The NZ Tax Team recently made a submission to Parliament on the Taxation (Kiwisaver, Student Loans, and Remedial Matters) Bill 2019. This Bill included a number of proposed remedial items and also lays out phase two of the Research and Development Tax Credit Incentive scheme. A proposal in this Bill also intends to address an issue between Inland Revenue’s FIRST and START systems, where the differing methods for calculating and rounding provisional tax instalments may be resulting in small underpayments (and therefore UOMI charges).
CA ANZ welcomes the changes that will make refundable R&D tax credits available to more organisations but believes that the use of a payroll tax-based cap to limit refundability is not appropriate. The payroll tax-based cap will exclude many start-up businesses from an R&D tax credit refund. This is a particularly harsh outcome when the R&D tax credit regime is intended to have a broad reach across the economy from start-ups to established R&D performers. Given that the expenditure eligible for the credit is largely on work performed in New Zealand, CAANZ does not see a need for such a cap.
Current law allows a taxpayer to allocate their provisional tax payments to particular instalments. The proposed amendment will remove taxpayers’ ability to choose the provisional tax instalment to which a particular payment is applied, and the Commissioner will be required to allocate payments to the oldest outstanding provisional tax instalment. CA ANZ does not support the proposed change. The amendment may unfairly penalise taxpayers by exposing them to additional late payment penalties even though the payment intended for a particular instalment is made on time. There could be valid reasons for why the taxpayer choose to allocate a payment to a particular instalment.