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New Zealand's Inland Revenue has released guidance on changes announced in Budget 2016 that may affect firms from April 1.
The changes will affect taxpayers who pay schedular payments; receive schedular payments; pay contractors through a labor hire business; contract for a labor hire business; or pay provisional tax.
For those who make schedular payments, the guidance says that the taxpayer has contractors receiving schedular payments and that contractor wants to change their tax rate or a new contractor begins work, Form IR330C should be provided to them, instead of IR330.
From April 1, 2017, contractors subject to the schedular payment rules can choose their own tax rate when they complete the IR330C, subject to minimums.
Meanwhile, a labor hire business that pays contractors to do work for clients under a labor hire arrangement will face new rules from April 1. These payments will newly come under the schedular payment rules. A taxpayer affected by the change will need to deduct tax from all payments made to these contractors on or after April 1 even if the work has been completed prior to this date and include the details of the payment and tax deduction on their employer monthly schedule, as with any other schedular payment.
The Inland Revenue said that the one percent monthly incremental late payment penalty will no longer be charged on goods and services tax debts for the period ending March 31, 2017, and later; income tax (including provisional tax) for the 2017-18 and later income years; and Working for Families Tax Credit overpayments for the 2017-18 and later income years.
Last, there will be changes to provisional tax use-of-money interest (UOMI) rules. These are intended to provide more certainty to those using the standard method. The changes include that when determining the interest start date, the NZD50,000 residual income tax (RIT) threshold for individuals using the standard option has been increased to NZD60,000. This threshold is also to apply to non-individuals. According to the tax authority, UOMI will only apply from the final installment date if the taxpayer uses the standard method and makes all other installments in full and on time.
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