Newsletter
LAY DODD NEWS - MARCH 2022
24 March 2022
2022 YEAR END CHECKLIST is available from our website at: https://laydodd.co.nz/downloads
Please contact us if you would like us to post your checklist.
The checklist is designed to help us limit the questions we must ask you later. Once your records are gathered together, please send to our office or email us.
This year has continued with a lot of uncertainty. These include continuous COVID-19 support payments and initiatives to support businesses.
We give an overview together with a reminder that the 2022 financial year is ending and some thought needs to go into the year-end cut off.
COVID-19 SUPPORT PAYMENT
What is it?
• Three fortnightly payments
• Payment $4,000 plus $400 per FTE (max 50 FTE)
- > 20 hours = 1 FTE
- < 20 hours = 0.6 FTE
• Payment capped at 8 times actual decline in revenue
• Applications via MyIR from 28 February 2022
- Application required for each two-week period
- First period two weeks commencing 16 February
For more information, please go to the IRD Website: https://www.ird.govt.nz/covid-19/business-and-organisations/covid-19-support-payment
COVID-19 SUPPORT PAYMENT – DROP IN REVENUE
• Measure of revenue over period of 7 consecutive days in affected revenue period
- Compared to typical 7-day period between 5 January 2022 and 15 February 2022
OR
- Compared to 7-day period between 5 January 2021 to 15 February 2021
• First payment - 40% decline in any 7-day period between 16 February to 4 April
• Second payment – 40% decline in any 7-day period between 7 March to 4 April
• Third payment – dates not yet confirmed
SMALL BUSINESS CASHFLOW SCHEME
• Changes are to be made to the Small Business Cashflow Scheme by the end of March
• Application period extended to 31 December 2023
• Base loan increased from $10,000 to $20,000
• Maximum loan amount $20,000 plus $1,800 per FTE
• Repayment period remains at 5 years
• First 2 years interest free
• Interest applies at 3% from the first day of year 3
For more information, please go the IRD Website: https://www.ird.govt.nz/covid-19/business-and-organisations/sbcs
COVID-19 PAYMENTS TO HELP PAY WORKERS AND SELF-EMPLOYED PEOPLE WHO ARE SELF-ISOLATING
There are two different COVID-19 payments available for employers and self-employed people at any COVID-19 traffic light colour:
• COVID-19 Leave Support Scheme
• COVID-19 Short-Term Absence Payment
These payments are to help employers pay workers, and to pay self-employed people, who can’t work while they are self-isolating or because they need to self-isolate while they are waiting on a test result.
There is no revenue test.
COVID-19 LEAVE SUPPORT SCHEME
COVID-19 Leave Support Scheme is for when people need to self-isolate and cannot work from home.
The Leave Support Scheme is a weekly payment, paid at a flat rate of:
• $600 a week for workers who were working 20 hours or more a week (full-time)
• $359 a week for workers who were working less than 20 hours a week (part-time)
To be eligible, the worker will need to meet certain health criteria, e.g., they have COVID-19 or are a close contact.
They must also have been told to self-isolate for at least four consecutive days.
When a worker needs to self-isolate for at least 11 calendar days or more, an employer or self-employed person can apply for a second weekly payment. More payments can be applied for every further seven days of self-isolation.
Employers can apply for casual workers and people who work variable hours. Use the average hours worked in the last eight weeks to work out what rate to apply for.
For more information go to: https://www.workandincome.govt...
COVID-19 SHORT-TERM ABSENCE PAYMENT
COVID-19 Short-Term Absence Payment is for when a worker or self-employed person needs to self-isolate while they are waiting on a COVID-19 test result and they cannot work from home.
Workers may also be eligible if they need to support a dependent (e.g., children or a family member with a disability) who has to stay home because they are waiting on a COVID-19 test result.
It is a one-off payment of $359 for each eligible worker. It can only be paid once in any 30-day period (unless a health official or doctor tells the employee to get another test).
For more information go to: https://www.workandincome.govt.nz/covid-19/short-term-absence-payment/index.html
Before applying
Before an employer applies for either of these payments, they need to have had a conversation with their worker and understand the declaration they are agreeing to.
An employer or self-employed person can only get one type of COVID-19 payment at a time for a worker or themselves if they are self-employed.
PLEASE NOTE: As the Inland Revenue Department are becoming more active on checking applications before approving, please ensure you have the back up information to support your application.
TRUST BENEFICIARY CURRENT ACCOUNTS
It has been common practice in New Zealand for trustees distributing income to beneficiaries (typically those on a lower marginal tax rate) not to distribute the cash, but to leave the amount outstanding, thereby creating a beneficiary credit current account.
From 1 April 2020 a new definition of settlor in Section HC 27 of the Income Tax Act 2007 applies. Broadly, it provides that a beneficiary with a current account balance will not become a settlor of the trust if:
• the trustee pays interest to the beneficiary on the current account balance at a rate equal to or greater than the prescribed rate of interest, or
• the amount owing to the beneficiary at the end of the income year is not more than $25,000.
If a beneficiary’s current account qualifies a beneficiary as a settlor of the trust, several potentially adverse tax implications could arise, such as:
• Where is the beneficiary currently a resident?
Could this affect the tax classification of the trust?
• If the beneficiary is planning to emigrate, could the beneficiary’s treatment as a settlor for NZ tax purposes be replicated in the new country and potentially drag the trust into that other country’s tax, capital gains tax or inheritance tax regime?
• Is the trust or the beneficiary in the business of dealing or developing land, or in the business of building, as tainting issues could arise.
• Will the addition of another settlor affect the trust’s main home exclusion for the bright line test as it applied to residential land?
• Could the imposition of settlor status affect Working for Families Tax Credits, or other social security benefits received by the beneficiary.
• Will the new settlor be liable as agent for an income tax liability of the trustee?
Trustees may consider taking steps to reduce any current account below the threshold by making cash or asset distributions to the beneficiary before the end of the 2022 tax year.
THE MINIMUM WAGE IS INCREASING ON 1 APRIL 2022
The details of the change are:
• The adult minimum wage will increase from $20.00 to $21.20 per hour.
• The minimum wage for starting out and training will go up from $16.00 to $16.96 per hour.
• All rates are before tax and any lawful deductions for example PAYE tax, student loan repayment, child support.
For more information go to: https://www.employment.govt.nz/about/news-and-updates/minimum-wage-increasing-on-1-april/
TERMINAL TAX INSTALMENTS FOR 2021 YEAR DUE ON 7 APRIL 2022
Emails and letters to applicable clients are being sent during March. If you usually receive a notice and have not, then please contact our office. The emails do not come from the usual Lay Dodd Partners address. Our accounting software now sends tax notices from mail@apps.myob.com so check your spam folder. Please do not reply to the tax notice email, instead forward any questions you have, to email reception@laydodd.co.nz
If there is any difficulty in meeting the payments, please get in contact with us by 4 April.
Disclaimer
This publication has been carefully prepared, but it is written in general terms only. The publication should not be relied upon to provide specific information without also obtaining appropriate professional advice after detailed examination of your particular situation.
