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 Stewart & Co Blog

Tax Payment Dates Over the Christmas Period

Pay Day Filing & PAYE Payments

With the introduction of Pay Day Filing this year for those who pay salary and wages we have had some clients querying what they are to do over the Christmas break.  If you are filing your Pay Day returns electronically with the IRD they are due normally within 2 workings days of the date your employees were paid. 

However, the IRD have advised that they do not consider the dates between 25 December and 15 January (inclusive) as being working days.  Therefore if you pay your employees between these days you have until 17 January 2020 to file your returns with the IRD. 

Your PAYE payments do not change and will be due as follows:

  • November 2019 PAYE – Due 20 December 2019
  • December 2019 PAYE – Due 20 January 2020

For Large Employers the payment date for PAYE on wages paid between 1 December – 15 December 2019 is 15 January 2020. 

 

GST

The IRD realise that this is a very busy time of year for people and therefore extend the date for filing your November 2019 GST return out to 15 January 2020. 

For monthly GST filers, your December 2019 GST return will be due 28 January 2020, as normal. 

 

Provisional Tax

The second instalment of provisional tax is due for payment on 15 January 2020.  We are in the process of sending out tax notices to all our clients for this instalment.  If you would like to discuss this with us please be in touch.

For any provisional tax payers who also pay GST you may note that the IRD have included the provisional tax amount due in your electronic return.  We recommend that you only pay the GST amount due per your return and pay the provisional tax based on the notice we will forward to you.  This is because we review your income for the year and there may be a change to the amount due, based on our review, especially if your income has increased significantly on prior years.   

Pink For A Day October 2019

We are going Pink For A Day to help raise funds The NZ Breast Cancer Foundation.

1 in 9 New Zealand women are affected by breast cancer in their lifetime.  Each day 8 New Zealand women on average are diagnosed with breast cancer.  But this isn't just something that affects women, 25 men a year are also diagnosed with breast cancer in New Zealand.  Almost everyone you talk to will have a story of someone they know having gone through treatment at some point in their lives.

October is breast cancer awareness month and the team at Stewart & Co Ltd are once again going Pink For a Day on 16 October 2019 to help raise funds to support the NZ Breast Cancer Foundation.  The NZ Breast Cancer Foundation are a not-for profit charitable trust with a vision of zero deaths from breast cancer.  Their mission is to push for new frontiers in early detection, treatment and support for those with breast cancer.

If you would like to make a donation to The NZ Breast Cancer Foundation we have set up a fundraising page at http://takeaction.org.nz/page/stewartcoltd.  100% of the funds raised go to The NZ Breast Cancer Foundation and remember that any donations over $5 can be claimed back as a donations tax credit at the end of the year.  Feel free to share the fundraising page with friends and family. 


Photo by Scott Webb on Unsplash

Legislation has now been passed restricting the expenses claimed against residential rental property income from 1 April 2019.  What this means is that for the 2020 income tax year onwards you are no longer able to offset your residential rental property losses against your other income, they are instead carried forward to future years to offset future residential rental property income.

 

Background

The New Zealand Government considered that it was an uneven playing field allowing investors in residential rental properties to be able to deduct expenses in excess of their income against their regular income as they were then able to use the tax saved to offset their mortgage, whereas home buyers are unable to do this.  It was noted that in many cases those buying residential rental properties were doing so with the intention of making capital gains in the long term rather than rental income gains in the short term.  This is different to commercial property owners who are generally looking to generate income on an ongoing basis rather than relying on capital gains in the future. 

The new residential ring-fencing rules are designed to make the tax system fairer, as well as improving housing affordability for owner-occupiers. 

 

So what does this all mean for you

If you own residential rental properties or are looking to invest in residential rental properties, you will only be able to deduct expenses from those properties up to the level of the residential rental income received in that year.  If you end up with more expenses than income, then those expenses are not deductible in that year but can be carried forward to a future year when the property is profitable. 

Here is an example:

Alex owns a rental property in Auckland.  Their annual income is $23,400 and their expenses change from year to year dependent on maintenance work etc.  Their situation could be as follows:

 

2020

2021

2022

Income

23,400

23,400

23400

Expenses

(25,000)

(27,000)

15000

Ring Fenced Losses from Prior Years

0

(1,600)

(5,200)

Net Income

(1,600)

(5,200)

3,200

Ring Fenced Expenses Carried Forward

1,600

5,200

0

Taxable Income

$0

$0

$3,200

 

There are options on how the income and expenses are treated if you own multiple rental properties.  The income and expenses can be treated on a property by property basis (meaning if one property makes a loss, this is not offset against the income of another property that makes a profit) or on a portfolio basis (the expenses from all properties are offset against the income from all properties) or a combination of the two.  There are different situations where each of these methods would be appropriate. 

There are also some situations where the losses will become available to offset your other income when a property is sold, such as if you sell within the 5 year bright-line period. 

If your properties are owned in an LTC the rules are the same but rather than the ring-fenced deductions staying in the company, they are passed out to the shareholders based on their shareholding.  If the shareholder holds rental properties in their own name, they can offset the LTC deductions against their other rental properties, otherwise the excess deductions are carried forward to a future year. 

 

What you should do now:

One of the main things you will need to consider from a tax perspective is whether you are intending on selling any of your rental properties within the bright-line 5 year period.  This may change what method we use to calculate your ring-fenced deductions. 

You may also like to plan for maintenance to be carried out on your properties on a regular basis rather than waiting until tenants move out or until you intend to sell. 

If you rely on the reduction in your tax liability to be able to pay the mortgage on your rental property, you may like to contact your mortgage advisor to discuss your options. 

 

The rules around ring-fencing of residential rental property deductions can be complex.  If you have any questions about your specific situation, please do not hesitate to be in touch. 


 

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