Earthquake tax relief measures announced

The Government has put in place several tax relief measures to help Christchurch residents and businesses trying to get back on their feet after last month’s earthquake, Finance Minister Bill English and Revenue Minister Peter Dunne announced today.

“With the end of the tax year rapidly approaching, businesses and employers in Christchurch and around New Zealand need some certainty about the tax issues arising from the Canterbury earthquakes,” Mr English said.

“These measures will make it easier for Christchurch businesses to comply with their tax obligations, recognising the disruption caused by the earthquakes,” he said.

The measures include:

• Providing an exemption so businesses do not have to pay tax or gift duty on trading stock they have donated within four months of either the September 4 or February 22 earthquakes.

• Making certain welfare contributions provided by employers tax free, within eight weeks of either earthquake.

• Extending the redundancy tax credit, which had been due to end on 31 March, to 30 September this year.

• Granting the Commissioner of Inland Revenue the discretion to extend statutory tax dates on a case or class-of-cases basis.

• Exempting certain payments made to families who receive Working for Families tax credits as a result of the earthquake from counting as income.

Mr Dunne said that normal tax rules had not been designed for disasters of the scale of the Canterbury earthquakes.

“Therefore the Government has recognised that they simply would not be fair for people in these extraordinary circumstances,” Mr Dunne said.

"It is important we provide both income tax and gift duty relief to businesses donating trading stock to help alleviate the impact of the earthquake.

“Without this exemption, businesses would be taxed on a deemed profit based on the market value of any donated goods,” he said.

To qualify, trading stock must meet certain criteria outlined on Inland Revenue’s policy website at www.taxpolicy.ird.govt.nz.

Mr Dunne said the move to give the Commissioner of Inland Revenue the discretion to extend statutory tax dates was consistent with the flexible approach the Government and Inland Revenue had already been taking after both Canterbury earthquakes.

“Many businesses are dealing with lost records and disrupted systems and this is being recognised,” he said.

Mr English said the definition of income for Working for Families was being broadened from 1 April to include cash gifts, payments of expenses and certain other payments.

“Cabinet has agreed this should not apply to the support given to people adversely affected by the Canterbury earthquakes.”

The Commissioner of Inland Revenue would have the discretion to exclude such payments from counting as Working for Families income for up to a year.

Mr Dunne said he expected most of the legislation for these decisions to be enacted in early May.

“The Government’s objective is to get earthquake-stricken residents and businesses back on their feet and today’s decision will help and reflects a need for common sense, flexibility and pragmatism,” he said.

Announcements would be made in due course on depreciation recovery and the Government would consider other issues as they arose.

Detailed information on the changes is contained in fact sheets on the Inland Revenue Department’s policy website at www.taxpolicy.ird.govt.nz.