Another tax year has now been completed and we are shortly about to begin finalising income tax returns for the 2024 tax year. As PIE income is now an integral part of any income tax return, Inland Revenue advice is not to process 2024 tax returns until after 15 May which is the final deadline for portfolio investment entities like Kiwisaver to provide them with 2024 income and tax deduction information.
There will be many changes coming up in the tax arena this year as the new coalition government implements it’s election policies. Initial announcements are that the bright-line test will be reduced after 1 July 2024 to a 2-year test, which means that properties purchased before 1 July 2022 will then not be subject to the bright-line test. Interest deductibility limitations on residential rentals will remain at 50% for the 2024 tax year, before rising to 80% for the 2025 tax year. A full interest deduction will be available for the 2026 tax year.
One area that will not be changing now is the ‘app tax’ which came into effect on 1 April 2024. This results in the platform providers (such as Uber and Airbnb) accounting for GST on services provided rather than individual drivers or accommodation owners. The rules allow for two supplies, the first from the local provider to the platform and the second from the platform to the public. If you are an individual driver or accommodation owner, please get in touch if you are unsure of how the app tax will affect you.
The income tax rate for trusts will change from 1 April 2024 to 39% for income over $10,000 per annum. This aligns the trust tax rate with the top rate applying to individuals and has encouraged interest in restructuring to reduce exposure to the new rate. Some scenarios have seen tax commentators wary that they could be seen as tax avoidance, and it would be important to ensure that there was no element of artificiality or contrivance.
There will be many changes in the tax system this year, with many potential issues arising. If you have any queries over tax or accounting issues, please get in touch with our office for further explanations.
