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COVID-19 Resurgence Support Payment Order 

Using the right resident withholding tax rate

Source: CCH and Inland Revenue

Chris Lynch, Managing Director, Lynch & Associates Limited

Tatiana Gakhovich, Associate CA, Lynch & Associates Limited


New Zealand tax residents will have resident withholding tax (RWT) deducted from interest and dividends earned from New Zealand bank accounts and investments. The bank or fund manager will deduct the tax before it is paid to the taxpayer.

From 1 April 2021, a new top tax rate of 39% has been introduced for individuals who earn over $180,000 in a year. Payers of interest such as banks and other financial institutions have until 1 October 2021 to have this rate available for taxpayers to use.


Individuals

Individual taxpayers can choose a rate of 20.5%, 17.5%, 30% or 33%.

Electing the correct rate for the total income earned for the tax year ensures that the correct amount of tax is deducted from the interest. If the rate selected is too low, the individual may have a tax bill to pay at the end of the income year.

If an individual does not elect an RWT rate but has given the interest payer a valid IRD number, RWT should be deducted at 17.5% for existing accounts, or 33% for new accounts.

If an individual has not provided the interest payer with their IRD number, RWT must be deducted at the non-declaration rate of 45%.


Companies

Companies must notify their interest payers that they are a company.

A company can elect either the 28% or 33% RWT rate.

If a company does not choose an RWT rate, but they have notified the interest payer that they are a company and given the interest payer a valid IRD number, RWT is deducted at 28%.

If a company has not supplied their IRD number, RWT is deducted at the non-declaration rate of 45%.

Note: Companies that are trustees are not required to notify the interest payer of their company status and may use the 17.5%, 30% or 33% rate. If the trust is a testamentary trust, it may also elect the 10.5% rate if appropriate. Companies that are Māori authorities are not required to notify their company status and may choose 17.5%, 30% or 33%. This reflects the obligation on trustees to act according to the tax position of the trust’s beneficiaries.


All others

All other taxpayers can elect a rate of 17.5%, 30% or 33%. If they do not make a choice, but they have given the interest payer a valid IRD number, RWT is deducted at 17.5% for existing accounts, or 33% for new accounts. From 1 April 2020, the non-declaration rate increased to 45%. 

Investment income across joint accounts

Income reported for joint investments will be split equally between the account holders who have provided valid IRD numbers to their payer.


If they need to, they can change the split of income and set a rate for a future split to make sure the income is directed correctly in the future. They can change this allocation through myIR or by contacting Inland Revenue. Alternatively, they can amend this allocation when Inland Revenue completes their income tax assessment at the end of the year or when they file their income tax return.


If taxpayers have a joint account, they can only use one RWT rate. They will therefore need to decide which is the most appropriate rate. For example, if they both earn over $180,000, choosing the 39% rate will avoid an end-of-year tax bill. If one account holder earns over $48,000 and the other less than $48,000, choosing the 30% rate will avoid the higher earner having an end-of-year tax bill.

If a resident and a non-resident hold a joint a joint account, RWT must be deducted from all interest paid on the account. The non-resident may claim a refund by completing either an IR3NR tax return or a New Zealand non-resident withholding tax refund request — IR386 form. 

Dividend payments

The RWT rate for dividend payments is 33%. The company paying the dividend will deduct the RWT before making the dividend payment to the taxpayer.


Imputation credits

A New Zealand company or unit trust may attach “imputation credits” to dividends. These imputation credits represent income tax the company has already paid. These credits may offset the RWT that is deducted from the dividend paid to the taxpayer.


Source: Using the right resident withholding tax (RWT) rate, Inland Revenue website, 17 August 2021, accessed 25 August 2021. 

COVID-19 Resurgence Support Payment Order


The COVID-19 Resurgence Support Payments Scheme (August 2021) Order 2021 (LI 2021/222) came into force on 24 August 2021.

The Order activates the COVID-19 resurgence support payments scheme (the CRSP scheme) and sets out the criteria for determining who is eligible for a grant of money under the CRSP scheme.


The CRSP scheme is generally activated by the Government when the period of increased alert level is 7 days or longer, but this is not guaranteed. Once the resurgence support payment has been activated it is available nationally, even if the alert level is not increased across the whole country. Applications for the alert level increase announced by the Government on 17 August are now open.


A business or organisation must have experienced at least a 30% drop in revenue or a 30% decline in capital-raising ability over a 7-day period, due to the increased COVID-19 alert level. Once activated, any business in New Zealand that has experienced a 30% drop in revenue or capital raising ability over a 7-day period as a result of the alert level increase would be eligible (subject to all other criteria being met).


When the resurgence support payment is activated, eligible businesses and organisations can apply to receive the lesser of:

• $1,500 plus $400 per full-time equivalent (FTE) employee, up to a maximum of 50 FTEs, or

• 4 times (4x) the actual revenue decline experienced by the applicant.


The Government could decide to activate the resurgence payment scheme multiple times if there are multiple alert level increases from level 1. Businesses and organisations can apply for the resurgence support payment each time that it is activated as long as they meet the eligibility criteria. Applications for the resurgence support payment may be made through Inland Revenue website.


Source: COVID-19 Resurgence Support Payment Scheme (August 2021) Order 2021, Delegated legislation, Notice Number 2021-dl3534, New Zealand Gazette website, 23 August 2021, accessed 25 August 2021. 

Chris Lynch, CA, Managing Director

Lynch & Associates Limited

Email Chris Lynch

Tatiana Gakhovich, Associate CA

Lynch & Associates Limited

Email Tatiana Gakhovich

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