Other changes to tax and social products 2022
For Tax Intermediaries
The information in this presentation is current as at 22 March 2022
Kia ora koutou, and welcome to this webinar.
My name is Sophie Smith and with me today is Helen Mitchell, we’re both External Relationship Managers at IR working with tax agents, bookkeepers and their Tax Professional Bodies.
Other changes to tax and social products 2022
- Tax Intermediaries
- Tax products
- Social products
Last year, the Minister of Revenue introduced the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Bill.
The Bill includes an assortment of proposed changes which are expected to take effect on or before 1 April 2022. There are also a number of other legislative changes which come into effect, or are proposed to come into effect from April too.
In this presentation we’ll be introducing proposed changes to various tax and social products.
Please note that the content is correct as of 22 March 2022 and some details may change.
Title: Tax products
First, we’ll cover changes to various tax products.
Title: Relief of use of money interest extension
Extend the relief of use of money interest (UOMI) to 8 April 2024.
One change that will especially be of interest to those impacted by COVID-19 is that the relief of use of money interest (UOMI) will be extended to 8 April 2024.
Customers who already have an indicator will not need to do anything.
Any customers who subsequently become significantly adversely impacted by COVID-19 will need to notify IR through myIR or regular communication channels.
Title: Provisional tax: Safe Harbour
Requirement for customers to pay in full and on time will be removed.
UOMI will be charged for unpaid amounts after the terminal tax due date.
Existing qualification requirements and late payment penalties will still apply.
The requirement for customers to pay provisional tax instalments in full and on time will be removed for customers using the safe harbour option.
UOMI will only be charged if an amount remains unpaid after the terminal tax due date.
All other existing qualifications will remain, and late payment penalties will still apply.
Also, billing will still occur based on the information we hold including reminder notices and alerts in myIR.
Title: Rate changes
|Provisional tax early payment discount (EPD)||2%|
|Employer superannuation contribution tax (ESCT) rate for past employees||33%|
|ACC earners levy (GST included)||$1.46|
|Minimum threshold for ACC earners levy||$42,465|
|Maximum threshold for ACC earners levy||$136,544|
|Student loan repayment threshold||$21,268|
|Student loan interest rate||2.8%|
|Student loan: Late re-payment interest rate||6.8%|
|Student loan: Reduced late payment interest rate||4.8%|
Next, here are some rates changes to be aware that will take effect from 1 April 2022:
- From the 2023 tax year onwards, the provisional tax early payment discount (EPD) will reduce from 6.7% to 2%.
- The employer superannuation contribution tax (ESCT) rate on contributions for past employees will change from 39% to 33% per year.
- The ACC earners levy (GST included) will increase to $1.46. Also, the ACC Earners' levy deducted will increase to earnings up to a minimum of $42,465 and a maximum of $136,544.
- New student loan changes will apply for the period ending 31 March 2023.
- The student loan repayment threshold will increase from $20,280 to $21,268.
- The student loan interest rate for overseas based borrowers will decrease from 3% to 2.8%
- The late re-payment interest rate will decrease from 7% to 6.8%.
- The reduced late payment interest rate will decrease from 5% to 4.8%
Title: Income tax assessment changes
2022 income tax assessments updated to include the 39% tax rate.
Wage and/or other leave subsidies will be considered as reportable income.
The paper income tax return select criteria will be changed to stop issuing paper returns that are not required.
When it comes to income tax assessment changes:
2022 income tax assessments will be updated to include the new 39% tax rate (IR3, IR3NR, CALC, IR9).
Wage and/or other leave subsidies will be considered as reportable income. These will show in myIR and can be included on individual income tax assessments (Auto-calcs).
We have listened to your feedback around the unnecessary paper return packs issuing for some clients. We have made a change to our paper select so that anyone who is linked to an intermediary for income tax will no longer receive one. If you need a paper return, these can be printed off our website.
Title: More changes
Matariki will be recognised as a public holiday for tax purposes
The loss carry back key point will be removed from the 2022 income tax returns
Tax pooling will be extended to PAYE, NRWT, GST, FBT, further income tax, and imputation penalty tax where there is no existing assessment, and a voluntary disclosure is made
More changes to be aware of include:
Matariki will be recognised as a public holiday for tax purposes. Due dates that fall on this day will be moved to the next working day.
The loss carry back key point will be removed from the 2022 income tax returns because the scheme was only available for the 2020 and 2021 tax years.
You or your clients will now be able to use Tax pooling to pay PAYE, NRWT, GST, FBT, further income tax, and imputation penalty tax where there is no existing assessment, and a voluntary disclosure has been made.
Title: Investment income changes
Customers who meet the 6-month de minimis payment criteria will be able to align the filing of their returns to 6-monthly
The definition of an end investor will include non-resident custodial institutions
For investment income information filing, customers who meet the 6-month de minimis payment criteria will be able to align the filing of their returns to 6-monthly. The existing de minimis criteria will not change.
Also, the definition of an end investor for investment income purposes will be updated to include non-resident custodial institutions. When a non-resident custodial institution has a New Zealand branch and amounts are being transferred from NZ to the non-resident custodial institution, they must withhold tax from payments of investment income they receive.
Title: Time bar
You will no longer be able to amend Employment information if it has been 4 years since the return was filed
Changes can still be made for student loan and/or child support deductions
You should also know that you and your clients will no longer be able to amend their Employment information – IR348 returns in myIR or gateway filing, if it has been 4 years since the return was filed due to time bar.
You and your clients can still request changes outside the 4 years to be made for student loan and/or child support deductions using the Employment information amendments – IR344.
Title: IR Commissioner decisions and process
Certain decisions made by the Inland Revenue Commissioner are not disputable
No subsequent challenge notices issued by IR.
In terms of IR Commissioner decisions and process:
Disputes and challenge procedures do not apply to decisions made by the Commissioner in relation to granting (or not granting) an exemption from a provision or provisions of the Inland Revenue Acts and shortening or dispensing with the period of public consultation.
Where the Commissioner issues an amended assessment following completion of the disputes process, confirmation that no subsequent challenge notice is required to be issued by IR.
Title: Other legislative changes
- Definition of an election day worker
- Definition of residential income
- Updated overseas donee list
- Depreciation cost base integrity measure for property
- Securitisation regime
Other legislative changes to be aware of include:
The definition of an election day worker will be extended to allow for the tax code to be used for all election day-related work. For example, advance voting work.
The definition of ‘residential income’ will include income that a person derives from a foreign currency loan to finance residential rental property.
The overseas donee list will be updated. The organisations that will be added take effect starting 1 April 2021 and those removed will take effect from 1 April 2022.
To prevent the purchaser from claiming more depreciation than was available to the associated vendor, the depreciation cost base restriction will apply where an associated vendor would have been allowed a deduction for an amount of depreciation loss for a non-residential building if the depreciation rate had not been 0%.
Currently, elections to the securitisation regime are currently completed when the yearly income tax return is filed, and the election takes effect for that year. There will be a remedial to allow for the election to be made from the commencement of the securitisation arrangement. Customers who enter into and elect a securitisation arrangement will have a defined point in when their special purpose vehicle (SPV) to be tax neutral removing the doubt on the withholding of non-resident withholding tax( (NRWT) and approved issuer levy (AIL), which should be returned.
Title: Sales suppression software penalty
New penalty regime will prohibit the sale, possession, or use of sales suppression software, which alters sales data in EFTPOS systems to facilitate tax evasion
The penalty will be treated as committing a single offence in relation to all tax types and periods
|Pre-notification disclosure||Reduced by 100%|
|Post-notification disclosure||Reduced by 40%|
A new penalty regime will be introduced to prohibit the sale, possession, or use of sales suppression software, which alters sales data in EFTPOS systems to facilitate tax evasion.
The penalty will be treated as committing a single offence in relation to all tax types and periods and a further penalty may be imposed for a later period of time if the taxpayer continues to use sales suppression software.
The taxpayer is liable to pay a penalty of $5,000. For pre-notification disclosure, this penalty can be reduced by 100%. For post-notification disclosure, the penalty can be reduced by 40%.
Title: Carrying forward tax losses
A new business continuity test (BCT) was introduced in 2021 as an alternative test for shareholder continuity when carrying forward losses.
Clarification will be added allowing companies to carry forward tax losses received in the year of the change in ownership to future years if the business activities remain relatively similar.
For the 2021 financial year, a new business continuity test (BCT) was added as an alternative test for shareholder continuity when carrying forward losses.
Clarifications will be made to allow companies to carry forward tax losses received in the year of the change in ownership to future years if the business activities remain relatively similar.
This includes confirming that part year losses can be used up until the day of the breach in ownership continuity.
Amendments will also be made to address shareholding continuity issues of a spun-out company and spun-out subsidiaries. This would prevent a spun-out company from breaching shareholder continuity requirements due to a corporate spin out where there has been no change in ultimate ownership.
This proposed amendment will be retrospective to 1 April 2020.
Title: Fair dividend rate foreign currency hedges
A series of technical amendments to the fair dividend rate (FDR) foreign currency hedges rules will be made. These are designed to further eliminate tax mismatch as much as possible.
The Foreign investment funds (FIFs) guide will be updated with the technical details by 1 April.
A series of technical amendments to the fair dividend rate (FDR) foreign currency hedges rules will be made, which are designed to further eliminate tax mismatch as much as possible.
Here is a list of the changes at a high-level.
The amendments include:
Modifying formula for which foreign currency hedges can be subject to FDR treatment/FDR hedge portions
de minimis threshold for non-eligible assets
the portfolio method for determining FDR hedge portions
optional look-through rule who hedge indirectly owned eligible assets
Allowing eligible hedges to:
have no NZD leg subject to certain requirements
continue to be subject to FDR treatment for transfer of ownership of the assets of a fund or investor class
methods for determining FDR hedge portions apply to a hedge of hedge
formula for calculating FDR income from eligible hedges is applied to hedges entered and settled within a valuation period
Making all other income or expenditure exempt from eligible hedges, besides the FDR amount
Amending the definition of non-eligible assets
Title: Local authorities taxation
- Treat dividends as exempt income
- No longer allow:
- Deductions for charitable or other public benefit gifts made to donee organisations
- Converting unused imputation credits to a tax loss
- Limit deductions for finance costs incurred on loans, borrowings and base price adjustments
- Ensure no credit for a consolidated group’s imputation credit account (ICA) for imputation credits to a dividend derived by a local authority
There will be several changes for local authority dividends and deductions.
These amendments will improve the integrity of local government taxation and include the following:
Treat dividends derived by a local authority from a wholly-owned council-controlled organisation (CCO), port company and energy company as exempt income.
Local authorities would no longer be allowed a deduction for charitable or other public benefit gifts made to donee organisations.
Local authorities would no longer be permitted to convert unused imputation credits to a tax loss.
Ensure that a local authority’s deductions for finance costs (including finance costs relating to financial derivatives such as interest rate hedges) would be limited to finance costs incurred on:
loans made to a council-controlled trading organisation (CCTO)
borrowings to acquire shares in a group company that is a CCTO, and
base price adjustments for financial arrangements involving CCTOs
Ensure that a credit would not arise to a consolidated group’s imputation credit account (ICA) for imputation credits attached to a dividend derived by a local authority.
A new page on the IR website called " Income tax for local authorities" with more information will be available by 1 April.
Title: Social products
That brings us to the end of our tax product changes. Now let’s take a look at the changes that are coming for child support and working for families.
Title: Policy changes
The Child Support Amendment Act was passed in March 2021.
The Act aims to simplify penalty rules, increase compliance, and provide more certainty for child support customers.
Some changes have already gone live. The remaining changes are being introduced from 1 April 2022 and include changes to:
- Definition of income
- Child expenditure calculations
There are several changes coming into effect for child support. The changes include a combination of new policy and proposed remedial changes.
The Child Support Amendment Act was passed in March 2021. The Act aims to simplify penalty rules, increase compliance, and provide more certainty for child support customers.
Some of the changes have already gone live on 1 April 2021 and on 26 October 2021 in line with our last Business Transformation release – information on these changes can be found on our website. The remaining changes are being introduced from 1 April 2022.
Changes to definition of income
Investment income will now be included in child support income for salary and wage customers. This means they will have their interest or dividends earned included in their child support income.
Child support will move to a ‘net’ income base – net income is gross income less any allowable deductions. It excludes any losses you have to bring forward from a previous year
With these changes when a person joins the child support scheme, an estimation can be backdated to the start of the assessment if received on or before the 28th day after notification of the assessment.
If a customer submits a second re-estimation for a previous year within the first 28 days IR will have the ability to decline this
The end of year reconciliation rules for estimations have been updated and a reconciliation period will be introduced for estimations. Income used in the square up will reflect the income received during the reconciliation period. This means when a person estimates more than once, each of their estimations will be squared up separately to reflect the income received in the period to which the estimate applied.
Child expenditure calculations
The use of the mixed age expenditure table will be repealed. Instead, the expenditure table used for each child will be based on their appropriate age bracket.
Inland Revenue will have the discretion to modify child expenditure calculations in exceptional circumstances such as in situations when complex care arrangements for children in the same calculation are not adequately accounted for by the usual method.
Title: Remedial changes
The Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Bill includes several proposed remedial changes for child support.
These changes are expected to be passed on or before 31 March 2022.
Included are changes to the estimations, time bar and offsetting provisions.
The Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Bill includes several proposed remedial changes for child support. These changes are expected to be passed on or before 31 March 2022.
These proposed changes mean:
Customers will be required to provide proof when advising of existing circumstances in the first 28 days after the notification of their assessments.
There is an adjustment to the time bar provision introduced by the Child Support Amendment Act that restricts child support reassessments to a four year period from the beginning of the relevant child support period.
Further evidence will be required from a customer when applying for a temporary exemption under the long term injury/illness category; to show they can’t engage in paid work due to the long term illness/injury.
Debt offsetting will be extended to voluntary agreements.
Title: Rate changes
|Current rate||New rate|
|Family tax credit||
Eldest child - $5,878
Additional child - $4,745
Eldest child - $6,642
Additional child - $5,412
Best Start tax credit
Minimum family tax credit
Income abatement rate
There will be increases to the family tax credit, Best Start tax credit and minimum family tax credit annual entitlement rates.
For Family tax credit:
The annual entitlement for the eldest child is increasing from $5,878 to $6,642.
The annual entitlement for any additional dependent child is increasing from $4,745 to $5,412.
This will result in an increase of up to $14 per week for the eldest child and up to $12 per week for any subsequent children.
The Best Start tax credit entitlement is increasing from $3,120 to $3,388 per year. This means an increase from $60 to approximately $65 per week, per eligible child.
The amount that minimum family tax credit tops up a family’s after tax annual income to is increasing from $31,096 to $32,864.
The income abatement rate that applies to the family tax credit and in-work tax credit entitlement is increasing from 25% to 27%.
Notice of entitlements which show customers what they will receive for the new year, starting 1 April 2022, were sent to customers in late February.
Title: Thank you
To view our other webinars visit www.ird.govt.nz/2022-changes
If you have any questions about our webinar, please email [email protected]
That brings us to the end of our presentation on the other changes that are coming for tax and social products in 2022.
To view our other webinars visit www.ird.govt.nz/2022-changes
If you have any questions about our webinars, please send them to [email protected]
Thank you for you for joining us, ngā mihi.