TAX TIDBITS
Issue Six, March 2006
In this months issue:
As of 1 April 2006, all borrowers who are resident in New Zealand for more than 183 days in a tax year will be entitled to a full interest write-off on their loans. This zero interest scheme was one of the election pledges made by the Labour government and will benefit approximately 400,000 New Zealanders that currently have a student loan. If you meet the 183 consecutive day eligibility criteria and/or exemption conditions, the write-off of all the interest charged from 1 April 2006 will be processed automatically after the end of each tax year ending 31 March. You will see the credited interest amount appear on your student loan statement of account you receive from Inland Revenue in April each year.
Also changing from 1 April 2006 are the entitlements for New Zealand families to receive assistance from the Inland Revenue. The changes were another election pledge from Labour to make it easier for people to work while raising a family. The changes to Family Assistance include higher income thresholds: for example, a family earning $60,000 per annum with 2 children is currently not entitled to any family assistance, however, from 1 April, they may now be entitled to $164 per fortnight.
Another change is the replacement of the Child Tax Credit with the new and higher paying in-work payment. To receive the in-work payment, couples must work 30 hours between them, and sole parents must work 230 hours per week. Qualifying families will receive up to $60 per week with three children and up to an extra $15 per week for each other child.
If you think you may qualify for family assistance then please contact your advisor at HWI or check out the calculators on www.workingforfamilies.govt.nz
Another 1 April 2006 change recently announced is how the IRD will be calculating tax for people who take in private boarders, including student homestays. There will now be two methods, the standard cost and the actual cost methods.
Standard Cost Method: This uses an average price index to set a threshold for whether you need to file a tax return and pay tax on income from boarders. If you have 1 or 2 boarders then the standard cost is $200 per week for each boarder. If you have 3 or 4 boarders then it is an additional $162 per week for each boarder over 2. If you have 5 boarders then you need to use the actual cost method and must file a tax return.
Example 1: If you have 2 boarders and they pay you $175 each per week then you do not need to pay tax on this income.
Example 2: If you have 3 boarders and they pay you $250 each per week then you may need to file a tax return and pay tax, depending on your circumstances.
Actual Cost Method: This method involves you keeping full records of income and expenses for the year and completing a tax return to declare any profit or loss.
Please call HWI if you are unsure of how these changes will affect you.
FREE Seminar: Technology in Business - How to systemise your business properly - Wednesday 8th March 2006 at 9am. Please email Mark at maldridge@hwi.co.nz for details or book online at www.hwi.co.nz
Disclaimer
Information contained within this document is of a general nature and does not constitute advice. Readers are cautioned not to act or reply on it without first seeking professional advice.
