Tax Stats 2017/18

A guide to key New Zealand tax stats and facts

Main

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Income Tax, RWT and NRWT

Income Tax:

INDIVIDUALS

Taxable Income: 2017/18 Tax Year Tax Rate
$1 - $14,000 10.5%
$14,001 - $48,000 17.5%
$48,001 - $70,000 30%
Over $70,000 33%

Taxable Income: 2018/19 Tax Year (Proposed) Tax Rate
$1 - $22,000 10.5%
$22,001 - $52,000 17.5%
$52,001 - $70,000 30%
Over $70,000 33%
Companies (other than LTCs): 28%
Complying Trusts:
Trustees 33%
Beneficiaries Individual rates apply (see above)
- except for minors 33%
(<16 years on the balance date of the trust, where a guardian or relative (or associate of these) has made a qualifying settlement on the trust and the beneficiary income amount is > $1,000).
Maori Authorities: 17.5%
Resident Withholding Tax (RWT):
Dividends: 33%
Dividends paid by a QC, a LTC, and dividends within the same company group (≥ 66% common shareholding) are exempt from RWT.

From 1 April 2017, a fully-imputed dividend paid to another company (other than an LTC) is exempt from RWT if the payer chooses that option.

Dividend RWT returns and payments due by 20th of the following month.

Interest:
Individuals 10.5%, 17.5%, 30% or 33%
Companies 28% or 33%
Rate depends on certain criteria and whether rate election made.

Interest paid within the same company group (≥ 66% common shareholding) is exempt from RWT.

Interest RWT return and payment dates:
EXPECTED TOTAL RWT DUE DATE
More than $500 per month 20th of the following month
$500 or less per month 1 April to 30 September - due 20 October
1 October to 31 March - due 20 April
For a 6-monthly filer, if interest RWT deductions exceed $500 per month for a 2-month period, the RWT must be paid to the IRD by the 20th of the following month.
Non-Resident Withholding Tax (NRWT):
Interest 15%*
Dividends
- fully imputed 15% (0% in certain circumstances)
- not fully imputed 30%
Royalties 15%
*0% (in relation to some corporate bonds), or 2% if loan is subject to approved issuer levy
Where a double tax treaty exists, the rate of non-resident withholding tax may be reduced. A company paying an imputed dividend and supplementary dividend to a foreign shareholder may be entitled to claim a foreign investor tax credit.

NRWT return and payment dates:
EXPECTED TOTAL NRWT DUE DATE
$500 or more per year 20th of the following month
Less than $500 per year 1 April to 30 September - due 20 October
1 October to 31 March - due 20 April
For a 6-monthly filer, if NRWT deductions reach $500 during a tax year, the NRWT must be paid to the IRD by the 20th of the following month. Monthly returns are then required for the remainder of the year.

Income Tax Payment Due Dates

Month of Balance:
PROVISIONAL INSTALMENTS
1st 2nd 3rd
28 Mar 28 Jul 28 Nov
TERMINAL TAX
7 Nov
The above terminal tax dates assume the taxpayer is linked to a tax agent.
PROVISIONAL INSTALMENTS
1st 2nd 3rd
7 May 28 Aug 15 Jan
TERMINAL TAX
7 Dec
The above terminal tax dates assume the taxpayer is linked to a tax agent.
PROVISIONAL INSTALMENTS
1st 2nd 3rd
28 May 28 Sep 28 Jan
TERMINAL TAX
15 Jan
The above terminal tax dates assume the taxpayer is linked to a tax agent.
PROVISIONAL INSTALMENTS
1st 2nd 3rd
28 Jun 28 Oct 28 Feb
TERMINAL TAX
7 Feb
The above terminal tax dates assume the taxpayer is linked to a tax agent.
PROVISIONAL INSTALMENTS
1st 2nd 3rd
28 Jul 28 Nov 28 Mar
TERMINAL TAX
7 Mar
The above terminal tax dates assume the taxpayer is linked to a tax agent.
PROVISIONAL INSTALMENTS
1st 2nd 3rd
28 Aug 15 Jan 7 May
TERMINAL TAX
7 Apr
The above terminal tax dates assume the taxpayer is linked to a tax agent.
PROVISIONAL INSTALMENTS
1st 2nd 3rd
28 Sep 28 Jan 28 May
TERMINAL TAX
7 Apr
The above terminal tax dates assume the taxpayer is linked to a tax agent.
PROVISIONAL INSTALMENTS
1st 2nd 3rd
28 Oct 28 Feb 28 Jun
TERMINAL TAX
7 Apr
The above terminal tax dates assume the taxpayer is linked to a tax agent.
PROVISIONAL INSTALMENTS
1st 2nd 3rd
28 Nov 28 Mar 28 Jul
TERMINAL TAX
7 Apr
The above terminal tax dates assume the taxpayer is linked to a tax agent.
PROVISIONAL INSTALMENTS
1st 2nd 3rd
15 Jan 7 May 28 Aug
TERMINAL TAX
7 Apr
The above terminal tax dates assume the taxpayer is linked to a tax agent.
PROVISIONAL INSTALMENTS
1st 2nd 3rd
28 Jan 28 May 28 Sep
TERMINAL TAX
7 Apr
The above terminal tax dates assume the taxpayer is linked to a tax agent.
PROVISIONAL INSTALMENTS
1st 2nd 3rd
28 Feb 28 Jun 28 Oct
TERMINAL TAX
7 Apr
The above terminal tax dates assume the taxpayer is linked to a tax agent.

Provisional Tax

Taxpayers who have a year-end “residual income tax” (RIT) liability exceeding $2,500 are generally required to pay instalments of provisional tax. Provisional tax payment dates are aligned with GST payment dates, depending on GST status and the method used. Most taxpayers pay provisional tax in three instalments, with a payment cycle of five, nine and thirteen months after the start of the income year (see also the Income Tax Payment Due Dates section). However, taxpayers who file six-monthly GST returns pay their provisional tax in two instalments, with a payment cycle of seven and thirteen months after the start of the income year.

Taxpayers are able to use a tax pooling system to manage their provisional tax payments. Refer to the Tax Pooling section for more details.

Standard method calculations for the 2017 & 2018 tax years:
2017 tax year 2016 tax return filed 2016 tax return not filed
2016 tax return filed 2016 tax return not filed 2017 tax return filed 2017 tax return not filed
Companies/PIEs 105% 2016 RIT 110% 2015 RIT 105% 2016 RIT 110% 2015 RIT
Trusts & Estates 105% 2016 RIT 110% 2015 RIT 105% 2016 RIT 110% 2015 RIT
Individuals 105% 2016 RIT 110% 2015 RIT 105% 2016 RIT 110% 2015 RIT
2018 tax year
2017 tax return filed 2017 tax return not filed
Companies/PIEs 105% 2017 RIT 110% 2016 RIT
Trusts & Estates 105% 2017 RIT 110% 2016 RIT
Individuals 105% 2017 RIT 110% 2016 RIT

Estimation method
A taxpayer can estimate or re-estimate their provisional tax up until the last instalment date.

GST ratio method
If a taxpayer is eligible for this method, they base their provisional tax payments on a percentage of the GST taxable supplies, and there are six instalments per year.

Interest payable on shortfall of provisional tax

Calculation for 2017 tax year:
Non-individuals: from the first instalment date

Individuals: from the first instalment date if any of these statements is true:

  • the year’s residual income tax is at least $50,000, or
  • the year’s provisional tax is estimated, or
  • the taxpayer holds an RWT exemption certificate.

Calculation for 2018 tax year:
One of the following calculation start dates will apply if any of these statements is true:

  • the year’s residual income tax is at least $60,000, or
  • the year’s provisional tax was estimated, or
  • not all instalments were paid on time, or
  • there has been a “provisional tax interest avoidance arrangement”

From the last instalment date, if all of the following statements are true:

  • all but the last instalments were calculated using the standard method (the final instalment can be calculated using either the standard or estimation method), and
  • all instalments were paid on time, and
  • all “provisional tax associates” also calculated all but the last of their instalments using the standard method (the final instalment can be calculated using either the standard or estimation method) OR used the GST ratio method, and
  • there has been no “provisional tax interest avoidance arrangement”

From the first instalment date in all other cases.

Use of Money Interest (UOMI)

The UOMI rates are:
Payable to the IRD on underpayments 8.27% from 8/5/16 to 7/5/17
8.22% from 8/5/17
Payable by the IRD on overpayments 1.62% from 8/5/16 to 7/5/17
1.02% from 8/5/17

(See also the Tax Pooling section)

Tax Pooling

Taxpayers are able to use a tax pooling system to manage their provisional tax payments. Tax payments can be purchased or sold at pre-determined dates through an intermediary. Using a tax intermediary can give the seller a better interest rate return. For a purchaser, it can mean a reduced interest cost and, in certain circumstances, reduced penalties.

Tax pooling can also be used to purchase other types of tax in certain circumstances.

Goods & Services Tax (GST)

On supplies in NZ (including goods/services imported into NZ):
From 1 October 2010 15%
Except for zero-rated supplies, including:
Exports 0%
Duty-free goods 0%
Sale of taxable activities as a going concern 0%
Sale of land to GST-registered purchasers (conditions apply) 0%
International transport 0%
Some business-to-business financial services 0%
Exempt supplies:
Financial services (except some business-to-business) N/A
Domestic rental accommodation N/A
Salaries / wages N/A

GST return accounting basis:
The Invoice Basis method is the default method for accounting for GST. However, Inland Revenue can approve the use of either the Payments Basis method or the Hybrid Basis method, subject to special rules (see below). The Hybrid Basis method uses the Invoice Basis method for sales and the Payments Basis method for expenses.

GST return periods:
Returns generally need to be filed 2-monthly. However, monthly or 6-monthly returns can be filed, subject to special rules (see below).

GST return and payment due dates:
The due date for GST returns and payments is the 28th of the month following the end of the taxable period, except for the following periods:

  • period ending on 30 November - the due date is 15 January
  • period ending on 31 March - the due date is 7 May


Special rules:

If the total of the taxable supplies (e.g. sales of goods and/or services) in a 12-month period exceeds:
$60,000 Compulsory GST registration (otherwise voluntary)
$500,000 Cannot use 6-monthly periods
$2,000,000 Must use the Invoice Basis method, unless a non-profit body or non-resident or Inland Revenue agrees to the use of the Payments Basis method
$24,000,000 Must use monthly periods

Fringe Benefit Tax (FBT)

On most fringe benefits provided by an employer 49.25%
FBT Value on Low or Interest-Free Loans:
Benchmark Interest Rate (Interest rate is reviewed quarterly)
From 1 January 2016 5.77%
FBT Value of Motor Vehicles (owned or leased):
Either 5% per quarter of the cost of the vehicle (incl. GST)
Or 9% per quarter of the tax value of the vehicle (incl. GST) – the minimum tax value is $8,333

Special valuation rules can apply if the vehicle was acquired at no cost, or if the owner or an “associated person” owned it at any stage during the 2-year period prior to the date of acquisition.

FBT Threshold for Annual Return Filing (instead of quarterly):

Total of annual PAYE and employer superannuation contributions:
2017 tax year $500,000 or less
2018 tax year $1,000,000 or less

FBT Exemption Thresholds for “Unclassified Benefits”:

The value of minor fringe benefits (such as chocolates and flowers) that can be provided to employees without attracting FBT is $300 per quarter per employee, and $22,500 per year per employer.

Donations

Individuals
A tax credit is available on qualifying donations not exceeding the taxpayer’s taxable income for the year:
Donation tax credit minimum $5
Donation tax credit 1/3 of the qualifying donations

Companies (other than Look-Through Companies)
Qualifying donations are tax-deductible, but only to the extent that the donations do not exceed the company’s net income for the year.

Tax Return Due Dates

Balance Date Return Due Date

If taxpayer is “linked” to a tax agent * -

31 March the following 31 March
From 1 Apr to 30 Sep 31 March after the end of the income year
From 1 Oct to 30 Mar 31 March after the end of the next income year

If taxpayer is not “linked” to a tax agent -

From 1 Apr to 30 Sep 7th day of the 4th month after the end of the income year
From 1 Oct to 31 Mar 7 July after the end of the income year
*Under “extension of time” arrangements. Taxpayers failing to file returns by the due date may lose their extension of time, resulting in earlier return and terminal tax payment dates for subsequent income years.

PAYE on Salaries & Wages

Deductions from Due date
1st to 15th of month 20th the same month.
16th to last day of month 5th of the following month, except for the 2nd December payment which has a due date of 15 January

Concession for small employers:
If the total PAYE (including ESCT) was less than $500k in previous year, there is only one payment due by the 20th of the following month.

Other tax types:
Employee ACC Earner Premiums, Student Loan repayments, Kiwisaver deductions, Kiwisaver employer contributions and Child Support deductions are all payable in the same manner.

PAYE on Schedular Payments

PAYE is a tax which is deducted at source from salary and wage payments. However, other types of payments for services might also need to have tax deducted at source. These payments would be for work done by non-employees - e.g. company directors, committee members, contractors, sales agents, entertainers, sportspeople.

If a particular activity is mentioned in Schedule 4 of the income tax legislation, a payment in relation to that activity could be a “schedular payment” which will need a special tax deduction.

There are some exemptions from the schedular payment rules:

  • a payment for services provided by a public authority, a local authority, a Maori authority
  • a payment made to a company, if the company is not one of the following : a non-resident contractor, a non-resident entertainer, a company involved in a “labour-hire arrangement” (see below), an agricultural, horticultural, or viticultural company
  • a payment covered by an exemption certificate (a certificate is not allowed for some taxpayers, including taxpayers involved in a “labour-hire arrangement”)
  • a payment for services provided by certain non-resident contractors

New schedular payment rules from 1 April 2017

Labour-hire arrangements are now subject to the schedular payment rules. These arrangements are generally where:

  • one of the payer’s main activities is the business of arranging for a person (or persons) to perform work or services directly for clients of the payer, and
  • the payment is made under an arrangement where some or all the work is done by the payee directly for a client of the payer, or directly for a client of another person, and
  • the payer and payee are not “associated persons” (a special definition applies), although the payer can choose to deduct tax from a payment to an associated person

Voluntary schedular payments:

  • if a taxpayer’s activity is not otherwise subject to the schedular payment rules, they can now elect into the rules
  • this election can also be used by a company to whom payments would otherwise be exempt from the rules

Withholding rate elections:

  • a taxpayer who is subject to the schedular payment rules (other than a non-resident entertainer) is now able to elect their own withholding rate, as long as it is not less than the relevant minimum rate
  • minimum withholding rates : 15% if the payee is either a non-resident or the holder of a temporary entry class visa as defined in section 4 of the Immigration Act 2009; 10% in all other cases
  • in order to use a rate which is less than the minimum rate, or to have a zero rate when a certificate of exemption is not allowed, a taxpayer can apply to Inland Revenue for a special tax rate certificate

Employee Accommodation & Allowances

New rules applied from 1 April 2015. These rules clarify the tax treatment of employer-provided accommodation, accommodation payments and other allowances or payments made by employers to cover employee expenditure. In some scenarios the taxpayer can elect to apply the rules retrospectively. Please contact your BDO tax adviser for further information.

ACC Levies

ACC employer levies are determined based on the risk of accident in a particular industry.

ACC employee levy details for the 2017/2018 year:
Maximum Liable Earnings   $124,052 (aged 18 or over)
Earners Levy (incl. GST)   $1.39 per $100 earnings (aged 18 or over)

Entertainment Deductions

Entertainment expenses are limited to a 50% deduction in certain scenarios:
Venue off-premises (eg corporate box, holiday home, boat)
Food/drink off-premises (eg social event, business lunch)
Food/drink on-premises (eg party or in area not open to all employees)
Full deduction (100%) is available for:
Food/drink on-premises (eg subsidised staff cafeteria open to all staff)
Food/drink - business trip
Entertainment outside NZ
Promotional samples

Where employees enjoy the benefit of the entertainment outside of their employment duties, the FBT rules might apply instead of the 50% deduction rule.

When a deduction for an entertainment expense is limited to 50%, a GST adjustment is also required.

Gift Duty

Gift duty was abolished from 1 October 2011.

Depreciation Allowances

Certain assets can be depreciated for tax purposes.
Examples: Economic Rate (DV)
Vehicle 30%
Computer 50%
Desk 13%
Building 0%

The 20% loading rate on brand new assets was removed from 20 May 2010.

Depreciation deductions ceased to be available for buildings with a useful life of 50 years or more from the 2012 income year.

Depreciation can generally be calculated using either the straight line method or the diminishing value method.

A taxpayer can elect not to depreciate an asset.

Low value assets ($500 or less) can be claimed as an expense in the year of purchase (subject to normal deductibility criteria). The asset cannot be an addition or improvement to an existing asset. All items acquired at the same time from the same supplier, and subject to the same depreciation rate, are treated as being one purchase.

Assets can be added to a “pool”, and depreciated as though just one asset. Each asset must have a cost or tax value of less than $5,000, and the diminishing value method must be used.

Mixed-Use Assets

A new tax regime deals with mixed-use assets, but only for specific types of assets which are used partly for earning income and partly for private use, and for which there is a period of non-use during the year (generally at least 62 days).

Application dates for land and improvements (including buildings):
Income tax returns 2014/15 income year
GST returns 17 July 2014

Application dates for boats & aircraft:
Income tax returns 2015/16 income year
GST returns 1 April 2015
Key points about the new regime:
  • There are special definitions and exclusions
  • These rules can take precendence over the entertainment and FBT regimes
  • Expenditure deductions are subject to new apportionment rules
  • A net loss for an asset might be quarantined until there is net income from the same asset
  • A taxpayer can possibly opt out of the regime, but no expenditure deductions would be allowed

KiwiSaver

New employees Automatically enrolled, unless they opt out
Existing employees Can elect to join
Self-employed Can voluntarily join
Not employed Can voluntarily join

Members/employees:
Employee contributions Minimum 3% of gross earnings
Member tax credit Matches 50 cents for every dollar of contribution paid into scheme
Maximum tax credit $521.43 per year

Employers:
Employer contributions 3% of gross earnings, less ESCT (see below)
Employer tax credit None
Employers deduct the employee’s contribution from their earnings, add their employer contribution, and pass this on via the IRD to an approved scheme provider for investment on the employee’s behalf.

See also the Employer’s Superannuation Contribution Tax (ESCT) section.

Employer’s Superannuation Contribution Tax (ESCT)

Employer’s Superannuation Contribution Tax (ESCT) is deducted from an employer’s superannuation contributions. The ESCT rate is based on the total of the employer contributions and the employee’s salaries/wages (for the previous year if employed for all of the previous year):
Threshold Amount ESCT Rate
$0 - $16,800 10.5% on all contributions
$16,801 – $57,600 17.5% on all contributions
$57,601 - $84,000 30% on all contributions
Over $84,000 33% on all contributions

Alternatively, the employer contributions can be taxed as salary and wages under the PAYE rules if the employee agrees.

Fair Dividend Rate (FDR)

The FDR method of calculating taxable income applies to share/equity investments of less than 10% in most overseas companies if the holder is subject to the Foreign Investment Fund (FIF) regime. If the FDR method is used for an investment, the taxpayer is not taxed on the dividend income or the increase in the value of the investment. The FDR method can also be used for some investments where the taxpayer’s ownership percentage is between 10% and 50%.

Individuals and most trusts can opt to be taxed at the lesser of:
5% of the opening value of their share portfolio* (as at 1 April each year for standard balance date taxpayers)

or, their actual return calculated under one of the other FIF calculation methods (normally the Comparative Value method, but losses cannot be claimed).

Companies and other non-individuals use:
5% of the opening value of their share portfolio*.

*Quick sale adjustments must be made when a FIF has been bought and sold in the same income year.

There are certain types of investment for which the FDR method is not allowed to be used.

The FIF rules do not apply to most shareholdings in companies which are tax-resident in Australia and listed on an ASX index.

For individuals, the FIF rules generally only apply if the total cost (as defined) of the individual’s FIF interests is more than $50,000. This threshold exemption also applies to a very limited range of trusts. A taxpayer can voluntarily opt into the FIF regime if they are below the threshold (special rules apply).

Tax Penalties

A tax shortfall may incur the following penalties:
Lack of Reasonable Care 20% penalty
Unacceptable Tax Position* 20% penalty
Gross Carelessness 40% penalty
Abusive Tax Position 100% penalty
Evasion 150% penalty
 
Penalties may be increased for:
Obstruction 25% penalty increase
 
Penalties may be reduced if shortfall is:
Disclosed before audit 100% penalty reduction for lack of
reasonable care or taking an unacceptable
tax position
Disclosed before audit 75% penalty reduction in all other cases
Disclosed during audit 40% penalty reduction
Temporary shortfall 75% penalty reduction
*Shortfall penalty for taking an unacceptable tax position only applies to income tax (not GST or withholding tax).
 
Penalties may be further reduced if the taxpayer satisfies the criteria for:
‘Previous good behaviour’ 50% further penalty reduction
 
Late filing penalties
Income Tax Returns:
Net income (before losses) Penalty
Under $100,000 $50
$100,000 – $1,000,000 $250
Over $1,000,000 $500
 
GST Returns:
Payment Basis $50
Hybrid $250
Invoice Basis $250
 
Other:
ICA Returns $250
Reconciliation statements $250
Employer monthly schedules $250
 
Late payment penalties:
Initial late payment penalty 1% (the day after due date)
Then, after a week 4% (seven days after due date)
Then, after each month 1% incremental increase (Note: no incremental penalties for most tax types for periods after 31 March 2017)
 
Non-payment penalties on employer monthly schedules:
Non-payment penalty 10%
A further 10% will be added each month an amount remains outstanding up to a maximum of 150%.

Residential Land "Bright-Line Test"

NZ does not generally tax a capital gain made on the sale of private residential land (i.e. not otherwise subject to tax).

Effective from 1 October 2015 for residential land acquired on or after that date, a sale within 2 years of acquisition can be taxed.

Key points about the new regime:
  • There are special definitions
  • There is a "main home exclusion" (special rules apply)
  • The test does not apply to property acquired through an inheritance
  • There is a "rollover relief" for property transferred in a relationship property agreement
  • A loss will be "ring-fenced"
  • Special anti-avoidance rules prevent companies and trusts being used to avoid the test

Contact our Tax specialists at your nearest office on

0800 379 528

www.bdo.nz

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