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LAY DODD NEWS March 2025

25 March 2025

2025 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 may ask you later.  

Once your records are gathered, please send or drop in to our office, or email us.

TAX CHANGES

Much like rust, tax never sleeps.  It has been another year of continual tax changes with some of the most notable being the increase in the trust tax rate to 39%, changes to the tax thresholds for individuals, and the reduction in the bright-line period to two years.  

IRD RISK REVEIWS

IRD have been more active recently with risk reviews and audits after a lengthy Covid hiatus, and we are seeing some reasonable activity around the treatment of personal services income and the Penny and Hooper decision.  Compliance areas of focus for IRD in 2025 will include:

  1. Applying the full range of compliance interventions to high-risk sectors such as the hidden economy, property speculators and developers, and multinationals.
  2. Reducing systemic risks in relation to cryptocurrency, electronic sales suppression tools, organised crime, offshore income, and corporate restructures.
  3. Audit interventions for areas noted above as well as trusts and diverted personal income.
  4. Increasing collection of high-value outstanding returns, high risk debt, small business cashflow loans, and student loans. 
  5.  Harsher line on debt collection.

KEY YEAR-END TAX TIPS FOR BUSINESS OWNERS

Financial year-end can be daunting, particularly for business owners that simply lack the time to pre-plan and leverage opportunities to reduce their tax exposure.

In the lead up to 31 March, two things that are often overlooked and are time sensitive:

Trading Stock

Trading stock (excluding livestock) on hand must be valued at cost or market selling value, depending on which is lower at year-end.  Any changes with the valuation approach should be disclosed accordingly.  General provisions for obsolete stock or stock write downs are not deductible for tax purposes.  Therefore, it is important to perform a stock take and to make sure that all obsolete stock is physically disposed of or written down to its net realisable value before year-end.

Writing off Bad Debts

Bad debts must be physically written off from the debtor’s ledger before the balance date for them to be claimed as tax deductions, and this may allow you to recover previous GST payments.  Recovery actions and sufficient information to support the debt as bad are required by the Inland Revenue Department.

TERMINAL TAX INSTALMENTS FOR THE 2024 YEAR REMINDER

2024 Terminal tax is due no later than Monday, 7 April 2025.  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 as 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.

THE MINIMUM WAGE IS INCREASING ON 1 APRIL 2025

The details of the change are:

  • The adult minimum wage will increase from $23.15 to $23.50 per hour and applies to all employees aged 16 years and over. 
  • The starting out and training minimum wage will increase from $18.52 to $18.80 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.business.govt.nz/n...

FAMILYBOOST CREDIT

  • The FamilyBoost payment was introduced as part of Budget 2024
    • It is a childcare payment made to families with young children to help with the rising costs of early childhood education (ECE).
  • The FamilyBoost payment is equal to 25% of ECE fees paid with a maximum refund of $75 per week (a maximum of $975 every three months) per family.
  • If you earn more than $35,000 per quarter, the amount you can claim reduces until your income reaches $45,000 per quarter.
  • Childcare fees can include optio charges and services.
  • Eligibility is based on:
    • Being the caregiver of a child or children aged 5 and under
    • Having household income of less than $45,000 a quarter
    • Having costs from a licensed early childhood education (ECE) provider. 
    • Being a tax resident of New Zealand

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 2025