If you started a new business during the year, either self-employed or in a partnership, you may be able to get an early payment discount by making voluntary payments.
Early payment discount
You may be able to get an early payment discount of 6.7% if you:
are self employed or a partner in a partnership
have started a new business
get most of your income from the business
make a voluntary income tax payment before the end of the income year
elect to receive the discount before the income year’s tax return is due
do not have to pay provisional tax in the income year, or in the past 4 years
have not received an early payment discount, any self employed income, or any partnership income in the past 4 years.
The discount can quickly add up:
Danny owes $5,000 income tax. The discount saves him $335.
Miriama owes $20,000 income tax. The discount saves her $1,340.
Tax Issues?
For more tips on saving your business expense, contact one of our tax advisory team by emailingbas@ursacorp.co.nzor simply call 09 281 8885 to discuss your situation today!
The new Trust Act 2019 will come into effect soon on 31 January 2021 and will replace the Trustee Act 1956. The update marks the first significant change in New Zealand’s trust law in over 60 years.
Trust Act 2019 restated and clarified the current trust law. Some of the changes include:
a description of the key features of a trust to help people understand their rights and obligations
mandatory and default trustee duties (based on established legal principles) to help trustees understand their obligations;
requirements for managing trust information and disclosing it to beneficiaries (where appropriate), so they are aware of their position;
flexible trustee powers, allowing trustees to manage and invest trust property in the most appropriate way;
provisions to support cost-effective establishment and administration of trusts (such as clear ruleson the variation and termination of trusts);
options for removing and appointing trustees without having to go to court to do so.
“The Trusts Bill will provide better guidance for trustees and beneficiaries, and make it easier to resolve disputes.“
The government has introduced a new tax bill on 2 December 2020. As taxpayers, you may be affected by the following changes:
From 1 April 2021, the new highest tax rate of 39% will apply if an individual’s income exceeds $180,000.
The Inland Revenue is also demanding more details to be disclosed for trusts.
The bill also includes changes to increase the Minimum Family Tax Credit threshold for the 2020–21 tax year and to clarify that Inland Revenue can request information solely for tax policy development purposes.
For more information, please visit the Inland Revenue website here.
The Current Rates
NZ individual income tax is using progressive rates. This means the tax rate increases as the taxable value goes up.
Currently, individual income tax rates are as follows:
For Each Dollar of Income
Tax Rate
Up to $14,000
10.5%
Over $14,000 and up to $48,000
17.5%
Over $48,000 and up to $70,000
30%
Remaining income over $70,000
33%
Other NZ income tax rates are not changed:
Most companies and corporates are taxed at a flat rate of 28%.
For any income the trust earns, the tax rate is 33%.
Who Will Be Affected By The New Tax Rate?
From the year beginning 1 April 2021, for each $100 earned above $180,000, individual taxpayers will pay an additional $6, compared to under the current tax rates.
“It is also about keeping a lid on debt while ensuring we can maintain our investment in health and education. For 98 per cent of earners there won’t be any change.”
–Finance Minister Grant Robertson
What Is Included In “Individual Taxable Income”?
Taxable income can include income from:
working including salary, wages or self-employed income
benefits and student allowances
assets and investments including Kiwisaver and rental income
overseas income.
You may need to pay income tax for any of the above type of income you earn. You might have more than one type of income.
If you sell a residential property you have owned for less than 5 years, you may have to pay income tax as well. This rule also applies to New Zealand tax residents who buy overseas residential properties.
The government is also requesting more information from taxpayers to make sure people pay their correct share of tax.
According to Revenue Minister David Parker, the new tax bill includes powers to collect information from trustees to test compliance and the effective operation of the 39% tax rate and to further understand what trustees do with trust assets and income.
Tax Issues?
Contact one of our tax advisory team by emailing bas@ursacorp.co.nz or simply call 09 281 8885 to discuss your situation today!
