ACC employer levies are determined based on the risk of accident in a particular industry.

ACC employee levy details for the 2024/25 tax year:

Maximum Liable Earnings  $142,283 (aged 18 or over)

Earners Levy (incl. GST)  $1.60 per $100 earnings (aged 18 or over)

Certain assets can be depreciated for income tax purposes.

Depreciation deductions ceased to be available from the 2011/12 income year for buildings with a useful life of 50 years or more, but were restored just for non-residential buildings from the 2020/21 income year onwards. However, all depreciation deductions for buildings will cease from the 2024/25 income year with the exception of some special types of buildings. A special deduction might be possible for commercial fit-out if its cost was not separated from the total cost of the building.

A residential building is defined as being:

1. a dwelling (this is also a defined term, and includes owner-occupied houses and apartments, and houses and apartments subject to residential tenancies)
2. and includes any building intended to ordinarily provide accommodation for periods of less than 28 days at a time, if the building (together with any other buildings on the same land) has less than 4 units for separate accommodation

Depreciation can generally be calculated using either the straight line method or the diminishing value method.

A taxpayer can elect not to depreciate an asset.

Assets can be added to a “pool” and depreciated as though just one asset. Each asset must have a cost or tax value of less than $5,000, and the diminishing value method must be used.

Low value assets

An asset purchase with a total cost that doesn’t exceed a certain threshold can be written off immediately. The thresholds are:

• for assets purchased before 17 March 2020: $500
• for assets purchased on or after 17 March 2020 and before 17 March 2021: $5,000
• for assets purchased on or after 17 March 2021: $1,000

The threshold amounts are GST exclusive if the taxpayer is GST-registered.

However, there are two scenarios where an immediate write-off is not permitted: 

• if the low-value item becomes part of any other property that is depreciable property, or is an improvement/upgrade of that property
• if more than one low-value asset is purchased from the same supplier at the same time, and if those assets have the same depreciation rate and the total cost exceeds the relevant threshold

Companies (other than Look-Through Companies)
Qualifying donations are tax-deductible, but only to the extent that the donations do not exceed the company’s net income for the year.

Māori Authorities (as defined for income tax purposes)
Qualifying donations, plus donations made to Māori associations (as defined in the Māori Community Development Act 1962), are tax-deductible but only to the extent that the donations do not exceed the entity’s net income for the year.

New rules applied from 1 April 2015. These rules clarify the tax treatment of employer-provided accommodation, accommodation payments and other allowances or payments made by employers to cover employee expenditure. Please contact your BDO tax adviser for further information. 

ESCT is deducted from an employer’s superannuation contributions. The ESCT rate is based on the total of the employer contributions and the employee’s salaries/wages (for the previous year if employed for all of the previous year):

Alternatively, the employer contributions can be taxed as salary and wages under the PAYE rules if the employee agrees.

If an employee enjoys the benefit of the entertainment expenditure outside of their employment duties, or can choose when to receive or use the benefit, the FBT rules might apply instead of the 50% deduction rule.

When a deduction for an entertainment expense is limited to 50%, a GST adjustment is may also be required.

The FDR method of calculating taxable income applies to share/equity investments of less than 10% in most overseas companies if the holder is subject to the Foreign Investment Fund (FIF) regime. If the FDR method is used for an investment, the taxpayer is not taxed on the dividend income or the increase in the value of the investment. The FDR method can also be used for some investments where the taxpayer’s ownership percentage is between 10% and 50%.

Individuals and most trusts can opt to be taxed at the lesser of:
5% of the opening value of their share portfolio*
(as at 1 April each year for standard balance date taxpayers)

or, their actual return calculated under one of the other FIF calculation methods (normally the Comparative Value method, but losses cannot be claimed).
 

Companies and other non-individuals use:
5% of the opening value of their share portfolio*.

*Quick sale adjustments must be made when a FIF has been bought and sold in the same income year.

There are certain types of investment for which the FDR method is not allowed to be used.

The FIF rules do not apply to most shareholdings in companies which are tax-resident in Australia and listed on an ASX index.

For individuals, the FIF rules generally only apply if the total cost (as defined) of the individual’s FIF interests is more than $50,000. This threshold exemption also applies to a very limited range of trusts. A taxpayer can voluntarily opt into the FIF regime if they are below the threshold (special rules apply).

Special valuation rules can apply if the vehicle was acquired at no cost, or if the owner or an “associated person” owned it at any stage during the 2-year period prior to the date of acquisition.

FBT Threshold for Annual Return Filing (instead of quarterly):

FBT Exemption Thresholds for “Unclassified Benefits”:

The value of minor fringe benefits (such as chocolates and flowers) that can be provided to employees without attracting FBT is $300 per quarter per employee, and $22,500 per year per employer.

Gift duty was abolished from 1 October 2011. 

GST return accounting basis:

The Invoice Basis method is the default method for accounting for GST. However, Inland Revenue can approve the use of either the Payments Basis method or the Hybrid Basis method, subject to special rules (see below). The Hybrid Basis method uses the Invoice Basis method for sales and the Payments Basis method for expenses.

GST return periods:

Returns generally need to be filed 2-monthly. However, monthly or 6-monthly returns can be filed, subject to special rules (see below).

GST return and payment due dates:

The due date for GST returns and payments is the 28th of the month following the end of the taxable period, except for the following periods:

• period ending on 30 November - the due date is 15 January
• period ending on 31 March - the due date is 7 May

Special rules:

Income Tax:

Because the personal income tax rates have changed part way through the 2024/25 tax year, the next table reflects the composite rates which will apply for the whole tax year:

Interest RWT payment dates:

For a 6-monthly filer, if interest RWT deductions exceed $500 per month for a 2-month period, the RWT is payable to the IRD by the 20th of the following month.

Where a double tax treaty exists, the rate of non-resident withholding tax may be reduced. A company paying an imputed dividend and supplementary dividend to a foreign shareholder may be entitled to claim a foreign investor tax credit.

NRWT payment dates:

For a 6-monthly filer, if NRWT deductions reach $500 during a tax year, the NRWT is payable to the IRD by the 20th of the following month. Monthly payments are then required for the remainder of the year.

RWT & NRWT return reporting requirements:

There are special reporting rules for payers of “investment income”. In some cases, income needs to be reported to the IRD by the payer even if no tax needed to be withheld from the payment.

The terminal tax date assumes that the taxpayer is linked to a tax agent

Employers deduct the employee’s contribution from their earnings, add their employer contribution, and pass this on via the IRD to an approved scheme provider for investment on the employee’s behalf.

Effective from 1 July 2019, people over 65 can now join a KiwiSaver scheme, but it is voluntary for employers to contribute for employees who are 65 or older.

See also the Employer’s Superannuation Contribution Tax (ESCT) section.

A special tax regime deals with mixed-use assets, but only for specific types of assets which are used partly for earning income and partly for private use, and for which there is a period of non-use during the year (generally at least 62 days).

Key points about the MUA regime:

• There are special definitions and exceptions
• From 1 October 2021, deductions for interest expenditure on accommodation could be phased out or denied altogether (see also the “Residential Property Interest Expenditure” section)
• Expenditure deductions are subject to special apportionment rules
• These rules can take precedence over the entertainment expenditure rules, the FBT rules, and the residential property ring-fencing rules
• A net loss for an asset might be quarantined until there is net income from the same asset
• A taxpayer can possibly opt out of this regime, but no expenditure deductions would be allowed

Concession for small employers:

If the total PAYE (including ESCT) was less than $500,000 in the previous year, there is only one payment due by the 20th of the following month (but an employer can choose to pay more often).

New employers:

A new employer can apply the small employer concession. However, if the total PAYE (including ESCT) passes the $500,000 threshold during the first year of employing, the employer needs to change to two payments per month (as per the above table).

Other tax types:

Employee ACC Earner Premiums, Student Loan repayments, Kiwisaver deductions, Kiwisaver employer contributions and Child Support deductions are all payable in the same manner.

PAYE is a tax which is deducted at source from salary and wage payments. However, other types of payments for services might also need to have tax deducted at source. These payments would be for work done by non-employees - e.g. company directors, committee members, contractors, sales agents, entertainers, sportspeople.

If a particular activity is mentioned in Schedule 4 of the income tax legislation, a payment in relation to that activity could be a “schedular payment” which will need a special tax deduction.

There are some exemptions from the schedular payment rules:

• a payment for services provided by a public authority, a local authority, a Maori authority
• a payment made to a company, if the company is not one of the following : a non-resident contractor, a non-resident entertainer, a company involved in a “labour-hire arrangement” (see below), an agricultural, horticultural, or viticultural company
• a payment covered by an exemption certificate (a certificate is not allowed for some taxpayers, including taxpayers involved in a “labour-hire arrangement”)
• a payment for services provided by certain non-resident contractors

New schedular payment rules from 1 April 2017

Labour-hire arrangements are now subject to the schedular payment rules. These arrangements are generally where:

• one of the payer’s main activities is the business of arranging for a person (or persons) to perform work or services directly for clients of the payer, and
• the payment is made under an arrangement where some or all the work is done by the payee directly for a client of the payer, or directly for a client of another person, and
• the payer and payee are not “associated persons” (a special definition applies), although the payer can choose to deduct tax from a payment to an associated person

Voluntary schedular payments:

• if a taxpayer’s activity is not otherwise subject to the schedular payment rules, they can now elect into the rules
• this election can also be used by a company to whom payments would otherwise be exempt from the rules

Withholding rate elections:

• a taxpayer who is subject to the schedular payment rules (other than a non-resident entertainer) is now able to elect their own withholding rate, as long as it is not less than the relevant minimum rate
• minimum withholding rates : 15% if the payee is either a non-resident or the holder of a temporary entry class visa as defined in section 4 of the Immigration Act 2009; 10% in all other cases
• in order to use a rate which is less than the minimum rate, or to have a zero rate when a certificate of exemption is not allowed, a taxpayer can apply to Inland Revenue for a special tax code certificate (also known as a tailored tax code certificate)

Taxpayers who have a year-end “residual income tax” (RIT) liability exceeding $5,000 are generally required to pay instalments of provisional tax. Provisional tax payment dates are aligned with GST payment dates, depending on the GST status and the method used. Most taxpayers pay provisional tax in three instalments, with a payment cycle of five, nine and thirteen months after the start of the income year (see also the Income Tax Payment Due Dates section). However, taxpayers who file six-monthly GST returns pay their provisional tax in two instalments, with a payment cycle of seven and thirteen months after the start of the income year.

Taxpayers can use the tax pooling system to manage their provisional tax payments. Refer to the Tax Pooling section for more details.

Standard method calculations for the 2024 & 2025 tax years:

Final instalment calculation: if a taxpayer expects their RIT for the current tax year to be $60,000 or more, and has used the standard method for all of the instalments to date, their final instalment amount can be based on the expected RIT less the total of the earlier instalment amounts – they do not need to use the estimation method just for their final instalment.

Estimation method

A taxpayer can estimate or re-estimate their provisional tax up until the last instalment date.

GST ratio method

If a taxpayer is eligible for this method, they base their provisional tax payments on a percentage of the GST taxable supplies, and there are six instalments per year.

Accounting income method (AIM) 

If a taxpayer is eligible for this method, they base their provisional tax payments on current year tax-adjusted accounting income. AIM-capable accounting software needs to be used. Taxpayers registered for monthly GST returns make twelve provisional tax payments per year. Those who are not GST-registered, or who are registered for two or six-monthly GST returns, will make six payments per year. A taxpayer can switch to the AIM method part way during a tax year if certain conditions are met.

Interest payable on underpayment or overpayment of provisional tax

Special rules apply if a taxpayer uses the GST ratio method or the accounting income method.

For all other taxpayers, one of the following calculation start dates will apply if any of these statements is true:

• the year’s residual income tax is at least $60,000, or
• the year’s provisional tax was estimated, or
• there has been a “provisional tax interest avoidance arrangement”

From the last instalment date, if all of the following statements are true:

• all the instalments were calculated using the standard method, and
• all instalments (except for the last one) were paid in full and on time, and
• all “provisional tax associates” also calculated all their instalments using the standard method OR used the GST ratio method, and
• there has been no “provisional tax interest avoidance arrangement”

From an earlier instalment date in all other cases

NZ does not generally tax a capital gain made on the sale of private residential land (i.e. not otherwise subject to tax). However, a special “bright-line” test was added to the income tax legislation with effect from 1 October 2015.

Residential land sold within 2 years of acquisition can be taxed if the acquisition date was between 1 October 2015 and 28 March 2018.

Effective from 29 March 2018, the bright-line test period was extended to 5 years. Residential land sold within 5 years of acquisition can be taxed if the acquisition date was between 29 March 2018 and 26 March 2021.

Effective from 27 March 2021, the bright-line test period was extended to 10 years. Residential land sold within 10 years of acquisition can be taxed if the acquisition date was on or after 27 March 2021. However, some acquisitions might still be subject to the 5-year rule. Please read the next line about a change to the bright-line period.

Effective from 1 July 2024, the bright-line test period will be returned to 2 years.

Key points about this regime:

• There are special definitions and exceptions
• There is a "main home exclusion" (special rules apply)
• The test does not apply to property acquired through an inheritance
• There is "rollover relief" for some ownership change scenarios, including when property is transferred as part of a relationship property agreement; from 1 July 2024, the rollover relief rules will be extended to most transfers between “associated persons”
• A loss will be "ring-fenced"
• Special anti-avoidance rules prevent companies and trusts being used to avoid the test

Special tax rules can mean that losses from residential rental properties are “quarantined” (i.e. suspended) and carried forward until there is enough “residential property income” to claim them against. As a general rule, this means that such losses can no longer be claimed against other types of income (e.g. salary and wages).

These rules applied from the beginning of the 2019/20 income year. Therefore, the start date was 1 April 2019 for standard balance date taxpayers, but was earlier for early balance date taxpayers.

Key points about this regime :

• There are special definitions and exceptions (including a "main home exclusion")
• From 1 October 2021, deductions for interest expenditure could be phased out or denied altogether (see also the “Residential Property Interest Expenditure” section)
• An owner can apply the rules on a portfolio basis or a property-by-property basis
• Special rules apply if the owner is a look-through entity – i.e. a partnership or a look-through company (LTC)
• Special rules apply if the owner is a company that is not an LTC
• Special anti-avoidance rules prevent trusts, companies, LTCs or partnerships being used to avoid the ring-fencing rules

NZ does not generally tax a capital gain made on the sale of residential properties (i.e. not otherwise subject to tax). Historically, the NZ tax system allowed landlords to deduct interest expenditure, even if gains made on sale of the property were not taxed. Special interest limitation rules have limited the deductibility of interest expenditure incurred in relation to properties located in NZ, although from 1 April 2024 those rules are being removed (in 2 steps as explained below).

• Properties acquired before 27 March 2021 : if a loan is in a foreign currency, no interest deductions are allowed from 1 October 2021 onwards; for other loans, deductions for interest are being phased out, starting with deductions limited to 75% from 1 October 2021, but with the limitations ending on 31 March 2025 as explained below.
• Properties acquired on or after 27 March 2021 (subject to certain exceptions) : no deductions for interest incurred from 1 October 2021 to 31 March 2024.
• From 1 April 2024 to 31 March 2025, 80% of the interest incurred will be deductible regardless of when the property was acquired or when the funds were borrowed.
• From 1 April 2025, all interest incurred will once again be deductible.

Key points about the limitation regime:

• There are special definitions, exceptions, and exemptions (e.g. for new houses)
• This regime does not apply to properties located in other countries
• This regime can apply to all types of taxpayers, including some companies
• Special "tracing" rules can apply - e.g. when borrowed funds are applied for purposes other than just the residential property, or when a variable balance loan such as an overdraft or a revolving credit facility is used
• This regime can also apply to properties subject to the “mixed-use asset” rules
• “Rollover relief” is provided for certain transfers or disposals
• Previously denied deductions can become deductible if the sale of the property is taxable
• Special anti-avoidance rules prevent companies and trusts being used to avoid this regime

Late filing penalties

Late payment penalties:

Taxpayers are able to use a tax pooling system to manage their provisional tax payments. Tax payments can be purchased or sold at pre-determined dates through an intermediary. Using a tax intermediary can give the seller a better interest rate return. For a purchaser, it can mean a reduced interest cost and, in certain circumstances, reduced penalties.

Tax pooling can also be used to purchase other types of tax in certain circumstances. 

In some circumstances, the IRD can charge or credit interest on underpayments or overpayments of most types of tax.

(See also the Tax Pooling section and the Provisional Tax section)