Newsletter

Back to All Articles

LAY DODD NEWS March 2024

28 March 2024

2024 YEAR END CHECKLIST

is available from our website at:

https://www.laydodd.co.nz/down... 

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, please send to our office, or email us.

TRUST TAX RATE INCREASE

The Labour Government introduced legislation in May 2023 as part of the last budget intending to increase the Trustee tax rate to 39% to align it with the top marginal personal tax rate.  The Bill lapsed before the Election, so it was thought to be removed from legislation.

It seems with the National Government coming in and reviewing the budget, the finances are in far worse shape than originally anticipated and that the country cannot afford to keep the status quo.

The Finance and Expenditure Committee reporting back on the Bill recommends an increase to the Trust tax rate and have broadly agreed to a $10,000 de minimis threshold.  Any Trusts with Trustee income above $10,000 or more would be taxed at the higher rate of 39%.  It is applied on an “all or nothing” basis i.e., Trusts will be taxed on all Trustee income at 39% (not progressively applied).

Everything is pointing to legislation applying from 1 April 2024.

How this could affect you:

  • If the Trust is a Shareholder of a Company with retained earnings.  To extract the retained earnings, typically the Company will need to declare a dividend to Shareholders.  The dividend will effectively be taxed at 39% when it passes to the Trust.
  • The Trust has investment or trading income – in most cases we are able to allocate beneficiary income to individuals at their lower marginal tax rates.  If this is not possible, then the Trust pays the tax at 39%.

The impact on how it affects your Trust will differ depending on the purpose and structure of that.

Please contact us with any questions you have on the potential impact of this change.

TERMINAL TAX INSTALMENTS FOR THE 2023 YEAR REMINDER

2023 Terminal tax is due no later than Monday, 8 April 2024.  

Emails or letters to applicable clients have been sent during March.  

If there is any difficulty in meeting the payments, please get in contact with us a soon as possible.

RESIDENTIAL RENTAL PROPERTIES:  INTEREST DEDUCTIONS AND BRIGHTLINE

One positive for the residential rental investors which came out of the Coalition Agreement was to bring back full interest deductibility on residential rentals sooner than originally planned.

The new timeline is:

  • 50% deductibility from 1 April 2023 to 31 March 2024
  • 80% deductibility from 1 April 2024 to 31 March 2025
  • 100% deductibility from 1 April 2025

Brightline Changes

In terms of the Brightline rule, the Government have reduced the Brightline period to two years with effect from 1 July 2024.  This means the sale of residential land on or after 1 July 2024 will not be subject to the Brightline rules if its Brightline acquisition date was prior to 1 July 2022.  Neither of these proposals are yet law.  While there is clear intent on the part of the Government to make changes, we recommend clients do not act on these policies until the law is passed.

EXTRACTING CAPITAL GAINS FROM COMPANY

We have many Clients who sell an asset or sell the business in a Company entity and pull the funds out straight away without talking to us.  If you want to continue using the Company, there is a process that has to be worked through before withdrawing the capital gain.  If not done the correct way, there could be tax implications.

Please contact us early if this scenario happens so we can plan the exit strategy.

Typical steps to consider on sale of business or an asset:

  • Do I still want to keep the Company?
  • If so, then do not distribute the funds out to the Shareholders straight away. 
  •  If yes to winding up, then need to work through the steps and processes to withdraw the gain or wind up the Company in the correct manner.

THE MINIMUM WAGE IS INCREASING ON 1 APRIL 2024

The details of the change are:

  • The adult minimum wage will increase from $22.70 to $23.15 per hour and applies to all employees aged 16 years and over. 
  •  Starting out and training minimum wage will increase from $18.16 to $18.52 per hour.
  • All rates are before tax and any lawful deductions for example PAYE tax, student loan repayment, child support.

Please make sure your payroll software has been updated for the changes.

For more information, go to: https://www.employment.govt.nz...

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.


LAY DODD NEWS March 2024