NZ Tax Changes 2020 - Tax write off threshold increased
The threshold under which New Zealanders' tax debt is written off has been extended, which would mean relief for about 149,000 taxpayers.
In response to the current economic downturn, the NZ Government has legislated for a temporary increase to the write-off threshold for tax to pay, from $50 to $200.
This applies for the 2019-2020 income tax year only and is available for individuals whose end of year tax liability is calculated by Inland Revenue’s automatic system.
The Government is moving to ease financial stress for around 149,000 taxpayers by changing the rules around write-offs for tax debt. This means that fewer people will have tax bills to pay this year.
Inland Revenue’s end of year automatic income tax calculation process for individuals is currently underway and is expected to run until early July. It is the annual wash up which results in people either having tax to pay or receiving a refund.
For the 2019-2020 income tax year, tax payable up to $200 will be written off. The usual threshold for writing off tax is $50. Increasing the write-off threshold will reduce tax bills for approximately 149,000 taxpayers. Writing off those amounts of tax may not seem huge to everyone, but it can be significant for someone experiencing financial stress.
In the 2018/19 year for example, around half of those who had a tax bill up to $200 were earning less than $60,000 a year. This can help a lot of people as we move into the economic recovery phase.
The auto-calculation process has meant that people have already started receiving refunds. As at 10 June, there have been 2.3 million assessments carried out resulting in $586 million in tax refunds and $118 million in tax bills to pay.
Once the process is complete, IRD expects to issue refunds in excess of $650 million as part of individual income tax assessment process.
This change was announced last week but legislation is still required to amend the returns for the 2019/20 tax year. For following tax years, the threshold will revert to the $50 limit.
The auto-calc process applies to people whose income is only salary, wages, interest or dividends, not those who use the IR3 tax return.
Source: Tax Policy - IRD