On 30 November, BDO’s Eyes on Tax Iain Craig and Mark Lodder held a webinar to take us through the most recent tax changes and what they mean for New Zealand businesses.
Mark Lodder started the webinar by discussing the recently announced GST changes, which he said was hopefully the sign of a maturing GST system. Changes include incorporating digitisation where possible, more simplification, changes to second-hand goods claims and updates to how GST occurs in the gig economy (which applies to ride sharing and short-term property rentals).
Next, Mark took us through how these changes affect private assets (the boat, the bach and the BMW) – specifically with mixed-use asset rules, where assets have a business use, a private use and are not used at all for at least 62 days of the year. The new changes appear to be replacing these rules with more of a fair and reasonable test, however the proposed changes are in Bill form only and may be subject to change when the legislation is finally enacted.
Changes to residential rental properties
Iain Craig then discussed changes affecting residential rental properties, which over the past few years have included ring-fenced losses, increasing the bright-line test, and non-deductible interest for rental properties acquired after 27 March 2021.
Rollover relief has recently been extended to some qualifying family trusts, and there have also been changes to rules on co-ownership and some trust resettlements – however not all transfers will qualify for rollover relief.
Managing tax in inflationary times
The webinar finished with a discussion on managing tax in inflationary times. Tax can significantly alter the tax burden, as well as savings and investment. Bracket creep, whereby wage inflation puts people in higher tax brackets, taxation of inflationary gains and the erosion of cash savings are among the problems caused by tax in inflationary times.
Iain shared some tips to counter this, including:
- Managing use of money interest and penalties
- Paying GST and PAYE ahead of income tax and apply for formal debt repayment plans if in trouble
- Evaluating capital investment decisions based on the real return expected
- If increasing borrowings to invest in capital assets, ensuring the interest will be deductible
- If investing as a hedge against inflation, considering the tax profile of the asset
Contact your BDO adviser to discuss any of the tax changes mentioned in the webinar.