April 2024 - Bay of Plenty Business News

8 BAY OF PLENTY BUSINESS NEWS April 2024
Tax changes taking
effect this month
March was a busy month
on the tax development
front, where we finally
got the detail of some important
property related changes, plus
some other bonus changes that
were introduced at the last minute
before the legislation was
passed. Some of these will impact
forecast tax payments for the current
tax year, others may impact
decisions around buying or selling
property, and we look at the
key changes below.
Removal of
commercial building
depreciation
As expected, the ability to claim
tax depreciation on commercial
buildings has been removed with
effect from the start of the 2024-
2025 tax year. For businesses with
a March balance date, this will be
from 1 April 2024, but for December
balance dates for example it
applies from 1 January 2024.
There are some exceptions
to the rule for buildings that are
expected to have a useful life (in
Inland Revenue’s eyes) of less
than 50 years – this includes
things like coolstores and farm
buildings for example.
Fitout of commercial buildings
also remains depreciable provided
these items are separated
out from the building structure
cost.
If you have not separately
depreciated fitout of commercial
buildings acquired since 2020 it
will be possible to request that a
portion of the total cost be allocated
to fitout and amend the relevant
tax returns, provided the
market value of the fitout can be
established.
Interest deductibility
for residential
investment property
restored
Interest payments on mortgages
for residential investment property
will be phased back in,
although not as quickly as the
National Party had campaigned
on. From 1 April 2024 80% of
interest will be deductible, with
interest being fully deductible
TAXATION
BY ANDREA SCATCHARD
from 1 April 2025 onwards. The
exception to this is for new builds
where interest remains 100%
deductible in all years.
Bright-line test back
down to two years
As campaigned for by the National
Party, the ten-year bright line test
for residential property will be
reduced to two years. This will
apply from 1 July 2024, meaning
that properties bought before 1
July 2022 will not be subject to the
bright line rules if a conditional
agreement for sale is entered into
on or after 1 July this year.
There are also some taxpayer
favourable changes to the way
the main home exemption operates
(to revert back to looking at
the predominant use of the property)
and the extension of rollover
relief for transfers between
associated persons.
Changes to the
tax treatment of
disposals of trading
stock at below market
value
In response to perceived over-taxation,
the rule that treats trading
stock disposed of for less than
market value to be deemed as
having been sold at market value
has been removed for donations
of trading stock to charities and
for other disposals in the course
of business (such as for marketing
purposes).
The market value rule could
still apply though where trading
stock is donated to entities that
are not charitable (this could
include individuals and non-profits
that either can’t or haven’t registered
as charities), unless there
is some benefit to the business
that is donating the stock.
Trustee tax rate de
minimis threshold
The trust tax rate rose to 39%
from 1 April 2024 (or the equivalent
start to the 2025 tax year),
but a last-minute change to the
legislation allows the 33% rate to
continue to apply to trusts with
trustee income up to and including
$10,000 (after deductible
expenses).
This lower rate is also extended
to certain types of trusts, regardless
of income level, such as
disabled beneficiary trusts and
deceased estates.
If you would like help understanding
how these changes
affect you, please contact a tax
professional.
Andrea Scatchard is a Tax Partner
at Deloitte, based in the Bay of
Plenty. She can be contacted on
ascatchard@deloitte.co.nz
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A Kiwifruit and Water Storage Development
project in Raukokore and Waihau
Bay continues to cultivate more economic
development and employment opportunities
with the most recent development
being a further eight hectares of land developed
in Waihau Bay.
The project, which began with funding
sought by Te Whānau a Maruhaeremuri
Hapū trust, included two linked projects,
the Raukokore/ Waihau Bay community
irrigation scheme and the development of
an initial kiwifruit orchard which would
be irrigated by the Raukokore/ Waihau Bay
irrigation scheme.
The long-term strategy for the kiwifruit
orchard development project was to see
200 hectares of low-returning Māori-owned
land with high horticultural potential,
located across multiple Māori land blocks
in Raukokore and Waihau Bay, developed
into kiwifruit orchards. The 30-year partnership
with local iwi would see these
orchards provide sustainable, permanent
employment opportunities and economic
growth for the area, with revenue generated
from the high-value crops packing at
SEEKA.
The initial orchard, Wai o kaha, saw
many local trusts and investors coming
together to lend both land and $5,200,200
of funding towards the project. 40 hectares
of kiwifruit were planted across five
orchards, Tawaroa, Otaimina, Raekahu,
Toopu and Orete. Produce company and
local employer, SEEKA is investing in the
Wai o kaha project and is also the orchard
developer, which sees SEEKA planting the
vines, running the orchard, and hiring local
employees, which in turn provides benefits
to the local community. The development
project began in late 2020 with Tawaroa
and Orete orchards followed by Otaimina
orchard in 2021 and Raekahu and Toopu
orchards in 2022.
Seeka also provided a share of the funding
for the Ngutupiri development, where a
further 12 hectares of land was developed
for kiwifruit in Te Kaha with the plants
coming from a local Te Kaha nursery.
The most recent joint venture between
local landowners, investors and Seeka
has seen the monetary investment of
$2,100,400 provided for the Waihau Bay
project. Seeka, who provided $1,050,000
toward the project, is also running the
development from the ground up, with the
produce company preparing the land with
structures and shelters installed, ready to
plant kiwifruit this winter.