Our clients receive regular updates from us regarding interesting, useful, and often crucial information, to ensure their business runs as smoothly as possible.
This month we continue the conversation on Property Tax, bringing you the latest update. We also discuss and cover options for dealing with outstanding tax, IRD penalties and interest.
Consultation on exemption of new builds from proposed tax rules.
The Government has confirmed new builds will be exempt from planned changes to the tax treatment of residential investment property.
Public consultation is now open on details of the proposals, which stop interest deductions being claimed for residential investment properties other than new builds.
“The Government’s goal is to encourage more sustainable house prices, by dampening investor demand for existing housing stock to improve affordability for first-home buyers. The proposals we are releasing today will help to achieve that goal,” Finance Minister Grant Robertson said.
Revenue Minister David Parker said: “The proposal to exempt property development and new builds should help boost supply by channeling investment towards increasing housing stock and away from direct competition with first home buyers and owner-occupiers for existing housing stock.”
“This consultation is focused on finalising the detailed design of the rules. The proposals will not affect the main home.”
Generally, it is proposed that residential property would be considered a new build if it is a self-contained dwelling (with its own kitchen and bathroom, and that has received a code compliance certificate). The Government is also considering whether subsequent owners should also be exempt from the interest changes, and for how long any exemption might last.
Consultation closes on 12 July 2021. The measures will be introduced into Parliament later this year but will apply from 1 October 2021.
The discussion document Design of the Interest Limitation Rule and Additional Bright-Line Rules will be available at https://taxpolicy.ird.govt.nz/publications/2021/2021-dd-interest-limitation-and-bright-line-rules and accompanying summary sheets at taxpolicy.ird.govt.nz.
Funding tax payments and minimising IRD interest and penalties.
A missed or underpaid tax payment often means a taxpayer is faced with a steep interest cost and potentially late payment penalties on top of what they owe.
A big frustration with Inland Revenue (IRD) is that it expects taxpayers to pay the correct amount of tax on the dates it sets. No ifs, no buts.
Failing to adhere to this rigid timetable or underpay and could incur penalties and interest which can add up.
For provisional taxpayers, the most relevant dates are 28 August, 15 January, 7 May, and 7 April.
IRD charges interest – currently, seven percent – from the date the payment was due until you pay the outstanding amount.
Late payment penalties may also apply as follows:
- One percent the day after payment was due.
- An additional four percent if the tax amount (including late payment penalties) remains unpaid after seven days.
We want to make sure that you don’t find yourself in this position, however, if you do we are here to help.
There are several options available to taxpayers that we can assist with such as:
- Installment arrangements with Inland Revenue.
- Tax pooling through an Inland Revenue approved tax pooling agency for settlements made within 75 days after terminal tax date.
- Specialist tax lending products available through certain institutions for financial payments if outside of 75 days after terminal tax date.
If outstanding tax is causing you sleepless nights, please contact us on 09 470 0444 to discuss your options.