Words by Christopher Niesche

New Zealand governments will soon be able to quickly respond to significant emergencies with a range of tax relief options, providing certainty for businesses and allowing accountants to more effectively advise their clients.

The passage through parliament of the Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Bill – known as the August Tax Bill – will allow the government of the day to select from a list of tax measures in response to a flood, earthquake or other emergency.

A long-term plan

Under the current rules, most emergency tax relief measures have to be passed by parliament, which typically takes six months or more. It means affected businesses and their accountants not only have to wait for the tax relief but can’t be sure if parliament will pass it into law (including what the finer details may look like) and so are unable to plan.

“Taxpayers and employers want certainty that what they’re doing is not going to have adverse tax consequences,” says John Cuthbertson FCA, CA ANZ New Zealand’s tax and financial services leader.

Examples include flood and cyclones where employees have lost everything, and employers want to know if providing them with food or clothes will incur fringe benefits tax. Or if they’ve made a one-off contribution to help their employees get accommodation, whether the payment will be subject to PAYE income tax.

Business owners who can’t access their premises and operate the business want to know if they can continue to claim business expenses. Others who have lost access to the internet and can’t pay their taxes online want to know if they will be able to get a deferral.

“Rather than having a sort of a knee-jerk reaction to this and rolling out a few measures each time based on historical stuff and then tweaking it, everyone thought it would be a far better idea to actually have a permanent suite of these measures,” Cuthbertson says.

Proposed emergency measures

There are multiple advantages to this approach. The measures can be developed and properly consulted on, without the pressures of an actual emergency event. Then, when an emergency takes place, the government of the day can cherrypick the measures relevant to the event and enable them in relatively short order, enhancing business and taxpayer certainty.

These measures include taxation rollover relief for revenue account property and depreciable property, and for amortisable land improvements; capped employer payments and fringe benefits, extended tax-free accommodation period; and income spreading provisions for forced livestock sales.

If, for instance, a flood or fire occurred in a rural area and a farmer had to sell off their stock because they couldn’t hold it on their land, perhaps due to lack of feed, they would be able to defer the tax owing on the sale. And, if they received an insurance payout because their stock had been destroyed, they could also defer tax owing.

The extra money still in the farmer’s pocket would help them restock and get back on their feet.

What the August Tax Bill means for CAs

The new regime will help accountants in multiple ways, Cuthbertson says. Firstly, if their own business has been affected by an emergency event, then the practice could claim the relevant tax relief on its own behalf.

Secondly, it will assist accountants in helping their affected clients. If the accounting practice can defer their client’s filing on tax returns and not be charged use-of-money interest, it gives accountants time to come up for air and assist their clients with their immediate needs following an emergency.

The removal of the uncertainty over whether an emergency measure will be passed or not (and to what extent relief will be provided) will also help.

“You’ll know pretty quickly, depending on the type of event it is, and once it gets declared, the likelihood of what sort of assistance will be there and so the advice to clients will be based on actual legislation, not something by way of media release that says this might happen,” Cuthbertson says.

Accountants can reach out to clients and let them know the assistance that will be available when they turn their minds to their finances.

The second part of the initiative would allow Inland Revenue to share sensitive information with other agencies to assist in delivering assistance in an emergency, provided certain safeguards are met. This information-sharing power would be activated by Order in Council. The proposal would take effect from 1 April 2025.