Income tax Dates
If you’re affected by the recent adverse weather, including Cyclones Hale and Gabrielle, we can offer the following extra relief and support. Read about our general support available for adverse events.
Read about our general support available for adverse and emergency events.
Insurance pay-out tax relief
Insurance payouts for destroyed business assets can lead to businesses earning profits and depreciation recovery income that may be taxed. If you have received insurance or compensation for business assets destroyed by the North Island floods, you can defer paying tax on profits earnt and depreciation recovery income by declaring it in a later year. This is provided that the assets are replaced by the end of the 2027-28 income year.
If you want to declare this income in a later year, you must file an election by 30 April 2024, or in your earliest income tax return, when you can reasonably estimate what your insurance payout will be.
If you file an election, you can leave the deferred income out of your income tax return for that income year. An election is required each year to continue to defer the income until you replace the asset.
When you acquire a replacement asset, your deferred income is subtracted from the cost of the replacement asset in your income tax return. If you do not replace the asset by the end of the 2027-28 tax year, then the tax relief is ceased in that year. If your business ceases operations or acquires replacement assets in an income year before the 2027-28 tax year, the relief would cease in the earlier income year.
We will include more information in our May Tax Information Bulletin.
In the meantime, for further detail on the provisions and how they might apply to an insurance pay-out, please refer to the Commentary to the Bill.
Commentary on the Taxation (Annual Rates for 2023-24, Multinational Tax, and Remedial Matters) Bill
Income Equalisation Scheme
To help affected farmers and growers, we are providing discretionary relief by allowing the following:
- Early withdrawals from the income equalisation scheme.
- Late deposits for the 2022 year.
Time frame for writing off bad debts
For the 2023 income year, the date by which affected businesses can write off debt as bad has been extended to 31 May 2023.
Order in Council (www.legislation.govt.nz)
Time frame for payment of beneficiary income
For the 2022 income year, the date by which affected trusts must pay income to a beneficiary of the trust has been extended to 31 May 2023.
Order in Council (www.legislation.govt.nz)
Accommodation Expenditure
Any accommodation costs that relate to an employee on an out-of-town secondment is exempt income of the employee. This is work done to help with the recovery or the rebuild in the areas affected by the North Island flooding events.
The start date that an employee must start out-of-town work was extended by Order in Council to 1 April 2024.
Grants available following Cyclone Gabrielle
Grants and subsidies were available to businesses and other organisations following Cyclone Gabrielle.
Farmer and grower recovery grant (MPI)
This grant was for urgent repair work. If you are unsure if this grant applies to your business, you can check the MPI website.
Cyclone Gabrielle recovery: advice, support, and funding (www.mpi.govt.nz)
This grant was made for deductible expenditure or depreciable property, so is not taxable. However, your business cannot claim deductions for the expenses paid for by the payment. Nor can you claim the full amount of depreciation on any depreciable property funded by the grant. Calculate depreciation on the cost of the asset less the value of the grant.
If your business is, or is liable to be, GST registered and the payment is for use in your taxable activity, the payment is liable to GST. This means it should be included in your GST return.
Cyclone-Gabrielle rural sector funding (MPI)
This grant was made to sector and regional groups to help with immediate recovery efforts.
If you are unsure if this grant applies to your business, you can check the MPI website.
Cyclone Gabrielle recovery: advice, support, and funding (www.mpi.govt.nz)
If the grant was made for deductible expenditure or depreciable property, it is not taxable. However, your business cannot claim deductions for the expenses paid for by the payment. Nor can you claim the full amount of depreciation on any depreciable property funded by the grant. Calculate depreciation on the cost of the asset less the value of the grant.
If your business is, or is liable to be, GST registered and the payment is for use in your taxable activity, the payment is liable to GST. This means it should be included in your GST return.
Cyclone business recovery grant (MBIE)
This grant was made by MBIE to help business keep operating while maintaining cashflow. It was paid by the following delivery partners.
- Auckland Business Chamber
- Hawke's Bay Chamber of Commerce
- Masterton District Council
- Northland Inc
- Tararua District Council
- Thames Coromandel District Council
- Toi Economic Development Agency
- Trust Tairawhiti.
This grant is an income subsidy and is taxable to your business. If you use the grant to pay any expenses, your business can still claim a deduction for those expenses.
If your business is, or is liable to be, GST registered and the payment is for use in your taxable activity, the payment is liable to GST. This means it should be included in your GST return.
We recommend you get advice from the grant provider or your tax advisor, as the contractual arrangements can change the GST treatment of these payments.
Grants from non-government entity, including relief payments from mayoral relief funds
Your business might have received a non-government grant to help you following Cyclone Gabrielle. For example, a grant from another business to help your repair fencing or relief payments from a mayoral relief fund.
In general, funds are taxable to your business if they were provided as an income subsidy, for cashflow or to pay for deductible expenses. Deductions are still available for expenses you incur.
If you received funds to help get depreciable property, the funds are not usually not taxable. A depreciation loss might be available.
The bright-line property rule and other land time-related tests do not tax properties affected by a North Island adverse weather event purchased by a Crown or local authority.
Property owners qualify for the bright-line property rule main home exclusion if they needed to vacate their home for a reasonable period to repair damages from a North Island flooding event.
Relief payments and Working for Families
Support or relief payments received by individuals and families affected by the recent weather events do not need to be included in your income for Working for Families purposes.
IRD Number applications
If you’ve recently applied for an IRD number, and you’ve been affected by the recent weather events, you have an extra 4 weeks (from the time your road access is restored) to complete your in-person identity verification details.
Affected customers are customers that have been impacted by the effects of the emergency events and they are physically unable to complete the in-person verification of identity documents (because for instance, roading infrastructure has been destroyed) normally required by us to issue them with an IRD number.
If you let us know as soon as you reasonably can that you’ve been affected by the recent adverse weather, we can then remit any late filing and payment penalties, and some interest. You’ll need to ask us to do this and have paid the core tax as soon as you reasonably can.
- For Cyclone Hale we can remove interest charged up to 31 March 2023 if you’re in the Northland, Coromandel, Gisborne, Wairoa or Wairarapa districts.
- For the January 2023 floods we can remove interest charged up to 30 April 2023 if you’re in the Northland, Auckland, Waikato or Bay of Plenty regions.
- For Cyclone Gabrielle we can remove interest charged up to 30 June 2023 if you’re in the Northland, Auckland, Waikato, Bay of Plenty, Gisborne or Hawke’s Bay regions, or the Tararua district.
We also know that there has been localised flooding and damage across other regions and districts. If that’s you, get in touch and we can see how we can help.