Are you ready for all the tax changes coming?

Tax Alert - March 2017

By Veronica Harley

1 April 2017 marks the beginning of the 2018 standard tax year.  This year, it is significant as there are a lot of tax changes that either come into effect on this date or will start to apply from the beginning of the 2018 income year which for most taxpayers commences 1 April 2017.  In this article we have compiled a list of the key enacted changes that you should be aware of.  We have reported on all these measures in previous Tax Alerts.  Please contact your Deloitte advisor for more information.

From 1 April 2017

  • Employers will be required to report share benefits under an employee share scheme via the PAYE system.  Employers also now have the ability to withhold PAYE on such benefits (at their discretion).  See our other article on this issue of Tax Alert for more details.
  • The self-correction threshold under which taxpayers can correct minor errors in their next tax return (and not reopen a past return) is increasing from $500 to $1000 of tax.
  • Contractors who are subject to the schedular withholding payment rules will, in most cases, be allowed to elect their own withholding rate without having to apply to Inland Revenue for a special rate. The schedular payment rules will also be extended to contractors who work for labour-hire firms.
  • New rules will allow the Commissioner to start disclosing certain taxpayer information and their significant tax debt to approved credit reporting agencies. Inland Revenue will also be able to share certain information with the Registrar of Companies to assist with enforcement of certain offences under the Companies Act 1993.
  •  From this date it will no longer be necessary to renew RWT exemption certificates annually (instead, RWT exemption certificates are issued for an unlimited period) to reduce compliance costs.

For the 2018 income year

  • More companies will qualify to pay FBT on an annual (rather than quarterly) basis as the threshold for PAYE and ESCT increases from $500,000 to $1 million.  
  • New concessional methods become available for calculating UOMI on provisional tax (refer our article in this issue on these new rules).  These rules apply to 2018 provisional tax.
  • The threshold for when UOMI applies on under and over payments of provisional tax will change (see our other article in this issue)
  • New optional compliance saving methods are available for calculating deductions for the business use of a home office and a motor vehicle.
  • The motor vehicle expenditure rules are being extended to certain close companies as an alternative to paying FBT on motor vehicle benefits provided to shareholder-employees.
  • With effect from the 2018 income year, taxpayers will have an option to save on compliance by choosing not to determine the amount of deferred employment income accruals that were paid out by the end of the 63rd day following balance date. That is, the whole accrual will simply be added back.
  • The 1% incremental monthly late payment penalty will be removed for provisional and income tax for the 2018 and later income years, GST return periods ending within 8 days before 31 March 2017 and GST return periods ending after 31 March 2017, under or over payments of Working For Families tax credits for the 2018 and later income years and any related civil penalties imposed for these taxes and periods.

The Taxation (Annual Rates for 2016-17, Closely Held Companies, and Remedial Matters) Bill was still going through the latter Parliamentary stages as we were compiling this list.  There are lots of measures in this bill which take effect on the date of enactment, from 1 April 2017 or the 2018 income year.  While the bill is expected to be enacted prior to 31 March 2017, there will be a short window of time for taxpayers to get organised on some of these issues. We will report on these changes once the bill is enacted and the application dates are finalised.  In the meantime contact your Deloitte advisor to discuss further.

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