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COVID-19 - Redundancy, tax and entitlements More information

 

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Redundancy, tax and entitlements

Nau mai, haere mai

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Narrator

Thank you for joining me today.

For many of us, our worlds have been turned upside down with COVID-19.

In this session I’m going to go through the common questions we get asked when peoples income changes.

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Today’s key messages

  • Inland Revenue is here to help you
  • Ensure Inland Revenue has all your correct information
  • There are lots of places you find useful information
  • Other government organisations may be able to assist you

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Narrator

Inland Revenue has a huge variety of resources designed to help you.

We are only one of the services available to you.

Check out covid19.govt.nz for a full list of places, that can, and are willing to help.

From an Inland Revenue point-of-view, we want to make sure you’re receiving what you’re entitled to, to make things a little easier.

It’s important for you to know a little about how our end-of-year tax system works, that way you know what to expect and what to plan for.

At any point you can contact us to discuss your situation.

This may be via secure mail in myIR, or through our contact centre.

Today I’m going to cover some of what you need to know.

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We will talk about

  • Income Tax
  • KiwiSaver
  • Child support
  • Student loans
  • Working for families tax credits

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Narrator

Our focus today is going to be on income tax, KiwiSaver, child support, student loans, and Working for Families.

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Income tax

  • Tax year 1 April to 31 March following year
  • Annual income may increase or decrease
  • Tax rate is based on your last 4 weeks earnings
  • End of year assessments
  • Online services is simple and fast

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Narrator

The New Zealand financial year runs from the first of April to the thirty-first of March, so we’ve just finished what is referred to as the 2020 financial year.

Soon we’ll be looking at completing income tax returns for this year.

If you don’t already have an online account with Inland Revenue, now would be a great time to register for one, as it’s the fastest way to update all of your contact details, and to view your income tax return.

Depending on your personal circumstances, your income may have increased, or decreased for the financial year, as we need to take into account any end of employment payments, and when these were paid out to you.

Any end of employment payment will be included in your income in the financial year in which you have received it.

If it was received before the first of April 2020, it’ll be included in the 2020 financial year we’re about to assess.

If it was received on, or after the first of April 2020, then it’ll be included in the following 2021 financial year.

Any lump sum payments received, including redundancy payments, are taxed at a flat rate based on your last 4 weeks’ earnings.

Last year a significant change was made to how we deal with end-of-year income tax returns.

From 2019 onwards, everyone is required to file an income tax return, the question is now, what kind of return is required?

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End of year assessments

  • Auto – calculated
  • Auto – calculated more information
  • IR3 income tax return

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Everyone falls into 1 of the 3 categories.

An auto calculated assessment is when we have the required information as your income has been taxed at source, such as salary and wages, New Zealand interest or dividends, Māori Authority distributions.

We will prepare the return and issue it to you, all you need to do is check it.

If something is missing you’ll need to let us know by making the change in myIR, or calling us.

An auto calculated requiring more information assessment, is when there are extra things that may need to be taken into account, such as, schedular payments or expenses, non-business expenses, ACC attendant care, dividends from countries other than New Zealand, investment income from joint accounts.

You have 45 days to provide the extra information required.

If you’re linked to a tax agent, this period is extended to the following 31 March.

Individual income tax filers, or IR3s, are for those with income that isn’t taxed at source.

An example of this kind of income is rental, business income, or overseas income.

Regardless of what kind of income tax return you’re required to do, the purpose of these is to find out if you’ve overpaid, or underpaid you tax in the financial year.

If you’ve overpaid your tax, we’ll get the refund out to you as soon as you’ve confirmed the details are correct.

If there’s an amount to pay, we want to give you enough time to sort this.

Generally, any amount to pay will be due on the seventh of February the following year, or seventh of April, if you have a tax agent.

If you’re not in a position to be able to make any repayments, please contact us before the due date so we can discuss, or send us an instalment arrangement plan via myIR.

If making payment will put you in hardship please contact us, as we may be able to look at further alternatives.

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KiwiSaver

Your employee contributions will stop from this employment when you stop work.

  • No KiwiSaver deductions from redundancy payments
  • Continue contributions yourself
  • Saving suspension
  • Significant financial hardship

Talk to your scheme provider, or visit the KiwiSaver or Sorted websites.

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If you’re a KiwiSaver member, KiwiSaver won’t be deducted from any redundancy payment you receive.

If you wish to keep contributing to KiwiSaver, you can make voluntary payments to your KiwiSaver provider.

They will be able to advise you how to do this.

When you recommence employment, your new employer will automatically start deducting your KiwiSaver contributions from your pay.

Consider a savings suspension if you want to pause your contributions while you get back on top of things.

If you’re experiencing significant financial hardship, you can apply to have your money released.

You need to apply to your scheme provider to do this.

For more in-depth information, you can visit kiwisaver.govt.nz, alternatively, sorted.org.nz is great for budgeting and other financial help.

Please note that the KiwiSaver website has moved to ird.govt.nz/kiwisaver

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Child support

Your redundancy payment could affect your child support.

  • If you pay child support the redundancy payment will be treated as taxable income, and may increase your assessment
  • You may be able to estimate your income for the tax year
  • Contact child support or update your details in myIR

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Being made redundant can affect how you’re assessed for child support, and your ability to pay it, especially if you receive a redundancy payment.

If you’re receiving child support payments, the payments you receive should not change after you’re made redundant.

However, if the paying parent, who pays child support to you is made redundant, and you’re the parent receiving these payments, your child support entitlement may reduce.

Alternatively, if you pay child support, your redundancy payment will be treated as taxable income, and may increase your assessment or amount to pay.

You can estimate your income for the tax year if you don’t get a new job within a few months.

To be able to estimate, you need to have a drop in income of 15 percent or more.

There are many factors that affect whether you can be reassessed, so you’re best to talk to us to find out what’s possible.

Many changes to child support are time restricted, so please make contact to discuss your situation as soon as possible.

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Student loan

Student loan repayments should be deducted from any redundancy payment you receive.

  • 12% student loan repayment deducted from redundancy payment
  • Earning below the pay period repayment threshold

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If you’re using an M SL tax code and you earn over the threshold, student loan repayments will be deducted from your redundancy payment.

If you earn under the threshold, but your redundancy payment pushes you over, the amount over it will have student loan repayments deducted.

If you have a student loan repayment deduction exemption certificate, or, student loan special deduction certificate, your employer will need to check with us regarding your student loan repayments from your redundancy.

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Working for Families

Your redundancy payment could affect your working for families payments.

Contact Inland Revenue or update your details in myIR.

If you ... then you.
 are getting WfFTC paid weekly or fortnightly need to work our if your payments should go up or down.
are getting WfFTC paid in a lump sum at the end of the financial year

can either:

  • wait until after the end of the tax year, or
  • start getting your payments weekly or fortnightly.
 have an end of year tax bill you can't afford to pay should find out your options for repayments.
 aren't already getting WfFTC should find out whether you're eligible.

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Narrator

A redundancy could have an impact on your Working for Families.

It’s important to let us know if you’ve been made redundant, and the amount of any lump sums received as your Working for Families are likely to change.

We can then ensure you receive the correct entitlement, and reduce the risk of having a debt to pay back at the end of the tax year.

Remember that Working for Families weekly and fortnightly payments are based on an estimate of what you think your family will earn in that financial year.

You’ll need to determine if your income needs adjusting.

If you receive your Working for Families payment as a lump sum at the end of the year, consider changing how you receive this.

Would receiving payments weekly, or fortnightly, help your family?

You can always change it back to a lump sum at a later date.

If you’re not registered for Working for Families, check out the, ‘How Working for Families works’ page on our website to see if your family qualifies, if so, the easiest way to register is through your myIR account.

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Remember our key messages

  • Inland Revenue is here to help you
  • Keep your information safe
  • To ensure your entitlements are correct, or you’re not paying too much, keep Inland Revenue informed
  • There are lots of places you can find useful information

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Narrator

Everyone’s situation is unique.

If you need further help or guidance, please make contact either through our contact centre, or send us a secure message from your myIR account.

If you don’t already have a myIR account, consider signing up for one today, it’s the easiest way to complete registrations with us, to update contact details, or see what’s happening with any end of year refunds or amounts to pay.

If you end up with a bill due to your redundancy payment, contact us to discuss what options are available.

For more in-depth information, go to our website, ird.govt.nz, and search our topics covered today, income tax, KiwiSaver, student loans, or Working for Families.

Thank you for joining me today.

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