• What assistance from Inland Revenue is available?

Te wiki o te tāke – The New Zealand Tax Podcast.

It’s been a very sombre week hearing the news and seeing the images of utter devastation from the cyclone and related flooding. My thoughts and best wishes go out to all my listeners, readers and fellow tax agents affected by Cyclone Gabrielle, particularly those in Hawke’s Bay and Tairāwhiti East Coast. I hope that you are safe and that you are getting all the assistance you need.

My last podcast was actually recorded four weeks ago before we went overseas. And it’s fair to say a lot has happened in that time, beginning, beginning with the weather bomb and related flooding over the Auckland Anniversary weekend and now Cyclone Gabrielle. So, this week we will focus on what help is available from Inland Revenue for those affected by these weather events. And hopefully we’ll get back to a more regular routine next week.

At present, Inland Revenue offices in Napier, Gisborne and Takapuna are closed, although I would expect the Takapuna office to open shortly. For those in the affected areas, communications permitting, your best option is to call Inland Revenue on their dedicated helpline on 800 473566 or send a message via myIR using the key word “flood “.

2022 terminal tax payments for many would have been due on 7th February. But the extent of the Auckland anniversary weekend flooding in the Northland, Auckland, Waikato and Bay of Plenty Regions led to Cabinet declaring it an emergency event on 8th February for the purposes of use of money interest remission. https://www.ird.govt.nz/updates/news-folder/emergency-event—heavy-rain-and-flooding-in-the-upper-north-island  What that means is Inland Revenue have advised for those significantly infected by the weather, late payment penalties will be waived once any taxes due are paid in a reasonable time. Furthermore, use of any interest charged up to 30th April will also be removed, which, given the interest rate is currently 9.21%, is actually quite a relief.

As always with Inland Revenue, the key is to get in contact as soon as possible and they do accept that there will be delays for many people given the state of the communications in the affected areas. And this advice also applies to those thousands of GST payments coming up for the 31st January GST return period which will be due at the end of the month.

More specific help is available through the Income Equalisation Scheme for farmers and other with others with agricultural businesses on land, including fishers. https://www.ird.govt.nz/media-releases/2022/tax-relief-for-adverse-events

 It also includes forestry businesses. And I have to say, I can’t say I’m terribly impressed by how the forestry industry has handled the issue of its slash by product, which appears to have wrought considerable damage in Tairawhiti East Coast and Hawke’s Bay.

That aside, eligible businesses are able to use the Income Equalisation scheme to even income fluctuations by spreading their gross income from year to year – I have had one or two clients use this. Under the scheme eligible persons can pay income into a special account which earns interest at 3% if it’s left on deposit for more than 12 months. The payment is tax deductible in the year for which it is made.

Typically, deposits must be made within six months of the tax year end. However, as an Adverse Event has been declared, late, deposits for the March 22 income year can now be made until 31st May.

Now any withdrawals, including interest from the scheme, are usually assessable and are counted as taxable income in the year businesses apply to withdraw them. Typically, amounts may not be withdrawn unless they have been on deposit for at least 12 months. This restriction has now been lifted and applications for withdrawals must be made in writing and will take approximately 20 days to process. I think you can expect Inland Revenue will give these a priority and try and move them through more quickly than that. https://www.ird.govt.nz/income-tax/income-tax-for-businesses-and-organisations/income-equalisation-scheme/discretionary-relief

These discretionary Income Equalisation Scheme reliefs become available whenever Cabinet makes the relevant declaration. They also cover droughts as well as floods and storms. By my reckoning, the declaration on 8th February, which is before Cyclone Gabrielle turned up, is the eighth such declaration in the past 12 months, two of which already related to the Tairāwhiti East Coast and Hawke’s Bay areas. As you can see, they’ve taken a tremendous hammering already.

I expect that the Ministry of Social Development will also be making special benefits and reliefs available. I do wonder whether some consideration could be given to extending the Small Business Cashflow Scheme to help small businesses affected in the area. Certainly, there’s plenty of opportunities for some creative thinking in this space and I think we’re going to need to see it because the scale of this event is scarcely credible. It’s certainly the biggest such natural disaster to hit us since the Canterbury earthquakes.

To summarise, basically what Inland Revenue can do at the moment is help with late payments and those who qualify for the income equalisation schemes now have some more discretion about payments and withdrawals. And as I just mentioned, we might see some special reliefs become available through other agencies in due course.

I mentioned in my last podcast He Tirohanga Mokopuna 2021, the Treasury’s combined statement on the long-term fiscal position and Long-Term Insights briefing released in September 2021. https://www.treasury.govt.nz/publications/ltfp/he-tirohanga-mokopuna-2021-html This raised the specific issue of the fiscal impact of climate change – and unsurprisingly this is now front and centre in the news. I’ll take a closer look at what Treasury had to say in next week’s podcast.

In the meantime, that’s all for this week. I’m Terry Baucher and you can find this podcast on my website www.baucher.tax or wherever you get your podcasts.  Thank you for listening and please send me your feedback and tell your friends and clients. Until next week, for all those affected, Kia Kaha. Stay strong.