The reintroduction of depreciation deductions for commercial and industrial buildings, an increase to the low-value asset threshold and a boost to the provisional tax application threshold will be valuable tools to help businesses survive and recover from the impact of Coronavirus, said John Cuthbertson, New Zealand Tax Leader for CA ANZ.
"While shorter term measures such as wage subsidies are crucial to give affected businesses some 'breathing room' introducing these tax changes now encourages medium to longer term investment to stimulate recovery of the economy."
"There has been a strong case for these changes for business for some time," he said.
"The fiscal cost of the reinstatement of depreciation deductions for commercial and industrial buildings, at an estimated $2.1 billion over four years, is high, but CA ANZ strongly supports the reintroduction of building depreciation."
"Commercial buildings do depreciate in value."
Regarding low value asset write-offs, CA ANZ believes increasing the threshold represents a significant simplification in the tax affairs of all businesses.
The business support package provides for immediate expensing, allowing businesses to fully deduct the cost of low-cost assets when they are purchased, with the threshold for the write-off currently at $500. It includes a temporary increase in the threshold to $5000 for one year, reverting to $1000 in the longer term. The estimated total cost of this element of the package is $667 million.
CA ANZ is also encouraging the Government to consider a higher threshold than $1000 post the 2021 year to better reflect business requirements and spending, year.
Supports for increase to provisional tax thresholds
CA ANZ also supports the increase to provisional tax thresholds.
The support package will remove the need for many small business owners to pay tax through the provisional tax system by raising the threshold from $2500 to $5000. This will not only simplify the tax affairs of many small businesses, but with provide cash flow benefits as well by delaying their tax obligations to terminal tax date (7 February).
Cuthbertson says "The Coronavirus support package announced yesterday primarily promotes investment and stimulus to aid business recovery, while other measures such as the wage subsidy focus on more immediate impacts. In isolation, these tax changes will not assist taxpayers in losses."
In principle, CA ANZ supports the other tax elements of the package including:
- Allowing the Commissioner of Inland Revenue to cancel use of money interest on underpayments of tax for taxpayers significantly impacted by the outbreak. This power will be limited in application or timing, depending on how the legislation is drafted. There has been a need for a wider discretionary power for some time and CA ANZ would support broadening this long term.
- Allowing Inland Revenue to share information with government departments to help these agencies provide assistance in relation to the outbreak.
CA ANZ has asked Inland Revenue for a relaxation of return filing requirements for affected tax agents with outstanding returns. Until updates are available, members who are concerned about their ability to meet their filing requirements should contact their agent account manager.
"The mixture of broad and targeted measures appears to strike the right balance. Ensuring eligibility criteria is clear, and payments are prompt will be key in the coming weeks," Cuthbertson said.
"It will be important that more resources are made available as needed and we will be watching the Budget announcement with interest."
CA ANZ is happy to engage in any consultation or assist with detailed design of legislation, expected to be introduced under urgency.
CA ANZ has collated some essential weblinks and resources including information on its impact on workplaces and businesses.Read More