Nextstep Accountants I Business Advisors

We want to express our deepest gratitude to search4accountants for being honored for 2024 Award 🏆 Winner.

This recognition is entirely due to our clients' invaluable support and contributions. Your consistent feedback, loyalty, and trust have been instrumental in our journey to success. We're incredibly grateful for your partnership and the positive impact you've had on our growth. This award is a testament to the strong relationship we share, and we're excited to continue building a lasting partnership.

Thank you again for being a part of this journey!

We look forward to achieving even greater success together in the future.

Special report on Income Tax (Tax Credit) Order 2023

This special report provides details of the change made by Order in Council to increase the family tax credit and best start tax credit amounts in line with inflation.

This will take effect from 1 April 2024.

The FTC and BSTC have been increased under section MF 7 of the Income Tax Act 2007.

The tax credit amounts per year before and after are provided in the table below:

For Information, contact us on [email protected] or 022 648 3224

rental

Update on Limits on Interest Deductions:

Navigating the New Norm: Understanding Limits on Interest Deductions for Residential Rental Properties

Interest deductions for residential property owners are being gradually phased out over the next 4 years.

Taxpayers must comply with the new law will be when they file their 2021/22 tax returns (ie, by 7 July 2022, or by 31 March 2023 for those taxpayers with accountants that have an extension of time for filing returns).

The proposals are complex and detailed, but in broad terms:

For residential property acquired on or after 27 March 2021, interest incurred from 1 October is no longer deductible.

For residential property acquired before 27 March 2021, interest deductions are phased out over the next 3 years, with nil interest deductibility from 1 April 2025 onwards.

Period interest incurred - % of interest able to be claimed for pre-27 March 2021 land

1 Oct 2021 to 31 Mar 2022 - 75%

1 Apr 2022 to 31 Mar 2023 - 75%

1 Apr 2023 to 31 Mar 2024 - 50%

1 Apr 2024 to 31 Mar 2025 - 25%

1 Apr 2025 and afterwards - 0%

Read more:
https://iknow.cch.co.nz/topic/tlp2468/overview/residential-rental-property-limits-on-interest-deductions

For Information, contact us on [email protected] or 022 648 3224

rental

Proposed framework for debt to government

Inland Revenue has issued an information release relating to the discussion document, “A proposed framework for debt to government”.

The discussion document was provided to targeted external stakeholders for a consultation that took place from 28 February 2023 until 6 April 2023. The document was also provided to members of the media or general public on request.

It is expected that the framework will be considered by Cabinet’s Social Wellbeing Committee in June 2023.

Source: A proposed framework for debt to government (discussion document), Tax Policy Inland Revenue website, 22 May 2023.

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For more information contact us on [email protected]

Kilometre rates updated for 2023 year

The Commissioner has updated the kilometre rates for the 2022–2023 income year to be used for motor vehicle expenditure claims.

The tier 1 rates increase from 83 cents to 95 cents per kilometre, largely as a result of steeper fuel costs. The tier 2 rate (which is for running costs only and applies for the business portion of any travel in excess of 14,000 kms) increases from 31 cents to 34 cents (petrol and diesel), from 18 cents to 20 cents (hybrid) and from 10 to 11 cents (electric).

The updated rates are published as Operational Statement OS 19/04 (KM 2023), “Kilometre rates for the business use of vehicles for the 2023 income year”. These rates may be used:

• to calculate expenditure claims for the business use of a motor vehicle.

• by employers as a reasonable estimate for reimbursement of expenditure incurred by employees for the use of a private motor vehicle for business purposes.

Section DB 12(4) of the Income Tax Act 2007 dictates that the Commissioner must set kilometre rates from time to time.

Source: Operational Statement OS 19/04 (KM 2023), “Kilometre rates for the business use of vehicles for the 2023 income year”, Tax Technical Inland Revenue website, issued 11 May 2023.

For information contact us on [email protected]

Bright-line test: renting to flatmates and deductibility of expenditure

Inland Revenue has released a draft “Questions we’ve been asked” (QWBA) that poses the question: if a home owner lives in their home and rents out a room to a flatmate, can they claim deductions for costs incurred in deriving the rental income?

The draft QWBA answers the question “yes”. As the rental income is assessable income, the home owner can claim deductions for costs incurred, subject to an apportionment exercise between the private use (of living in the house) and income-earning use (rental income from a flatmate). Apportionment based on physical use of the space is a reasonable basis for apportionment.

The draft notes that:

• the interest limitation rules have no application if the house is the person’s main home
• the residential ring-fencing rules have no application more than 50% of the land is used by the person as their main home for most of the income year
• the mixed-use asset rules are unlikely to apply, but if the criteria are satisfied, the specific exclusion for long-term rental property may be pertinent.
The deadline for comment is 13 June 2023.

Source: PUB00397-2, “Income tax Income tax – deductibility of expenditure – renting to flatmates”, Inland Revenue Tax Technical, issued 2 May 2023.

For information contact us on [email protected]