Another year over, and a new year just begins
Tax Alert - March 2020
By Emma Marr
As the 2020 tax year draws to a close, it is timely to remember tasks that should be done before 31 March, for those with a standard balance date. There are also various law changes taking effect from 1 April that many taxpayers should have front of mind as the new year begins.
Investment income reporting
As reported on in our December Tax Alert, from 1 April 2020 payers of investment income (interest, dividends royalties, or other taxable distributions) will need to comply with new information reporting requirements. Payers will need to be registered with Inland Revenue and have a myIR account set up in advance. The reporting requirements are fairly extensive and very regular, so it will pay to be organised in advance.
Another change coming is to charitable organisations. From 1 April 2020, all entities with a charitable purpose will need to be registered with the Charities Service in order to get or retain donee tax status. This is necessary for donors to claim a donations tax credit or tax deduction.
Regular readers may also remember that the Government announced a law change late last year to provide that all charitable donations must be made in cash (including payments made by credit card or bank transfer) in order to qualify for a tax credit or to be deductible. The change will be retrospective with effect from 1 April 2008, but with a savings provision for those who have already filed a tax return or donation tax credit claim for the date of the announcement of the law change (17 December 2019). The law change has been included in a tax bill currently before Parliament.
New travel allowance rules
Inland Revenue’s new operational statement on employer provided travel to a distant workplace, which we covered in the February 2020 Tax Alert, must be applied from 1 April 2020. Check the rules and make sure you understand them, or ask for assistance from your usual Deloitte tax advisor if you need assistance.
Things to remember before year end
Remember to check on the following, as it could save you some money when you come to pay your final tax bill for the 2020 year:
- Write off bad debt: you will only get a deduction when a bad debt is properly written off in your accounts.
- Check the imputation credit account: a debt balance at 31 March results in a penalty, so make sure the account is not in debit at year-end. This applies for all taxpayers, regardless of balance date.
- Check your fixed asset register: make sure you’re using correct depreciation rates and depreciating new assets for the full month of purchase, not just from the day of purchase. Likewise, pooled assets can be depreciated for the entire year. Ensure assets you have sold or lost are properly disposed of on the fixed asset register, as this might result in a deduction. Assets that cost less than $500 can be immediately deducted, as long as you didn’t buy more than one of the item on the same day from the same supplier.
- Review trading stock valuation: If any trading stock is obsolete, you might be able to re-value. To value it below cost you’ll need to substantiate the valuation.
- Check your losses: If you have had a shareholding change during the year, you might have forfeited tax losses. Check shareholder continuity to ensure it remains equal to or above 49%.
- Thin capitalisation: If your company’s debt has fluctuated over the year, you should check that it is not breaching thin capitalisation ratios. If you are, the company may have a higher tax liability than you are expecting.
As always, if you need help understanding new rules or applying old ones, contact your usual Deloitte advisor.
March Tax Alert 2020 contents
- GST issues paper proposes some much needed R&M to the GST Act
- Another year over, and a new year just begins
- How healthy is your tax compliance for your rental property?
- OECD guidance on financial transactions finalised
- Update on OECD Base Erosion and Profit Shifting measures
- Snapshots of recent developments
- Deloitte Tax Calendar - Last Call