Covid-19 Tax Update

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The government response to Covid-19 and the shutdown of the economy has seen a raft of tax changes proposed. These are still in draft form and we will be in a better position to advise clients once the legislation is passed.

However, we suggest the following in regard to upcoming tax payments. As always, early engagement saves long term pain so call us if you need advice in regard to your specific circumstances.

7 May GST, 2020 Tax Filing and Business Planning

Right now we favour drafting the 2020 Financial Statement positions, but not taking a final 2020 tax position too early, our view is wait and see what the Government rolls out next, there is still a budget to come in May and we don’t know how much more stimulus or legislation changes they will need to produce. A few months of trading in 2021 will allow you assess how the remainder of teh year will progress and plan accordingly before we close off 2020. There are changes to various IRD rules as well that may make it beneficial to hold off filing 2020 tax returns early.

Having a good 2020 draft tax position though, means we can move to final accounts quickly if we need to for any reason, but we have flexibility to incorporate changes.

Please contact us urgently if you want to review your taxation, over the next few weeks to determine what is the best course of action for you, particularly for the 7th of May Provisional Tax and GST payments and returns.

Tax Payment Strategies for On Time or Overdue Taxes and Dealing with Tax Cashflow Issues

  • Please contact us for a strategy no matter the tax type or period we can help, in terms of dealing with tax, the sooner we start reviewing options the better, for past, present or future taxes.
  • We can arrange tax purchase/options through Tax Management NZ, so there are other ways for you to deal with tax payment issues in addition to direct payment arrangement deals with IRD on taxes to be paid.

We can still purchase 2019 terminal tax due 7th of April 2020 as far out as 17 June 2020 for final payment, and we can look at a variety of dates for the various provisional taxes. In some instances this may be more economical than the time and cost to complete a payment arrangement and remission of penalties and interest.

If you are applying for finance, a bank might require you or we to certify all taxes are up to date, a TMNZ arrangement is likely to meet that requirement, a direct tax arrears arrangement with IRD might not.  Have a look here to get the basics of this at: https://www.tmnz.co.nz/

  • Before committing to a 7th May 2020 tax payment, based on your draft results to 31 March 2020, due to lockdown and Covid we recommend clients review their cash flow needs, and only pay IRD in the first instance if they have significant surplus funds to do so.
  • Penalty and Interest relief period is for 24 moths effective 24 March 2020 to 24 March 2022.
  • In any event not paying the IRD upfront, will require a repayment arrangement or use of a TMNZ type Scheme.
  • At this stage we are still working through what IRD will deem an acceptable repayment arrangement.  If come 7th May 2020 and the IRD hasn’t yet signalled what an acceptable repayment arrangement is, we would assume 6 to 24 months, until told otherwise.
  • Instalment proposals may be accepted by IRD with “minimum requirement” if it’s within 24 months, thought this still needs to be clarified.
  • Any proposal that IRD views as risk based may require in support of the application three months bank statements/credit card statements, management accounts, lists of debtors and creditors, cash flow projections.
  • IRD link https://www.ird.govt.nz/Updates/News-Folder/covid19-business-changes