MEDIA RELEASE (NZ)

Parliament has passed an emergency tax package that can be quickly activated when the next Cyclone Gabrielle or Kaikoura Earthquake strikes, says CA ANZ Tax Leader John Cuthbertson FCA.

“The emergency management catch cry is ‘get ready,’ and that doesn’t just mean having food, water and shelter, but equally having policies ready to enable quick financial responses from those affected,” said Mr Cuthbertson.

“When emergency strikes, the Government can turn this policy on for specific regions, giving them a range of tax relief options to deploy that are tailored to that event, whether it’s flooding, earthquakes or fires.

“Essentially the tax changes will enable employers to help their employees and the community quickly and easily, and provide certainty of tax treatment and position, without fear of immediate complications.

A survey by insurance company IAG revealed that 68 per cent of New Zealanders expect to be impacted by climate hazards, with 90 per cent expecting more frequent and extreme floods in the next 30 years, and 87% expecting more frequent and extreme storms.

And advice from the Treasury warns there is an 80 per cent chance of another Cyclone Gabrielle type weather disaster happening in the next 50 years, at a cost of up to $14.5 billion.

“It’s a case of if, not when the next disaster strikes, and we need policies like these to enable communities to make quick decisions to help themselves,” he continued.

“The Bill will allow for a longer tax-free period on emergency accommodation, and in addition limited support payments or the distribution of physical goods won’t be taxed.

“For example, employers won’t need to account for PAYE on payments made to assist their employees with temporary accommodation. And they won’t have to return FBT on physical goods or services provided by way of initial support.

“Business owners will also not have to stress about deductibility of costs related to clean up of premises and recovery of business operations.

"Rollover relief for tax is crucial, as it defers having to pay tax up front. Instead, it allows taxpayers to use the full value of insurance proceeds from damaged property and equipment to buy replacement assets, without having to return those insurance proceeds as income. 

Related to that, the recovery of tax depreciation is deferred.

“A time limit in which to purchase new assets is often stipulated but there is usually flexibility in terms of the assets purchased – like for like is typically not required.

“We had previously advocated for a permanent set of measures to replace one-off taxation recovery legislation, such as the Hurunui/Kaikoura Earthquakes Recovery Act 2016 and the Severe Weather Emergency Recovery Legislation Bill.”

“There was backlash due to the abrupt, one-day consultation period for Cyclone Gabrielle’s Severe Weather Bill, and officials have responded, with this proposed framework.

“Providing taxpayer certainty and direction in times of crisis, when decisions need to be made, should not be underestimated,” concluded Cuthbertson.”