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They’re here!! Tax Threshold Changes – 31 July 2024 On the 30th May 2024, the Government announced new tax thresholds, from 31st July 2024. Previously, it was indicated these changes would take place 1st July 2024, and this date was amended at announcement. What do these changes mean for you and your payroll? The new thresholds have been confirmed, and have been published on the IRD website as follows; This impacts directly on PAYE values. All wages and Salary payments made on and after 31st July 2024, must have PAYE calculated using the new rates. Pay cycle is not the indicator of which tax tables to use, the pay date leads this. See the example for a weekly payroll below; Example 1: Works Monday to Friday. Is paid the following Tuesday. Worked from 22 July to 26 July. The pay date is 30 July. New tax threshold are not used. Example 2: Works Monday to Friday. Is paid the following Tuesday. Worked from 29 July to 2 Aug. The pay date is 6 Aug. New tax threshold will be used. There are also some components that are not changing until 1st April 2025. Extra Pays. Calculating extra pay will still use present tax thresholds and won’t change until 1st April 2025. Employees may question this, as they may expect less tax to pay. So be prepared to answer why this has not changed. Use what IRD has stated; Using the new thresholds may create underpayment of tax. Any issues will be sorted out at the end of year assessment (square-up) Extra pays include Annual Leave cash ups, Annual & Special bonuses, back pay and lump sum holiday pays (Annual leave paid in advance/beginning of leave period) Employer Super Contribution Tax (ESCT) This will not change on 31 July 2024. It will change on 1 April 2025 to reflect personal income tax threshold increase. What to tell Employees. Be proactive, rather than reactive. Get information on changes to employees before 31 July so payroll does not get flooded with questions. Employees will be looking for additional money, so will question any payment they believe should have been taxed at a lower rate with the new thresholds (such as extra pays, as already addressed in this notice) As an example, if you have an annual bonus paid to employees after 31 July 2024, provide employees with information on how this is taxed. Use IRD references as much as possible, to back up what you are doing. Link to IRD – Personal Income Tax Changes https://www.ird.govt.nz/pages/campaigns/personal-income-tax-threshold-changes Employee needing to change their tax code. The employee must decide if they need to change their tax code based on the changes that will occur on 31 July 2024. Unless Payroll or the employer receives instruction from IRD. Payroll and/or the Employer must not involve themselves in advising an employee what tax code they should be using. Payroll and/or the Employer must not act as a financial advisor for the employee. If that occurs, and the advice is not correct, it makes the employer liable for any error. Payroll and/or the Employer can only access information regarding what they pay to the employee, so it is not possible to know all their personal financial information If the employee asks for help, this is what Payroll and/or the Employer can do; Direct them to the current IR330 and explain there is step by step guidance on that document. Direct them to the IRD website https://www.ird.govt.nz/income-tax/income-tax-for-individuals/tax-codes-and-tax-rates-for-individuals/tax-codes-for-individuals Or they can call IRD directly https://www.ird.govt.nz/contactus Our payroll team have undertaken the necessary training, and have obtained the resources required to ensure accurate wage calculations, so our clients can update their payroll information and provide employees with the right information prior to the changes on 31st July 2024. If you are processed wages client, we will be emailing and posting wage calculations over the coming weeks. We will also be contacting our established advisory clients. If you have not used our Payroll services in the past, and require assistance in getting this right for your employees, email us on: wages@cooperaitken.co.nz We are happy to help! back to all blogs Written by Jane SmithPayroll Team Lead P: 07 889 7153E: wages@cooperaitken.co.nz 

A much anticipated change to Income Tax Rates – a Payroll perspective. On 9th May 2024, The Hon. Nicola Willis reiterated the Government position on delivering income tax reduction for working New Zealanders. The last time changes in income tax thresholds took place, was 1st October 2010*. Whilst tax relief is most welcome in this current economic climate, the timing of implementation brings some questions. Wage calculations – again? Many of our wage’s clients will recall the changes made 1st April 2024, when minimum wage increased and ACC Earner levy was raised to 1.6 cents in the dollar. Clients can expect similar wage calculation activity, to show the changes required to net payments, to reflect the changes in their PAYE deduction figure. This is a cost to your business. What are the new threshold’s? As previously reported by our own Gerrie Jacobs (March 2024) we have only been given proposed threshold figures, the announcement of the new rates is due today at 2pm. Once announced, Inland Revenue, Payroll service providers and software developers will have a very small window in which to enact these changes (as prior to this announcement, our team has not been in a position to provide accurate calculations). Seems straight forward – why do I need further wage calculation’s for my employees? Unfortunately, these changes come with levels of uncertainty. When tax rates are changed part way through a year (as is happening this year), an average of the new and old rates are applied across the entire year to determine a person’s annual tax liability. The average tax rates are called composite rates. Having a composite tax year will bring another component of complexity to the situation. It is also fair to note that other payroll components will be affected. Employer Superannuation Contribution Tax (ESCT) and Prescribed Investor Rates (PIR) will have changes that directly correspond to the changes in thresholds. If these calculations are not administered correctly, your employee’s deductions may be incorrect. So what do I need to do? If you use an external payroll service provider, such as ourselves, you can expect the following, as per your applicable payment scenarios: Automatic payments (Salaries and standard pays) – we will provide you with an updated wage calculation prior to your first payment date after the changes come into effect. Hourly rate wages (also referred to as ‘Live’ wages) – our software partners will have updated the system. We will apply additional vigilance when the first pays are calculated, to ensure the updates have loaded correctly and the outcome is in line with expectations. If you are managing your own payroll, and would like an independent review of your processes, or a fresh calculation to move forward with – please reach out. Our friendly team are on hand to provide support and advice. Our main contact details are; Phone: (07) 889 7153 – ask for Payroll Division.Email: wages@cooperaitken.co.nz [*] Source https://www.parliament.nz/media/7523/library-research-brief-income-tax-rates-december.pdf —————————————————————– Written by Jane SmithPayroll Team Lead P: 07 889 7153E: wages@cooperaitken.co.nz 

Here we go again…. Bright-line v4 The original Bright-line test was introduced with effect from 1 October 2015 and was designed by Inland Revenue as a simple way to capture tax on property speculation.  The intention test had proven to be almost impossible for Inland Revenue to apply with speculators buying and selling houses in an ever-rising property market with some making impressive profits from doing so. The design of the test was initially on this basis: if a residential property was bought and sold within two years and didn’t fit the criteria for one of the few exemptions, it was subject to tax. Though this had some “complications” in terms of the legislation, by comparison it would never be so simple.  In the years that followed the Government of the day determined that using the tax system to drive certain economic behaviours would be the answer to what was perceived as unfairness in the area of home ownership. Cue the extension of the Bright-line to 5 years, along with some relief measures.  When this still wasn’t having the desired impact a further extension to 10 years, with even further complication as a result ensued.  What began as a simple test was pushed to such complexity, in the interest of remaining fair, that it became a whole area of expertise all on its own. The fact that the ‘Special report on interest limitation and additional bright-line rules’ ran to a whopping 216 technical pages of explanation, examples and interpretation should say it all.  So come 1st July 2024, not quite 9 years since originally introduced, we have now come full circle. And thankfully for most tax payers we can now throw out the 216 page special report as the test has returned to almost as introduced originally. If you sell a property on or after 1 July 2024 the bright-line property rule will only apply if the property is sold within 2 years of purchasing it. However, if you sell a property before 1 July 2024 the current bright-line rules still apply. The important point to note is that the end date for the Bright-line Test is the date that you enter into a sale and purchase agreement. Therefore, if you wish to apply the new two year test the agreement must be on or after 1 July 2024. There are some other taxpayer friendly changes coming. In terms of the main home exemption this will return to the much simpler 50% rule. For the exemption to apply you must: use more than 50% of the property’s area as your main home use the property as your main home for more than 50% of the time you owned it. A further win is that if you build on the land, you will now not have to include the construction period when determining if your usage of the property qualifies for the main home exclusion.  This will greatly reduce the number of taxpayers that were inadvertently caught in the bright-line test previously due to a change in circumstances. The other major simplification, and extension, is the rollover relief rules will be extended to be based on the associated person rules rather than the complicated regime we have now.  Though welcomed at the time they were not simple to apply and applied in relatively limited situations.  The following situations will now receive rollover relief under the new rules: associated companies, or a person and an associated company relatives (within 2 degrees of relationship) trusts and settlors, beneficiaries, and related trusts a partner and a partnership a look-through company and an owner of that company. These new rules will be limited to situations where the transferor and the transferee are associated for 2 years before the transfer. You will also only be able to claim rollover relief once in any 2-year period. So hopefully this will be the last time I need to write an update on the Bright-line test. The tax system works best when left to Inland Revenue policy officials in consultation with the advisor community, rather than being the political plaything for politicians with a particular ideologically-driven view of the world. As always, if you have any questions on how the legislation, new or old may affect you please get in contact with your usual CooperAitken point of contact.         ————————————————————————————————- 1st Rory NoorlandPartner + Chartered AccountantP: 07 889 7153E: rory@cooperaitken.co.nz  more on rory

ACC: Standard Cover vs CoverPlus Extra Love it or hate it, ACC levies are all part and parcel of making money!  But don’t fret, we are here to help guide you and create an ACC world much easier to stomach. Let’s start with the basics: Standard ACC Cover This includes the standard CoverPlus policy which covers self-employed sole traders and partners.  Standard cover also is known as WorkPlace Cover.  This policy is for Shareholders covering non-PAYE shareholder-employees. This type of cover is an automatic policy for self-employed/shareholders and PAYE earners. This cover pays out 80% of your income if you have an accident. You must prove your loss of earnings which can be difficult. Levies are calculated based on your liable earnings. CoverPlus Extra (CPX) This type of policy is optional, but displays so many more benefits: You have a Signed Agreement between yourself and ACC at an agreed value. You can choose any level of cover from $39,492 to $122,232. The cover is 100% guaranteed. You don’t have to prove loss of earnings. You receive the full entitlement until 100% fit. Provides flexibility and certainty. If you are currently covered by CoverPlus Extra, you should already know how extremely beneficial it is and how proudly its boasts a more streamline claims process, as well as flexibility to choose your own level of cover.  This in turn saves you time, money, and the feeling of satisfaction in knowing you are under the best safety umbrella should an accident occur. But here’s the catch… If you don’t pay your CoverPlus Extra policy in full or have a payment plan set up before the due date your CoverPlus Extra policy will be automatically cancelled, If your payment plan is set up and you have insufficient funds when the debit occurs, the cancellation will be backdated to the start of the policy year. Reverting to standard cover will mean your levies will instead be generated based on your liable income after your tax return, so a surprise bill might be coming your way! If your CoverPlus Extra policy does cancel, it doesn’t necessarily mean you don’t have any cover, rather that you will revert to standard cover mentioned above.  This may not provide the same level of certainty at the event of a claim taking place.  You may reapply for CoverPlus Extra again, but this will mean you go through the full application process which can be costly and time consuming. If you struggle to remember due dates, ACC offers the following payment options to better align with your budget as well knowing your payments are always on time: 3 or 6 monthly direct debit plan (interest free) One off direct debit plan (on due date) Or a manual payment in full by the due date It’s important to remember if you like to pay your invoices on the 20th of the month but your CoverPlus Extra is due prior to this there are no exceptions – ACC still require payments by due date otherwise cancellation will occur. If paying by direct debit, we have the option to change the due date to suit you and your budget, so this might suit your situation better. Every dollar saved is a dollar in your pocket for the fun stuff – so we are all about CPX for eligible candidates.  Curious? Enquire with our friendly ACC Team today for a free quote and information on how to get your hands on our most recommended ACC policy – CoverPlus Extra.  Contact our ACC Team P: 07 889 7153E: acc.morrinsville@cooperaitken.co.nz  send the team an email

Where is the coalition government at with changes to environmental regulations? Currently there is a lot of uncertainty over what the new coalition government will change in current environmental policy. This is what we know so far; Resource Management Act The new government repealed the Natural and Built Environment and Spatial Planning Acts, which were intended to replace the Resource Management Act (RMA).  The new government has stated it intends to begin work on a longer-term programme to repeal the RMA, however details have not been announced. Freshwater Management In December 2023 the Government announced it will replace the National Policy Statement on Freshwater Management (NPS-FW).  It is expected this process will take 18-24 months. They have given Councils a three-year extension, from 2024 to 2027, to release regional freshwater plans implementing the NPS-FW and Te Mana o te Wai.  This allows Councils time to implement changes to the NPS-FW the new government intends to make.  Many councils are  indicating they will proceed with their current plans while others will use the extension. Waikato Regional Council is continuing to push on with Plan Change 1. At present this remains in the Environment Court. In the interim the government intends to either remove Te Mana o te Wai or rebalance it to ‘better reflect the interests of all water users” this year.  Te Mana o te Wai, meaning the mana of the water, was introduced in 2020 allowing Councils when deciding on a matter relevant to freshwater, such as consents and developing freshwater management plans, to prioritise: first, the health and wellbeing of water bodies and freshwater ecosystems second, the health needs for people, such as drinking water third, the ability of people and communities to provide for their social, economic, and cultural well-being, now and in future. The National-NZ First agreement also states they will “replace the National Environmental Standards for Freshwater to better reflect the interests of all water users”. This is where regulations such as nitrogen reporting, intensive winter grazing and wetland management sit.  No further details have been released. Freshwater Farm Plans As the Resource Management Act remains in place so does legislation that falls within it.  This includes Freshwater Farm Plans, so they are still a requirement. However, Waikato Regional Council is waiting for further clarification from the new government on intended changes as both coalition agreements contain commitments to improve Farm Environment Plans so they are more cost-effective and pragmatic for farmers. Significant Natural Areas Last week the coalition government announced it is suspending councils’ requirements to comply with significant natural area provisions in the National Policy Statement for Indigenous Biodiversity for three years, while they work on replacing the RMA. Greenhouse Gases Statements in the coalition agreements relating to greenhouse gas policy and agriculture include: maintaining a split-gas approach to methane and carbon dioxide through to 2050 and reviewing the methane science and targets this year for consistency with no additional warming from agricultural methane emissions. Incentivising the uptake of emissions reduction mitigations, such as low methane genetics and low methane-producing animal feed Enabling farmers to offset sequestration against their on-farm emissions. So far, there have been no changes to current compliance requirements, so it is a wait and see. We’ll keep you updated on any developments in this area.  read about our new agri-compliance service back to all blogs

Are you keeping up with the economy? Time for an Income Review. This is a message for business owners in the service/contracting industry: ensure you have reviewed your chargeable hourly rate. Inflation is easily noticeable and has been all over the news, and New Zealand’s Consumers Price Index (CPI) increased 4.7% in the 12 months to the December 2023 quarter[i], and 7.2% in the 12 months to December 2022 quarter[ii].   Inflation may have you feeling the pinch and finding yourself in a position where not only is cash (the lifeblood of any business) getting harder to find but there’s also a squeeze on the net profit ‘bottom line’ which is the reporting body of a business.  The bottom-line figure in the Profit & Loss Statement is helpful for planning and decision making because it’s the starting point for knowing how much to allocate for; drawings, tax payments, paying back debt, and reinvesting back into the business. And it’s a common mistake to let the bank account balance be the leading guide for those decisions.So, what measures could you take to relieve some of the pressure? You can review the spending in the most recent cashflow statement and put steps in place to reduce unnecessary expenses, and you can work with us to set a business expense budget to keep you aware of future spending. However, the reality is that while these exercises are extremely helpful for tightening the belt on spending, it’s just kicking the can further down the road unless you’re also reviewing the most powerful tool your business has at the same time: Income. Reflecting on the CPI statistic, if the chargeable hourly rate does not at least match the inflationary increase, then the business is losing spending power and risks losing some of its freedoms – Time (need to work more to compensate), Financial (less to spend on the things you need and want), and Mind (disrupted sleep worrying about cashflow).  Simply put, if everyone else around you is increasing their price points, you need to, or your business will be left behind. Another issue is that self-employed need to understand what their actual bottom line/hour figure is.  We can work with you to get a detailed answer to this, but a  quick high-level exercise you can do now is: Roughly work out the number of hours you worked throughout the year and divide it into the Net Profit figure from your most recent Profit & Loss statement.  For example : Nick is self-employed, offering services to the public, and he charges himself out at $70/hour.  That can seem quite an appealing hourly rate.  However, the most recent 12 month Profit & Loss statement showed a Net Profit of $75,000 (Income less expenses, interest and depreciation).  Nick worked 5 days a week, doing 8 chargeable hours a day, for 49 weeks (after he took 3 weeks off over summer). He did not work an additional 8 stat days and had 4 days off where he couldn’t work due to sickness.  Total hours available to work =1,582. The actual relative hourly rate (before tax) is more like $40.23.  Nick needs to reflect on how appealing that number is now as compensation for all the work he has put in. Because business owners will know too that on top of chargeable hours is time spent working on the business doing things like invoicing, lining up work, and meeting all the compliance requirements. From 1st April 2024, the Minimum wage will increase to $23.15.  If your number is around that, or less than what you expect on PAYE wages, then it’s critical to meet with our team for a deeper dive into meaningful things you can do to get back on track. Your time and risks all need to be compensated for all those skills and extra efforts that go into being self-employed. Increasing your hourly rate can be a scary thing, especially if you haven’t reviewed it for a while, because of the competition for work and clients.  A solution is to incrementally increase your price by a small manageable % and set yourself a reminder to review every 6 months there on. There’s every chance if you’re reviewing the charge-out rate, your competitors in the industry are making a move too – so are you ready to make yours?  Your time, financial and mind freedom depend on it. See our team today for more business planning ideas, and tools, to know your numbers. Written by Rachel Robb.  ____________________ [i] www.stats.govt.nz/indicators/consumers-price-index-cpi/   updated 24 January 2024 [ii] www.stats.govt.nz/news/annual-inflation-remains-at-7-2-percent/  updated 25 January 20- it Rachel RobbPartner, CA P: 0800 866 191E: rachel@cooperaitken.co.nz M: 027 208 1374 more on rachel

Taxing Times: New Zealand’s 2024 Tax Changes As the calendar flips to 2024, New Zealand braces itself for a series of tax changes that promise to shape the fiscal landscape for individuals, businesses, and the economy as a whole. In our opinion the tax changes in New Zealand for 2024 are poised to have far-reaching implications in both their application and their outcomes. Income Tax Threshold Changes The new government intends to change the tax rate thresholds from 1 July 2024. The proposed threshold adjustments are as follows:           In conjunction with the threshold change, the eligibility for the Independent Tax Earner Credit (IETC) is also said to expand to $70,000 (up from $48,000). IETC is the tax credit you’re eligible for if you earn between $24,000 and $48,000 per annum; you are not claiming Working for Families Tax Credits; your income is not an income-tested benefit; or you don’t receive New Zealand Superannuation. Trust Tax Rate Increase The last government introduced a Tax Bill on 23 May 2018 as part of their budget. Included in the Bill was a proposed increase in the Trust Tax rate to 39% (up from 33%). The Tax Bill expired and was not passed into effect prior to the election, the now Finance Minister Nicola Willis however confirmed on 12 February 2024 that the Trust Tax rate will in fact increase to 39% from 1 April 2024. On 11 March 2024 there was an additional announcement by Nicola Willis in which she indicated that the Government is also proposing that trusts that earn less than $10,000 per annum (after deductible expenses) would still be taxed at 33%. Inland Revenue released a high-level guidance document on 2 February 2024 on how it may view some taxpayer transactions and structural changes regarding the increase in the trustee tax rate. We will work with our clients where applicable to ensure that any changes to your tax planning or business structures are within the confines of the guidance provided by Inland Revenue. Interest Deductibility and Bright-line test The last Government took a hardline approach to property investors by changing the rules around the ability to deduct interest on the loans on rental properties, as well as changing the Bright-line test first to five (5) and then to ten (10) years (up from two). Interest deductibility for rental properties will be restored on a phased-in approach over the next two years as follows: 80% deductible in the 2024/2025 income year 100% deductible from the 2025/2026 income year (full deductibility from 1 April 2025) The Bright-line test for investment properties will be reduced to two (2) years (from ten (10) years) with retrospective effect from 1 July 2024 which in effect means that investment property acquired before July 2022 should no longer be subject to the Bright-line test at sale. Speak with us if you are unsure if the Bright-line test will still apply to you or not. Commercial Building Depreciation Due to the impacts of COVID-19, the previous government announced in March 2020 a reintroduction of tax depreciation on commercial buildings for the 2020/2021 tax year, whilst it was originally removed in May 2010. The new government has indicated that it will remove the ability to claim commercial buildings depreciation, though we are uncertain when this will take effect, we expect it will take effect from 1 April 2024. As individuals, businesses, and various stakeholders adapt to these evolving tax measures, understanding their implications is important for navigating the fiscal terrain of New Zealand in the year ahead.  Please do not hesitate to contact us if you would like to discuss any of the above and how it may affect you. Written by Gerrie Jacobs. Gerrie JacobsPartner, CA P: 0800 866 191E: gerrie@cooperaitken.co.nz M: 021 284 6444 more on gerrie

The Minimum wage is increasing The minimum is set to increase again come 1st April 2024. The adult minimum wage will increase by 45 cents, from $22.70 to $23.15 per hour. The starting out, and training minimum wage will increase by 36 cents, from $18.16 to $18.52 per hour. These rates are before tax and lawful deductions. It does not include 8% Holiday pay for casuals. This needs to be calculated on top. If you have salaried employees, you must ensure that your team are not at risk of falling below the new minimum wage, should they work additional hours. You will need to revisit your calculation for the maximum number of hours each can work, per pay period, before requiring a top up payment. The minimum wage is not the only change. The ACC Earner Levy is increasing In addition to the increase in minimum wage, the ACC Earner levy, which makes up part of your employees PAYE calculation, will also be increasing. The increase of 7 cents per $100 of income, will also take effect from 1st April 2024, taking the levy from 1.53% to 1.60%, or, $1.60 per $100.00 of earnings. This will impact of the amount of PAYE paid to the IRD, for each employee. It is important that any salaried staff have their existing calculations revisited, to ensure the increase is accounted for. Student Loan repayment thresholds are increasing The amount of money an employee can earn before the 12% Student loan is deducted, will increase from $22,828 to $24,128. On average, employees can expect to earn an additional $25 a week on their gross incomes, before the 12% Student loan deduction applies. Please see the table below for details. Please contact our payroll team if you need support or advice. contact our payroll team