Here is a basic tax calendar that most small businesses fit into. These Return Filing due dates are based on your balance date being 31^stMarch .

Remember the below are return filing due dates NOT payment due dates. Your accountant is best suited to advise your on the payment due dates for terminal tax.

The best way to get your due dates is by selecting your GST status.

Please choose from the following the GST status that applies to you:

Non GST Registered

Income Tax Return Dates

Without Tax Agent Extension of Time:  Due 7^th July

With Tax Agent Extension of Time:        Due 31^st March

2 Monthly GST Registered 

Income Tax Return Dates

Without Tax Agent Extension of Time:  Due 7^th July

With Tax Agent Extension of Time:        Due 31^st March

GST Return Dates

April / May:                    Due 28^th June

June /July:                      Due 28^th August

August/ September:    Due 28^th October

October/ November:   Due 15^th January

December/January:     Due 28^th February

February/ March:         Due 7^th May

Provisional Tax Due Dates

1st Instalment:             Due 28^th August

2^nd Instalment:             Due 15^th January

3^rd Instalment:             Due 7^th May

6 Monthly GST Registered 

Income Tax Return Dates

Without Tax Agent Extension of Time:  Due 7^th July

With Tax Agent Extension of Time:        Due 31^st March

GST Return Dates

April to September:    Due 28^th October

October to March:      Due 7^th May

Provisional Tax Due Dates

1st Instalment:   Due 28^th October

2^nd Instalment:   Due 7^th May

Employer:  PAYE Filing Dates

20th of the month following the month of actual work.

Some key changes have been made for the Provisional Tax Rules for tax years 2018 onwards.

You will still need to pay your 1st (28/08/2017) and 2nd (15/01/2018) Provisional Tax Payments on time.

For the 3rd Provisional Tax (due 07/05/2018) if your Residual Income Tax i.e. Total Tax for the year works out to be:

• • Less than $60K   
    • You still have to pay the 3rd provisional tax on/or before 07/05/2018.
    • You are not subject to any Use of Money Interest until your terminal tax is due i.e. 07/02/2019.
  • More than $60K
    • You still have to pay the 3rd provisional tax on/or before 07/05/2018.
    • You are subject to paying Use of Money Interest for any underpayments of your total tax from 07/05/2018.

Practical Examples

Total Tax Less Than $60K

–       Jane Doe is a provisional taxpayer with a March balance date that pays provisional tax in three instalments. Her total provisional tax for the year works out to be $45,000 payable in 3 instalments of $15,000 each.

–       Jane Doe makes a $15,000 payment on 28/08/2017, 15/01/2018 and 07/05/2018 respectively.

–       In April 2018, when the accounts are completed by the Accountant, it turns out that the total tax works out to be $57,000 for the year.

–       Because Jane Doe, has already paid $45,000 AND her total tax is less than $60,000 (i.e. $57,000), she has to make her terminal tax payment ($57,000 less $45,000 = $12,000) by the 07/02/2018.

–       Her User of Money Interest (UOMI) will only be applicable on any balances outstanding on the $12,000 from 07/02/2019.

Total Tax More Than $60K

–       Joe Bloggs is a provisional taxpayer with a March balance date that pays provisional tax in three instalments. His total provisional tax for the year works out to be $90,000 payable in 3 instalments of $30,000 each.

–       Joe Bloggs makes a $30,000 payment on 28/08/2017, 15/01/2018 for the 1^st and 2^nd Provisional taxes.

–       In April 2018, when the accounts are completed by the Accountant, it turns out that the total tax works out to be $107,000 for the year.

–       Because Joe Bloggs total tax for the year is greater than $60,000, he has to pay the difference $107,000  less two payments of $30,000= $47,000 on the 3^rd Provisional Tax due on 07/05/2018.

• • • • If Joe Bloggs DOES make the $47,000 payment on 07/05/2018, AND he has made the 1st and 2nd Provisional Tax Payments on time, he will NOT be subject to Use of Money Interest (UOMI).
      • If Joe Bloggs makes a partial payment of $40,000 on 07/05/2018, AND he has made the 1st and 2nd Provisional Tax Payments on time, he will be subject to Use of Money Interest  (UOMI) on $7,000 underpayment from 07/05/2018 i.e. ($107,000 less $100,000 = $7,000)
      • If Joe Bloggs makes a  make a full payment the $47,000 payment on 07/05/2018, AND he has made the 1st and 2nd Provisional Tax Payments on time, he will be subject to Use of Money Interest (UOMI) on any underpayment from 07/05/2018.

Missing a Provisional Tax Payment or Not Paying on Time

It should be noted that if a taxpayer doesn’t pay or makes an incorrectly calculated instalment (not being the final one) on or before its due date, then UOMI will apply.  The unpaid tax on which UOMI is calculated is deemed to be the lowest of:

UOMI will then apply on that unpaid amount from the relevant instalment date until the date the tax is paid.

Example

–       ACME has used the standard uplift method, it has not correctly paid an instalment on time.  The amount of unpaid tax that ACME has in relation to the second instalment is the lowest of:

• • • –   the amount a taxpayer was liable to pay for that standard uplift instalment (i.e. $87,500) less the amount paid in relation to that instalment (i.e. nil); or
    • –     1 divided by the number of instalment dates for the tax year multiplied by their actual RIT for the year (i.e. 1/3 x $270,000 = $90,000) less the amount paid in relation to that instalment (i.e. nil).

–       The lesser of these two amounts is the standard uplift liability that was due of $87,500 so UOMI will be calculated on this from the second instalment date of 15 January 2018 until it was paid on 28 March 2018.  It should also be noted that a late payment penalty would likely apply for missing the second payment and that no grace period operates when the late payment is a provisional tax payment.

Meeting your income tax obligations during the tax year

•         The number of instalments you are required to make depends on the way you choose to calculate your provisional tax instalments. If you’re GST-registered, how often you file GST returns also determines how many provisional tax instalments you’re required to make.
•         The amount of provisional tax you need to pay is based on your expected profit for the year or your GST taxable supplies (sales) and depends on the way you choose to work out your provisional tax instalments.
•         At the end of the year you pay or are refunded the difference between the amount of provisional tax you paid and the amount you should have paid, based on your actual profit for the year.

You may be liable for provisional tax

If your residual income tax (tax to pay) on your last income tax return is more than $2,500, you may have to pay provisional tax for the following year.

What is Residual Income Tax?

Residual income tax (RIT) is the amount of tax you have to pay, less any tax credits you may be entitled to (excluding working for families tax credits or other tax payments made during the year) and any PAYE deducted.

Calculating your provisional tax

You can use one of these options to work out your provisional tax:

•         standard
•         estimation
•         ratio option.

The ratio option can only be used if you’re registered for GST.

Due dates for your provisional tax

The number of times you need to pay provisional tax each year depends on the option you use to calculate your provisional tax, and how many times you pay GST (if registered).

If you have a 31 March balance date (ie your tax year ends on 31 March) and you use the standard or estimation options to calculate your provisional tax payments, your provisional tax due dates are:

If you have a 31 March balance date and you use the ratio option to calculate your provisional tax payments, these are due on:

If you’re registered for GST you pay your provisional tax and GST at the same time on a combined GST and provisional tax return.

Make sure we receive your returns and payments on or before the due date. If you file and/or pay late or don’t pay the full amount, late payment penalties and interest may apply.

If your income is from salary, wages, benefits or taxable pensions, your tax will automatically be deducted under the PAYE (pay as you earn) system. This means when you get your weekly, fortnightly, or monthly pay, your tax has already been deducted from it.

PAYE is the tax your employer deducts from your salary and wages. It includes:

– the tax rate for your income, and
– an ACC earners’ levy

Income tax rates for individuals

The rates in the table below apply from 1 April 2016 onwards.

ACC earners’ levy rates

All employees must pay an ACC earners’ levy to cover the cost of non-work related injuries. It is collected by us on behalf of the Accident Compensation Corporation (ACC).

Employers deduct the earners’ levy from wages. It is included as a component of PAYE deductions.

Earners’ levy is charged at a flat rate each year: The Current Year (2016/17 onwards) ACC Levy Rate is $1.39 per $100 i.e. 1.39%

Income Tax Calculator

The IRD has some very good calculators to workout your tax on your taxable income. Click the link below and then Start.

http://www.ird.govt.nz/calculators/tool-name/tools-t/calculator-tax-rate.html

Goods and services tax (GST) is a tax on most goods and services in New Zealand. It also applies to imported goods and certain imported services. It is charged and accounted for at 15% on the selling price or market value of goods and services you provide.

GST is not a tax on your business income. Your customers pay this when buying your goods and services.

Registering for GST

You are required to register when your business turnover:

• for  the last 12 months was $60,000 or more, or
• for  the next 12 months you expect it to be over this threshold

A turnover of $5,000 a month is a guideline to gauge whether you are required to register.

One Monthly GST Registration

Returns are filed monthly and this option is available to all GST-registered persons.

Businesses whose taxable supplies are worth over $24 million are required to use this option.

Two Monthly GST Registration

Returns are filed on a two-monthly basis and you can choose which month you want your period to end:

• Category A – periods end on the last day of January, March, May, July, September and November
• Category B – periods end on the last day of February, April, June, August, October and December

This option is allocated to you if you do not elect your own option.

Six Monthly GST Registration

You can only use this option if the total value of your taxable supplies in any 12 months is not likely to be more than $500,000.

PAYE Deductions

PAYE (pay as you earn) is the basic deduction made from an employees’ wages. It includes an ACC earners’ levy. PAYE deduction tables and an online calculator are tools to help calculate the amount to deduct.

Student Loan Deductions

You must make student loan repayment deductions for employees using a primary (main) tax code, when they earn above the pay period repayment threshold. If they are using a secondary tax code you must make student loan repayment deductions from all of their secondary earnings. You can also be asked to make voluntary or compulsory extra deductions.

Child Support Deductions

As an employer, you may need to make child support deductions from an employee’s pay. If so, we will send you notice of the amount to deduct.

Superannuation Contributions

Employer superannuation contributions (formerly specified superannuation contributions) are made by an employer for an employee’s benefit. They are subject to tax (ESCT, formerly SSCWT) which may be deducted at one of three different rates. Employer superannuation contributions are different to any deductions that an employee asks an employer to make from their wages to a superannuation scheme.

Kiwisaver

From 1 July 2007 employers must deduct employees’ KiwiSaver contributions from their before-tax pay using the PAYE system. All employers must make KiwiSaver available to new staff, unless the employer qualifies for an exemption from automatic enrolment.

Tax Credits for Payroll donations

Tax credits for payroll donations are calculated for each employee who makes a donation using payroll giving. The amount of the tax credit is 33 1/3 cents for each dollar donation. This is reflected in the reduced PAYE payable.

There is always a lot of confusion around drawings versus salaries. Who wins is essentially based on your resective situation.

Essentially there are three options.

1) The company pays a PAYE salary/wage to the working shareholder/s.

The advantages are

1. a) Covered for ACC based on salary and no ACC complications
2. b) Personal tax paid as you go so no nasty surprises
3. c) You would normally pay a working shareholder $38,000 or more to take advantage of the lower 18.89%(incl ACC) tax rate.
4. d) Companies have to be able to justify what they pay shareholders. ie can’t work 1 hour per month and get paid $38,000, its not realistic or a fair market rate.

This is always a preferred option, even if the salary is low to start with to allow for uncertain profitability of the company. You can also increase it later in the year.

2) Keep the profits in the company and it will pay 28% …. at the moment.

If the shareholder has previously loaned in money, then the company can repay this debt and the shareholder won’t have to pay tax. If the shareholder current account becomes overdrawn then the company must charge the shareholder interest at the FBT rate. This interest income will be taxable to the company but non deductible to the individual. The retained profits would normally be passed to the shareholders as tax paid dividends with 28 cents imputation credits. A Dividend Withholding Tax will need to be paid at the time of dividend declaration. If the shareholder is a Trust, then the tax should be fully paid.

Whilst this pay seem like the best option – you need to be also aware of the 80% income attribution rules that underpin how the income is to be transferred.

3) Shareholder to take drawings throughout the year and then after the year end accounts are finished allocate the shareholder a shareholder salary.

(NOTE – not a directors salary as this must have PAYE deducted)

For FBT and tax purposes the salary is credited on the first day of the income year. So Joe bloggs takes $1,000 per week in drawings, so $52,000. His opening current account is $0. At the end of the year Joe decides to allocate himself a $60,000 shareholder salary. So there will be no interest charged on an overdrawn current account as it starts with the $60,000 salary and is slowly reduced to $8,000 at the end of the year. Joe would then have to pay personal tax on the $60,000 and most likely be liable for provisional tax (rental losses etc could change this).

A common problem with this is one year you may only allocate $30,000, then the next year you allocate $60,000. This results in a large tax bill due 7/4/2019 (for 31/3/2018 year) as the provisional tax would have been paid based on $30,000 and most likely a big provisional tax bill due on the 7/3/2019 as the next years provisional tax will be based on the $60,000.

In any case – talk to us so that we can advise what the best option might be for you based on your particular situation.

Persons engaged in business have a choice as to how they will establish their business. Options include carrying on business as a sole trader, in partnership or as a company. A company is essentially a mechanism to create a separate legal entity to carry on business.

Every company has certain basic elements:

• a name which has been reserved by the Registrar of Companies
• at least one share, one shareholder and one director
• addresses for the registered office and for service (the Registrar also requests an address for communication)

A company may have limited (most common) or unlimited liability – refer to the section below headed Why Form a Company for more information about these liability types.

A company comes into existence after it is incorporated under the Companies Act 1993. Once incorporated it is recognised in law as an independent legal entity (a Body Corporate). This means it is treated as being a separate “person” from its directors and shareholders. It can therefore do many of the same things as a natural person – e.g. hold property in its own name, enter contracts, sue and be sued, etc.

Why form a company?

There are a number of reasons why people choose to incorporate a company rather than one of the other business types.

Limited Liability – The primary reason is the protection that limited liability affords to shareholders. All companies are limited liability companies unless the particular company’s constitution provides otherwise (Note: this is very rare). Although it is common to speak of a “limited liability company”, it is in fact the liability of the shareholders that is limited. The company is liable in full for all obligations that it incurs.

This concept of limited liability becomes important if the company is unable to pay its debts, and a liquidator is appointed. Shareholders of a limited liability company are not liable for the business debts of the company (subject to any personal guarantees given) – they are only liable (to the liquidator) for any unpaid money owing on their shares. If they have fully paid for their shares prior to the company being placed in liquidation, they will have no further liability to the company’s creditors.

By contrast a sole trader, or a person trading in partnership, will be personally liable for business debts that cannot be met by business funds.

Some other reasons for incorporating a company include:

• Continuity of existence – a company will continue until it is removed from the register. It can often survive many changes in ownership or management. With a partnership, the retirement or death of a partner usually brings that partnership to an end.
• Transferability of shares – shareholders may sell or otherwise dispose of their shares at any time (subject to any restriction imposed in the company’s constitution). A partnership interest, on the other hand, is generally not able to be assigned or transferred.
• Control by shareholders – if the shares held by a shareholder are voting shares, that shareholder may participate in the election and removal of directors. Accordingly, shareholders, with their collective right to elect the directors, have the ultimate control of the company without being concerned in its day-to-day affairs.

Annual Meeting

Every company must hold an annual meeting of shareholders once in each calendar year. Generally the meeting must be no later than 6 months after the company’s balance date and no later than 15 months after the previous annual meeting.

A company does not have to hold its first annual meeting in the calendar year of its incorporation, but must hold that meeting within 18 months of incorporating.

Annual Return

All companies are required to file an annual return in a designated month.

A company is not required to file an annual return in the calendar year of its incorporation (i.e. a company incorporated in 2016 will file its first annual return in 2017).

Company Names

The Registrar of Companies is responsible for the approval and reservation of company names.

A New Zealand company (or an overseas company intending to carry on business in New Zealand) cannot be registered under a name unless that name has been approved and reserved by the Registrar (Sections 20 and 333(1) Companies Act 1993

A company may choose to change its name. It must first apply to the Registrar of Companies to reserve the name it has chosen. After the company has been notified that the new name has been reserved, the director(s) must pass a resolution to change the name and then notify the Registrar of the change. There is a $10 fee for reserving a company name online ($25 if you apply using a paper form) but there is no fee for changing a company name.

Registration of a company name only provides limited name protection – that is, it will prevent another company being incorporated under an identical or almost identical name.

Company Addresses

Every company must have a registered office and address for service in New Zealand.

The registered office and address for service need not be at the company’s place of business, nor in the same place. However they must be at a physical location not a postal centre or document exchange. The Registrar also seeks an address for communication. This can be a postal address and for online applications the applicant for incorporation must supply an email address. These addresses are first notified to the Registrar on the application for incorporation.

If a company wishes to change its registered office or address for service, the change, and the date upon which it is to take effect, must be notified to the Registrar. The notice must be registered at least 5 working days before the change takes effect and changes can be notified either online using the company key or by using a paper form.

Directors and Shareholders

It is very important to recognise the distinction between shareholders and directors.

Shareholders are investors in the company. They pay money into the company in return for shares. The amount shareholders pay for shares is determined by agreement with the company. They do not participate in the management of the company, other than by voting on the appointment and removal of directors.

Directors are responsible for managing the company’s day-to-day business. In doing so, directors owe duties to the company, to its shareholders, and to others dealing with the company. Directors must act honestly in what they believe to be the best interests of the company and with such care as may reasonably be expected of them in all the circumstances.

Directors must not carry on the business in a manner likely to create a substantial risk of serious loss to the company’s creditors (so-called “reckless trading”).

A person cannot be a director of a company if he/she is:

• under 18 years of age; or
• an undischarged bankrupt; or
• prohibited from directing/promoting/participating in the management of a company under any statutory provisions; or
• subject to a property order made under sections 30 or 31 of the Protection of Personal and Property Rights Act 1988; or
• not qualified pursuant to the constitution of a particular company.

Any changes in the director(s) of a company or information relating to the director(s) must be notified to the Registrar and can be notified either online using the company key or by using a paper form.

New director appointments or resignations must be notified within 20 working days of an appointment being made or a resignation taking effect. The other changes (e.g. new director’s address) must be notified within 20 working days of the company first becoming aware of the change or event. It is an offence under the Companies Act if these requirements are not complied with (Section 159).

A new director must consent to act as a director and certify that he or she is not disqualified from being appointed or holding office as a director.

Issue of Shares

After incorporation a company must issue to any person named in the application as a shareholder, the number of shares that the application says the shareholder will receive. After the first issue of shares, the board of a company may issue shares at any time, to any person, and in any quantity it sees fit. This power is subject to the provisions of the Companies Act 1993 and any provisions in a company’s constitution that may modify its right to issue shares. The Registrar must receive notice of the share issue either online, using the company key, or on a paper form filed with the Companies Office within 10 working days of the issue.

Distributions to Shareholders

The board of a company may authorise a distribution by the company at any time, and of any amount, and to any shareholders it sees fit. But before doing so it must:

• be satisfied that the company will be able to satisfy the solvency test immediately after the distribution; and
• ensure that it does not breach section 53 of the Act, or any provision in its constitution relating to distributions.

Directors who vote in favour of a distribution must sign a certificate stating that the company can satisfy the solvency test and give the grounds for that opinion. A company satisfies the solvency test if:

• it is able to pay its debts as they become due in the normal course of business; and
• the value of the company’s assets is greater than the value of its liabilities including contingent liabilities.

Books and Registers

The Companies Act 1993 requires every company to keep and maintain certain records:

• Company records [described in section 189]
• Share register [described in section 87]
• Accounting records [described in section 194]
• These requirements are described in detail below.

1 . Company Records

[Section 189 Companies Act 1993]

A company must keep a variety of documents at its registered office including the constitution (if it has one), minutes of shareholders and directors meetings, financial statements and accounting records and the share register.

Note: The records may be kept at another location in New Zealand provided that location is notified to the Registrar with 10 working days advance notice of the change.

2 . Share Register

[Sections 87-94 Companies Act 1993]

A company must maintain a share register that records the shares issued by the company and states:

• whether there are any restrictions or limitations on their transfer; and
• where any document that contains the restrictions or limitations may be inspected.

The share register must also record an alphabetical list of the:

• name(s)
• last known address, and
• number of shares held for each shareholder (Note: includes both current shareholders and those who have been shareholders within the last 10 years).

The register must also show the date of share issues, repurchases or redemptions and share transfers.

An agent (such as a professional share registry) may maintain the share register of any company.

Subject to a company’s constitution, a share register may be divided into 2 or more registers and kept in different locations. A notice of the location of each register must be delivered to the Registrar within 10 working days after the share register is divided. The share register, if undivided, is the company’s principal register and must be kept at its registered office. If divided, the share registers may be kept elsewhere.

3 . Accounting Records and Appointment of Auditors

[Sections 194 and 196 Companies Act 1993]

Every company must prepare financial statements annually. These must be audited unless all shareholders in the company agree otherwise (Auditor Resolution). If an auditor is to be appointed, the appointment is made at each annual meeting. There are some companies that must always appoint an auditor (ie. those that are required to file financial statements under the Financial Reporting Act 1993).

The board of a company must ensure that the company keeps accounting records. These records must:

• Correctly record and explain the company’s transactions;
• At any time enable the financial position of the company to be determined with reasonable accuracy;
• Enable the directors to ensure that the company’s financial statements comply with the Financial Reporting Act 1993; and
• Enable the company’s financial statements to be readily and properly audited.

Financial Reporting Act 1993

You do not need to register any financial documents with the Companies Office each year unless your company:

1. Is an Issuer (e.g. has issued securities to the public, which includes raising money from the public, seeking public investment or seeking public participation in a project, all through a registered prospectus);
2. Is an overseas company that is incorporated outside New Zealand and carries on business in New Zealand;
3. Is a subsidiary of a company or body corporate incorporated outside New Zealand;
4. Is a “large” company that has between 25% and 50% of its shares (i.e. below the level qualifying the company as a subsidiary under 3 above) held or controlled by:

• a company or body corporate incorporated outside New Zealand or a subsidiary of such company or body corporate; or
• an individual (individuals) not “ordinarily resident” in New Zealand.

If your company is caught by either 4a or 4b, the “large” test is applied. A “large” company is defined as having at least two of the following three characteristics:

• It, and any subsidiaries, have assets at balance date stated in the (consolidated) statement of financial position exceeding $NZ10M;
• It, and any subsidiaries, in the relevant accounting period had a total turnover exceeding $NZ20M; or
• It, and any subsidiaries, had at balance date fifty or more full time employees.

Companies and other entities that fall into any of these categories must file a full set of financial statements with the Registrar along with the filing fee of $250.00. An additional late filing fee of $100 applies if the financial statements are filed out of time (i.e. later than 5 months and 20 working days after the balance date).

Security Interests

Historically companies were required to maintain a register of charges. This provision was removed with the introduction of the Personal Property Securities Act 1999 – although it would be considered good practice for companies to maintain details of their security interests.

Security interests over personal property (e.g. secured loans, leases or hire purchases) can be registered and searched on the Personal Property Securities Register (PPSR) ww.ppsr.govt.nz.

Adopt, Alter or Revoke a Constitution

The shareholders of a company without a constitution may adopt one by special resolution. Shareholders may also alter or revoke a constitution by special resolution. The board of a company must ensure that notice of an adoption, alteration or revocation is filed with the Registrar within 10 working days of the event taking place. There is no fee to adopt, alter or revoke a constitution.

A quick overview on the 3 common types of business structures in New Zealand.

Sole trader

A sole trader is a person trading on their own. The sole trader:

• controls, manages and owns the business
• is personally entitled to all profits
• is personally liable for all business taxes and debts.

As a sole trader you can usually begin the business without following any formal or legal processes to establish it. You may employ other people to help run the business.

Partnerships

In a partnership, two or more people run a business together. Each partner:

• shares responsibility for running the business
• shares in any profit or loss equally, unless the partnership agreement states otherwise
• is liable for any debt within the partnership.

Many partnerships are established with a formal partnership agreement.

Income tax

The partnership itself does not pay income tax. Instead it distributes the partnership income to the partners. The partners then pay tax on their own share.

Income, tax credits, rebates, gains, expenditure or losses allocated to a partner in an income year will generally be allocated in proportion to each partner’s share in the partnership’s income under the partnership agreement.

Limited partnerships

A limited partnership exists as a formal and legal entity in its own right. It is separate from its partners.

Companies

A company exists as a formal and legal entity in its own right. It is separate from its shareholder(s) or owner(s).

Assets and liabilities

The company:

• owns the assets and liabilities of the business
• is responsible for any debts.

The shareholders’ liability for losses is limited to their share of ownership of the company.

• Following this review, the bill introduces new rules to ensure that the fit-out of commercial and industrial buildings will continue to be depreciable.
• Budget 2010 also removed depreciation loading for assets purchased after 20 May 2010. The bill makes technical changes to these rules to ensure that depreciation loading still applies to assets where investment decisions were made before 20 May 2010 but not completed until sometime after.

Commercial fit-outs depreciable

• The law will be clarified so that commercial and industrial fit-out remains depreciable property.
• The law relating to residential fit-outs will remain unchanged. Residential fit-out is generally non-depreciable as set out in the Commissioner of Inland Revenue’s Interpretation Statement IS10/01.
• Items of fit-out that are shared between commercial and residential purposes – for example, lifts, electrical cabling, fire protection, sewerage and water reticulation in a mixed-purpose building will be depreciable if the dominant purpose of the building is commercial. Fit-out used only for commercial purposes will be depreciable property.
• The new rules recognise that there are commercial buildings that provide residential-type accommodation by excluding a number of these types of buildings from the meaning of “dwelling”. This will ensure that fit-outs associated with these buildings will continue to be depreciable. The types of buildings that will be specifically excluded from the meaning of “dwelling” are:A new rule will allow commercial building owners, who did not itemise building fit-out separately from the building at the time of acquisition, to amortise up to 15% of the building’s adjusted tax book value at 2% straight-line per year until the building is disposed of.

• hospitals;
• hotels, motels, inns, hostels, or boarding houses;
• certain serviced apartments;
• convalescent homes, nursing homes, or hospices;
• rest homes or retirement villages, from hospital care through to residential care facilities; and
• camping grounds.

Depreciation loading

Depreciation loading was removed on a prospective basis as part of Budget 2010. Loading continues to apply in respect of assets purchased or constructed before 20 May 2010 or when there was a commitment to purchase or construct an asset on or before 20 May 2010. While the existing legislation that gave effect to this grandparenting worked in most situations, its result was unclear in others.

• Under the new rules an asset will be eligible for depreciation loading if:The first part of this rule will cover assets that were clearly purchased on or before 20 May 2010. The second part will cover situations when there was a clear commitment to purchase an asset, but when the purchasing process was incomplete or, for an asset under construction, when the asset was not yet built.

• it is acquired on or before 20 May 2010; or
• there was a decision to purchase or construct it and its owner either: – entered into a binding contract for its purchase or construction on or before 20 May 2010; or – incurred expenditure in relation to it on or before 20 May 2010.

• Evidence of a decision to purchase or construct an asset can be provided through documents that conclusively show such a decision had been made. Alternatively, a decision can be evidenced through a statutory declaration sent to the Commissioner of Inland Revenue that states that a decision had been made.