Working for families - tax credits income net widened
Paul Martin • November 6, 2013
A reminder, you are no longer able to use investment losses such as from rental properties to reduce your income for working for families (WFF) tax credit.
The definition of income now also includes an extra nine types of income:
- Attributable trustee income
- Attributable fringe benefits
- PIE income other than registered superannuation schemes such as Kiwisaver and retirement benefit schemes
- Passive income earned by children (includes interest, dividends and rent). Amounts over $500 per child will be included as family income
- Worldwide income received by a non-resident spouse
- Tax exempt salary or wages under specific international agreements
- Income equalisation deposits made by you, your trust or a company controlled by you or your trust
- Certain pension and annuities - includes 50% of payments from life insurance policies or a superannuation fund (excludes NZ super)
- Other payments received from any sources that are used for your family's day-to-day living expenses (but only if the total amount from those sources is more than $5,000). An example of this might be board received.
In future, when you apply for WFF tax credits, you'll need to let IRD know about amounts from any of the above sources.
For those clients who receive or are entitled to WFF credits, when we prepare your tax return we'll need to request the above information.
This time of year can be hard on small business. Your expenses continue and your cashflow can suffer when your debtors go on holiday.
Inflation may be down but there’s still real uncertainty for business owners.
How the new Government and coalition agreements might affect owners of residential rental properties
There were some key takeouts of interest to many of our clients from the recently signed coalition agreements between National, ACT and New Zealand First and the formation of the new Government. In particular there are a number of policies which will likely benefit landlord clients who own residential rentals. I have summarised some of these below. 1. Return of Interest deductibility for residential rental properties Interest deductibility for residential rental property owners will return. It will be phased back in over three tax years: • 2023/24 tax year: 60% of interest cost will be deductible. • 2024/25 tax year: 80% of interest cost will be deductible. • 2025/26 tax year: 100% of interest cost will be deductible. 2. Reduction in bright-line period National signalled in their pre-election campaign that the bright-line period for residential rental property sales would reduce from 10-years to 2-years. While the exact implementation of this policy is not yet known, it is good news on the horizon for residential property investors. 3. Reinstatement of 90-day no-cause termination notices The new government will reinstate 90-day no-cause tenancy termination notices. This will avoid many unnecessary disputes in the Tenancy Tribunal and gives landlords more confidence in letting to possibly “marginal tenants". Many landlords have avoided what they considered to be risky tenants because eviction for anti-social behaviour was so difficult. With this reinstatement, landlords might be more inclined to give a marginal tenant a chance because they know that if the tenant misbehaves, they won’t be stuck with them. If you would like more information on how these changes might affect your personal circumstances, please feel free to contact us to discuss further.
