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Law changes for overseas investment in Kiwi businesses

If you are a New Zealand business seeking overseas investment, there are new requirements you’ll need to follow. Find out about the changes and what you need to do.

When: From16 June 2020

What: Changes have been made to rules that impact New Zealand businesses looking for overseas investment. The changes include:

  • a new requirement to notify the Overseas Investment Office (OIO) about overseas investments, and
  • a new national interest test that will apply to some investment transactions.

OIO will need to be notified about all overseas investments that will result in:

  • more than 25% of a New Zealand business or its assets being owned by investors outside of New Zealand, or
  • an increase to an existing holding beyond 50, 70 or to 100%.

A new national interest assessment will apply in rare circumstances to evaluate whether an overseas investment in sensitive and high-risk assets are in New Zealand’s national interests.  

Changes also mean the application process for lower-risk investment transactions is simplified, and some transactions will no longer need consent.

Changes to the Overseas Investment Act (external link) — Overseas Investment Office

Who: New Zealand businesses seeking overseas investment.

Why: Overseas investment can support New Zealand’s COVID-19 economic recovery, so that businesses can continue to grow and evolve, and keep more New Zealanders in jobs. The right checks and balances are needed to protect businesses that are important to New Zealand’s national security, economy, and communities.

What you need to do: If you are seeking overseas investment, be aware of the changes to when the OIO needs to be notified, and that a new national interest assessment might apply to overseas investors wanting to invest in your business.

Businesses seeking investment should get advice from their advisors, for example a lawyer or accountant.

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Paid parental leave is changing

Paid parental leave is extending from 22 to 26 weeks from 1 July 2020. Here’s what you need to know.

When: 1 July 2020

What: Paid parental leave will increase from 22 to 26 weeks. You are already required to provide job-protected parental leave to eligible employees for a minimum of 26 weeks if the employee meets the 6-month employment test (who’ve worked for you for at least an average of 10 hours a week for six months or more). For employees who meet the 12-month employment test (who’ve worked for you for at least an average of 10 hours a week for 12 months or more), the period of parental leave you are required to provide is 52 weeks.

Parental leave

The ‘keeping in touch’ allowance is increasing to 64 hours. These hours allow an employee to work a limited amount of time during the paid parental leave period, without losing their entitlement for payments. This arrangement needs to be agreed to by you and your employee.

Why: To provide increased support for primary carers including working parents with newborns and families taking on the permanent care of children under the age of six.

What you’ll need to do: This change doesn’t require you to provide additional leave. Just be aware that eligible employees who take parental leave will be paid for 26 weeks and can arrange to work up to 64 hours of ‘keeping in touch’ allowance.

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Fewer people to face end of year tax bills

The Government is moving to ease financial stress for around 149,000 taxpayers by changing the rules around write-offs for tax debt.

“Fewer people will have tax bills to pay this year,” said Revenue Minister Stuart Nash.

“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. We’re doing everything we can to help households as we move into the economic recovery phase.

“The auto-calc 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, Inland Revenue expects to issue refunds in excess of $650 million as part of individual income tax assessment process.

“This change was agreed 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,” Mr Nash said.

The auto-calc process applies to people whose income is only salary, wages, interest or dividends, not those who use the IR 3 tax return.

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Inland Revenue warns of scams during tax refund process

Inland Revenue is warning customers to be wary of scammers during the 2020 tax refund season.

Between Mid-May and July, IR automatically processes and pays out tax refunds. It is also when scammers may try to scam you.

This year IR will send around 2.5 million automatically assessed tax refund notices during that time, using both customer’s myIR accounts and through the post. These will be sent out in daily batches, Monday to Friday, between mid-May and the end of July.

Scammers know this as well and target this time of the tax year to try to rip people off and gain access to bank accounts and other personal information.

Here’s what IR will and won’t do when we send out the tax assessment notices.

Inland Revenue absolutely will let people know if they have a refund by sending an income tax assessment.

We will only pay funds directly in to the bank account we have on record and we will ask people to log in to their myIR account from www.ird.govt.nz 

We will ask for bank account details if we don’t have them but importantly, we will always ask people to provide these in a secure way – using their myIR account or through our call centre. 

We will also give people until February next year to pay any bill.  A bill won’t have to be paid immediately.

Inland Revenue will never put a dollar amount of a refund in an e-mail or txt message and will not ask for your credit or debit card details in order to  pay a refund.  We will also never ask you to reply to an e-mail or txt message to provide your bank account details.

IR will also never speak to customers threateningly.

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Pay-as-you-earn provisional tax

New provisional tax option for small businesses

Small businesses that have turnover of less than $5 million a year can work out their provisional tax using the accounting income method (AIM).

AIM uses new functionality included in approved accounting software to work out payments. You can continue to use another provisional tax option if you think your business won’t suit AIM. It will suit your business if you have:

  • irregular or seasonal income
  • accounting software or want to start using accounting software.

Once you’ve opted in to AIM you’ll only pay provisional tax when your business makes a profit. This will help you to avoid cash flow problems.

As long as you make your payments in full and on time, there is no exposure to use-of-money interest. If your business makes a loss you can get your refund straightaway rather than waiting until the end of the year.

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Changes coming to property market

Changes coming to property market: Property Institute

Property Institute of New Zealand Chief Executive Ashley Church says the impact of the election on the New Zealand property market can already be largely predicted – even though the final make-up of the next Government could be weeks away.

Mr Church says that the role of NZ First as ‘King or Queen maker’ in coalition negotiations means that much of what is likely to happen is predictable because New Zealand First policy positions will feature whether National or Labour is ultimately chosen as a coalition partner.

“While the coalition talks are all about negotiating positions – Peters will have considerable leverage over both parties – so there are some bottom lines that we can reasonably expect to find their way into any final agreement”.

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