Snapshot of recent developments
Tax Alert - November 2021
Applications are open for the sixth round of the Wage Subsidy
The sixth round of the Wage Subsidy opened for applications on 29 October 2021, and will remain open until 11 November 2021. The revenue decline test period under this round needs to be measured over the 14-day consecutive period from 26 October 2021 to 8 November 2021. All other eligibility criteria remain unchanged from the previous round. For further details about the Wage Subsidy please read our September Tax Alert Article here.
Resurgence Support Payment Scheme updates
To date, the Government has made four payments available for the August 2021 activation of the COVID-19 Resurgence Support Payment (RSP). On 2 November the Inland Revenue announced a change to the application period for the first three payments. The required revenue decline test period and the deadline of making an application for each payment are summarised below:
- For the first payment, the seven-day period of revenue decline must fall within 17 August 2021 and 1 November 2021. Applications are open until 1 December 2021.
- For the second payment, the seven-day period of revenue decline must fall within 8 September 2021 and 1 November 2021. Applications are open until 1 December 2021.
- For the third payment, the seven-day period of revenue decline must fall within 1 October 2021 and 1 November 2021. Applications are open until 1 December 2021.
- For the fourth payment, the seven-day period of revenue decline must start on or after 22 October 2021 and end immediately before all areas of New Zealand return to Alert Level 1. Applications for this payment will close on the first working day that is one month after a nationwide return to Alert Level 1.
Further, on 22 October 2021 the Minister of Finance Hon Grant Robertson announced the Government will increase the amount and frequency of the RSP. After the fourth grant payment, the RSP will increase to a fortnightly payment of $3,000 per eligible business and $800 per FTE, up to 50 FTEs or NZD43,000. The first RSP under these changes will open for application on 12 November 2021. Other eligibility criteria remain unchanged. A Deloitte article has covered more information on the update of the Scheme.
$60m fund for business advice and mental health support
The second element of the Business Boost announced on 22 October 2021 by the Minister of Finance is a $60m fund for business advice and mental health support in Auckland. Through the Regional Business Partner Network businesses will be able to apply for grants of up to $3,000 worth of advice and planning support and then up to additional $4,000 to implement that advice. Grants are not required to have a matching contribution from businesses. Ten million dollars is being provided for mental health and wellbeing support to small businesses. This will be delivered through a programme being developed with the EMA and Auckland Business Chamber of Commerce.
Additional business support under the new COVID-19 protection framework
Also on 22 October 2021, the Minister of Finance advised that Cabinet had made in-principle decisions on financial support which will become available when the new COVID-19 Protection Framework takes effect, The Minister will take a paper to the Cabinet in November confirming the details of the support, and any other outstanding decisions relating to the transition. An overview of the proposed support plan has been provided as follows:
- A transition grant will be made available to support, particularly Auckland, businesses when they move into the new framework. The grant will be based on similar criteria to the RSP.
- Once the framework is fully operational across New Zealand, the current support schemes will be replaced with something to better reflect the new framework. This new financial support should target the most affected businesses when areas of the country are in “red”. The Government is still considering what, if any, financial support is appropriate for businesses who choose not to be part of the vaccine certificate regime.
- Across the broad support will not be provided for areas designated as “orange” or “green”.
- Potential support to be provided in the event of local lockdowns is still being discussed.
- The ongoing support for people to isolate because of being exposed to COVID-19 or being tested will continue, regardless of location.
Tax Legislation and Policy Announcements
Order in Council extending October filing due dates
The Tax Administration (Extension of Due Dates) Order 2021 extends the due dates for the filing of tax returns and the payment of tax (including provisional tax and GST) originally due on 28 October 2021 to 4 November 2021. This Order was issued due to the Inland Revenue’s system closedown which made filing by 28 October 2021 difficult. The Order came into force on 21 October 2021.
Officials’ enforcement and review on FBT treatment of work-related vehicles
The Minister of Revenue Hon David Parker recently provided answers to the parliamentary written questions on the enforcement and review for the Fringe Benefit Tax (FBT) treatment of the work-related vehicle exemption. The Minister has been advised by officials that compliance work is underway for FBT as part of their normal compliance programme, and the Business Transformation project now allows Inland Revenue to use extensive data analytics to identify FBT issues. The work has however been paused temporarily as Inland Revenue’s immediate priority has been supporting taxpayers through the recent COVID-19 response. In addition, there are currently three FBT projects underway on the treatment of work-related vehicle, including a stewardship review, expected to be completed by the end of the year which may inform future policy or operational work programmes; a project monitoring FBT and compliance areas for risk; and a general review of the policy settings and definition of work-related vehicle. A report back to the Minister is expected in the first half of 2022, following the completion of the regulatory stewardship work. Any proposed legislative change that may result from this review would generally follow the Generic Tax Policy Process which involves opportunities for public comment and consultation, often through an issues paper which would set out the reasoning behind any proposed changes. You can read more about FBT and work related vehicles here.
Order bringing Budget’s Child Support Amendments into force
The Taxation (Budget 2021 and Remedial Measures) Act 2021 which received royal assent on 24 May 2021 contains remedial measures on the Child Support Act 1991 regarding penalties for late payment of financial support debts. The recently published Taxation (Budget 2021 and Remedial Measures) Act Commencement Order 2021 brings these measures into force from 1 November 2021.
NZ secures free trade agreement with UK
On 20 October 2021, NZ and the UK reached Agreement in Principle (AIP) on the key elements of a new high quality, comprehensive and progressive free trade agreement (FTA). The AIP confirms the parameters of the deal but does not create any legally binding obligations as work is continuing to finalise the legal text of the FTA. Once the text has been finalised and legally verified, and domestic approval processes have been completed, arrangements will be made for the signing of the FTA. New Zealand and the UK have been in the process of negotiating a new Double Tax Agreement (DTA) for a number of years; there has been no update on the progress of this.
Transition to new KiwiSaver default providers
In September 2021, the Government finalised KiwiSaver (Reallocation and Transfer of Default Members) Regulations 2021 which came into force on 1 November 2021. Default KiwiSaver members who are with one of the five default providers that have not been re-appointed will be transferred to a new default provider from 1 December 2021. The regulations ensure all KiwiSaver default members of outgoing providers are transferred safely and securely to the new default funds. A fact sheet is available for more information.
Inland Revenue statements and guidance
Tax payments - when received in time
On 6 October 2021, Inland Revenue issued SPS 21/03 - Tax payments - when received in time. This standard practice statement updates and replaces SPS 20/04 Tax payments – when received in time, reflecting the removal of cheque exception arrangements as a payment method option, effective from 1 March 2021, as New Zealand banks phase out the use of cheques.
Variation to extend R&D general approval application filing deadline
On 15 October 2021, Inland Revenue published COVID-19 variation COV 21/04 - Variation to section 68CB(2) of the Tax Administration Act 1994. For the 2020-21 income tax year, the time by which an application must be filed has been extended by three months using s 6I of the Tax Administration Act 1994 in COV 20/10 - Variation to section 68CB(2) of the Tax Administration Act 1994. That variation did not however provide the same level of extension to applicants with balance dates of 31 May 2021 or later, because the Commissioner’s variation power in s 6I was to expire on 30 September 2021. The application of s 6I has now been extended to 30 September 2022, as such, the Commissioner has now issued a variation to ensure that applicants with balance dates of 31 May 2021 or later are entitled to the full three months extension of time, on the same conditions. This variation applies from 1 October 2021 to 31 March 2022.
Amortisation rates for Landfill Cell Construction Expenditure
On 19 October 2021, Inland Revenue released draft Determination ED00234 - Amortisation rates for Landfill Cell Construction Expenditure, made pursuant to section 91AAN (Determinations on rates for diminishing value of environmental expenditure) of the Tax Administration Act 1994. The Determination applies to taxpayers, who meet the criteria under section DB 46 of the Income Tax Act 2007 and have incurred landfill cell construction expenditure in an income year starting on or after 1 April 2021. Its application may be supplemented or amended by supplementary Determinations pursuant to section 91AAN(6) of the Tax Administration Act 1994. This determination replaces DET 05/02. Submissions close on 30 November 2021.
Inland Revenue removed some calculators and tools from their website
As part of the final stage of Business Transformation, on 21 October 2021 Inland Revenue removed the following calculators and tools from their website:
- Depreciation claim calculator.
- Depreciation rate finder.
- Foreign Investment Fund (FIF) exemption check.
- Standard costs calculator for boarders and home-stay students.
New calculators are being developed, however there is currently no timeframe around this. In the interim, Inland Revenue will provide information on their website where the calculators were previously located to assist taxpayers to work out their obligations. The newly repaired FIF calculator remains in its same location on the Inland Revenue website (refer to our previous article about prior issues with the FIF calculator).
Child Support Employer Deduction notices in Inland Revenue’s new system
Inland Revenue moved child support into their new system in late October as part of the final stage of Business Transformation. Inland Revenue will be able to access more up-to-date employment information which will allow more accurate calculations of child support amounts to be deducted from a liable parent’s income. Some child support employer deduction amounts will change to reflect the up-to-date information. Inland Revenue will notify employees and employers of any change by issuing new employer deduction notices from late October.
Business transformation final release has gone live
On 28 October 2021, the business transformation stage 4 release 2 (final release) has been completed and gone live, and Inland Revenue systems have reopened after this upgrade. Business transformation webinar series is available to help understand what’s changed, including the myIR version upgrade, alerts, filing viewing and amending returns, managing profiles and logins in myIR and child support.
2021 peer review reports on country-by-country reporting
On 18 October 2021, the OECD released Country-by-Country reporting - compilation of 2021 peer review reports. The annual peer reviews of the BEPS Action 13 Minimum Standard cover three key review areas: the domestic legal and administrative framework, the exchange of information framework and the confidentiality and appropriate use of Country-by-Country (CbC) reports. The 2021 annual peer review is the fourth such review of the 132 member jurisdictions of the OECD/G20 Inclusive Framework on BEPS pertaining to the implementation of CbC reporting.
Progress on the Platform for collaboration on tax
On 20 October 2021, the OECD published the Platform for Collaboration on Tax (PCT) Progress Report 2021. The PCT is a joint initiative of the IMF, OECD, UN and the World Bank. The report examines activities that the PCT has undertaken in five focus areas since July 2020: medium-term revenue strategies, COVID-19, tax and sustainable development goals, international taxation, and co-ordination. The new workstreams reflect the changing global tax landscape and the challenges of the pandemic for governments and policymakers as countries around the world try to balance the increased spending and lower revenues due to the COVID-19 crisis.
Deloitte Global News Focus
Deloitte’s OECD Pillar One & Pillar Two tax advisory service
Deloitte Global has recently launched the OECD Pillar One and Pillar Two tax advisory service, this offering combines the deep expertise of Deloitte tax specialists with the analytical power of our technology solution to help companies assess and evaluate the potential implications of Pillar One and Pillar Two on their tax profile. A brochure of the offering is available. For the latest updates on OECD Pillar One and Pillar Two, read this month’s tax alert article and Deloitte US tax insights.
Deloitte tax transformation trends survey on the future of tax talent
Deloitte has released the second report of the Tax Transformation Trends survey series - Talent reimagined. The survey tapped into the perspectives of more than three hundred tax and finance leaders with a focus on talent transformation.
Note: The items covered here include only those items not covered in other articles in this issue of Tax Alert.
November 2021 Tax Alert contents
- Significant reporting and disclosure changes looming for New Zealand trusts
- Income tax implications for capital gains distributed to New Zealand beneficiaries through Australian discretionary trusts
- The property parent trap
- PAYE and NRCT simplification coming for cross-border workers
- Are my debt levels subject to the Arm’s Length Test?
- Updated political agreement on global tax reform
- Operational Taxes update: New W-8 series forms – are you ready?
- Snapshot of recent developments