Legislation Passed - Stimulus Package Update
The COVID-19 Response (Taxation and Social Assistance Urgent Measures) Bill was passed under urgency in Parliament on March 25th. This includes the COVID-19 UOMI concessions for taxpayers that were signaled on Tuesday 17 March as part of the Government's stimulus package.
This legislation matches closely with the original set of proposed changes communicated on Tuesday 17 March.
Here's what you need to know:
Context for the new Act
The legislation is the Government’s response to the economic impacts of COVID-19. The Act includes measures aimed at providing targeted relief to taxpayers that have been severely affected by the COVID-19 outbreak. It also includes measures aimed at addressing the broader economic impacts of the outbreak.
Under the Act, a taxpayer may ask the Commissioner to remit interest accrued after 14 February 2020 where the taxpayer’s ability to make their tax payment on time is “significantly adversely affected by COVID-19”. The taxpayer must also have asked for the relief as soon as practicable and made the payment as soon as practicable.
Interest will continue to accrue on the taxpayer’s IR account until the core tax debt has been paid.
"Significantly adversely affected"
The commentary to the Act gives further explanation of what “significantly adversely affected” means, saying it applies when:
- A taxpayer is physically unable to make a tax payment on time; and
- A taxpayer is financially unable to make a tax payment on time because of the economic nature of the COVID-19 outbreak.
What does "physically unable to make a tax payment on time" mean?
The commentary to the Act uses being in quarantine as an example of what it might mean to be physically unable to make a tax payment on time. The Government and IRD will provide further examples in the coming days.
What does "financially unable to make a tax payment on time" mean?
The preliminary guidance on this does not differ from that set out initially, which is that IRD will be looking for the following:
- A taxpayer’s income or revenue has reduced by at least 30% compared to the same month 12 months earlier (if your February 2020 income is 30% lower than your income from February 2019, for example) and
- The taxpayer has explored other options to support themselves financially, such as talking with their bank about additional finance or re-negotiating other loans/overdrafts.
What is the timing of the policy?
The Commissioner’s discretion to remit interest will apply to interest that has accrued on tax payments due on or after 14 February 2020. Provided (as set out above) that the taxpayer has asked the Commissioner to remit the interest “as soon as practicable” and has made the payment of tax "as soon as practicable".
Do taxpayers still have to pay the core tax itself?
Yes. The interest will not be remitted until the core tax debt has been paid.
What is the IR’s advice to taxpayers right now?
IRD is encouraging taxpayers to speak with their tax agent about ways they can reduce or delay their payments and the tools available to do this. Tax pooling is one of the best tools available to taxpayers and should be mentioned when speaking with clients.
What else should taxpayers think about?
While it’s natural for taxpayers to focus only on their own position right now, continued tax revenue plays a critical role in enabling Government to fund assistance for those who need it and in leading the country out of an economic crisis.
Tax Traders’ guidance on this is if you have the resources and ability to pay your taxes you should, and we are here to help with that.
Addendum: Expected decrease in UOMI rates
It is likely that the IRD will decrease their interest rates for both under- and over-payments of tax. Based on the Official Cash Rate being cut to 0.25% this week, we expect that:
- The rate IRD pays on overpayments will decrease from 0.81% to 0.00%
- The rate IRD charges on underpayments will decrease from 8.35% to approximately 7.00%
We anticipate these new rates will apply from 7 May, and will keep you informed as the details are confirmed.
- News and updates
- Frequently asked questions
- Peace of mind for delayed payments
- How tax pooling can help
- Understanding the stimulus package – tax pooling is part of the toolkit
- No blanket removal of UOMI on late payments – Read >>
- LEGISLATION PASSED - Stimulus Package Update – Read >>
- Three new reporting tools available now – Read >>
- Now available 24/7 – Read >>
- A message from our Founders – Read >>
- feeGuard, complimentary from 18 March – Read >>
- How tax pooling can help; PDF to share – Read >>
Resources for download
- Peace of mind for tax finance
Access the best of IRD and Tax Traders with complimentary feeGuard.
Peace of mind policy (PDF) >>
- How tax pooling can help
A one-page guide to relieving cash flow pressure with tax pooling.
How Tax Pooling Can Help (PDF) >>
- CA ANZ - Coronavirus resources
- Legislation - COVID-19 Response (Taxation and Social Assistance Urgent Measures) Act
- Beehive - COVID-19: Economic Response Package
- IRD - COVID-19 information page
- New Zealand Government - COVID-19 links
- New Zealand Trade & Enterprise - Coronavirus
- Ministry for Primary Industries - Coronavirus and the effects on trade
- Ministry of Health - COVID-19 Novel Coronavirus