied to goods and services within NZ, and is designed to be borne by the end user ie the person or business who consumes the good or service and does not on-sell it.
Once your annual turnover goes over $60,000, you must register for GST. If your turnover is less, you can still opt to register, but you don’t have to.
A business or person who is registered for GST may charge GST on their sales and also claim GST on their expenses. The difference is then either paid to or refunded by, the Inland Revenue Department.
If you would like to calculate your own GST, visit the IRD website for a selection of How To guides https://www.ird.govt.nz/gst/
If you would like us to take care of it for you, give us a call on 09 273 7377
Short Term Rentals
If you rent out a room, caravan or sleep-out, even if its just for a few days, this is income and must be declared. There are some exceptions to this rule if you are renting out your holiday home that you also use yourself.
For example if your holiday home qualifies as a mixed use asset, and you earn less than $4,000 per year from renting it out, you don’t need to include this income in your tax return. However, if you are not including the income, you cannot include the expenses either.
Income earned that is not from a mixed use asset, will need to be incluede in an IR3 (Individual) tax return.
You should also note that you are able to claim expenses for the time of the rental – for example, rates, cleaning etc however these expenses will need to be apportioned accordingly.
You can read more about the general rules on the Ministry of Business, Innovation and Employment website here
If you’d like further help to assess your tax position, get in touch. We’d be happy to assist.
If you are a Sole Trader or Partnership, you can claim the running costs of using your own vehicle in your business.
Running costs include things like fuel, registration, warrant of fitness, repairs and maintenance.
You can claim 100% of costs if you only use the vehicle for business and not personal use.
If the vehicle is used for both business and personal travel, you will need to make adjustments to apportion these costs.
A logbook should be kept for 3 months (every 3 years) in order to determine the proportion of business versus personal travel.
*Note that travel between work and home is not classified as business use.
More detailed information can be found here on the Inland Revenue website…
Throughout the year, many important dates occur in respect of payments that need to be made to Inland Revenue. If you don’t meet your obligations on time, you may be charged penalties and use of money interest.
These dates will be different depending on your circumstances and the various tax types you are liable for.
For example, if you’re GST registered, you’ll need to know when the returns and payments will be due, and this will also depend on your filing frequency.
Luckily, the Inland Revenue Department make it easy by supplying calendars of due dates, for all different tax types.
For more information, check out the IRD website here…
From 1st April 2018, businesses will be able to file payroll information each time they process a pay run, rather than once a month. This process replaces the employer monthly schedule.
Although this is an option form April 2018, businesses should note that it will be compulsory from 1 April 2019.
The purpose of this change is to make a business’s tax requirements part of its payroll process, rather than being a separate step.
Several payroll providers are able to support payday filing so if you haven’t already, check with your provider to see if they are one of them, and how you can take advantage of this functionality.
If you don’t use payroll software, you should start planning now and figure out a system that will work for you, and ensure you meet your obligations. There will be time after your payday to file the returns.
Payment due dates for PAYE and other payroll deductions won’t change.
For more information, check out the IRD website here…
The focus for Finance Minister Robertson’s budget is on public service spending (health, education and housing) and investment in infrastructure.
There are two tax-related announcements in the budget:
- Changes to the bloodstock rules that will allow new investors to deduct the cost of high-quality horses acquired for breeding.
- Inland Revenue receives $31.3 million in operating spending over the next four years to carry out its revenue-collecting role. $3 million of this is earmarked to analyse the potential to improve tax compliance in specific industries through the use of third-party reporting and withholding taxes.
The Minister also makes special mention of the tax initiatives that the new Government has already instigated since it took office in October last year:
- Reintroducing an R&D tax credit for New Zealand businesses, with a commitment to lifting research and development spending to 2% of GDP within 10 years
- Introducing ring-fencing to rental losses
- Imposing GST on low-value goods imported by bringing in GST registration for offshore suppliers
- Reversing the previous Government’s changes to the income tax thresholds, and
- Funding boosts to the Working for Families tax packages.
If you would like further information, you can view the full online budget report here.
The New Zealand tax system imposes taxation on the basis of the tax residence of a person and the source of income they earn.
These two concepts are key in determining a migrant’s income tax liability.
In addition, migrants may face a number of more complex tax issues including; superannuation, trusts settled offshore and foreign investments such as shares and rental properties.
We are able to provide advice and assistance to ensure you meet your obligations.
Contact us now to make an appointment.