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How April 1 2024 Tax Changes could impact your Business



The new 2024 financial year has begun, and with it comes a whole heap of tax changes. Get our break down for small business owners.



Interest deductibility returns for landlords

The first stage of bringing back mortgage interest deductibility on residential investment properties kicked in on April 1.


If you are a landlord, you can claim 80% of your interest expenses this 2024 financial year. You can then claim 100% of those costs from April 2025.


The previous government had removed interest deductibility, but bringing it back was part of National’s coalition agreement with ACT.

 

Road user charges for EVs and hybrids

People who drive light electric vehicles and plug-in hybrids are no longer exempt from paying road user charges (RUC) from April 1.


Owners of light EVs will have to pay $76 per 1000km.


Drivers of plug-in petrol hybrid vehicles will pay $38 per 1000km (down from the original proposed rate of $53). This reduced rate is because hybrids also use petrol, which currently includes a fuel excise.

 

Trustee Tax Rate Increase

The previous government had planned to raise the trustee tax rate from 33% to 39% from April 1.


This was to bring it in line with the top personal tax rate and stop people from using trusts to pay less tax.


However, a $10,000 trustee income threshold has since been proposed. This would mean trusts with no more than $10,000 of trustee income would still be taxed at the lower rate of 33%.


Trusts with income of more than $10,000 would be taxed at the new, higher rate. This change will only impact Trusts that earn income. If a Trust has no income, then there is no income to tax. The majority of Trusts in New Zealand do not earn income (eg: many Trusts only own a passive asset, such as a house).


The bill proposing those changes had its third reading in Parliament last week.

 


Commercial Building Depreciation

From 1 April 2024, commercial buildings will again no longer be eligible for depreciation on the building component. The reinstatement of building depreciation was a short lived measure during Covid that both major political parties campaigned on removing.

 

It is important to note that buildings will remain depreciable property, but they will have a depreciation rate of 0%.


With the removal of depreciation there will be a reinstatement of the old “notional fit-out” regime introduced the last time building depreciation was removed. This allows buildings acquired in or before the 2010-11 income years to deem a portion of the building’s adjusted tax value as fit-out that can still be depreciated.


There is a calculation that considers the intervening periods when depreciation was allowed.

 

Got questions?

There are a lot of technical tax calculations that need to happen with these changes, but this is what we are here for!


If you have read any of this and have questions about your situation, please get in touch.




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