Articles by Matthew Gilligan
Firstly our hearts go out to those in Christchurch who have had to endure the earthquakes and aftershocks of recent times. Many of our staff have family in Christchurch and we have been hearing first hand the events of 22nd February and the flow-on effects from this major earthquake.
We at GRA want to do our bit as well. We are donating to 'Paw Justice' a charity that has organised a pet-food bank to donate essential supplies to the many affected animal shelters in Christchurch.
With Christchurch being the second largest city in New Zealand, we are aware that many of our clients are based in Christchurch, or have investments or business interests in Christchurch. Here at GRA we thought it would be useful if we can assist you with the brief guide below of financial matters that you may want to consider.
If you are a Christchurch resident and you have yet to file your income tax return, we have taken the liberty to inform the IRD that you will be late in filing this return.
Financial Guide To Quake Victims
Filing and Payments to IRD
If your business was damaged in the earthquake, it may be unrealistic to meet your filing and payments to the IRD for all the variety of taxes you may be set up to pay.
In these instances, we can contact the IRD on your behalf and let them know that you have been affected. Doing so will give the IRD the ability to use their discretion and reverse any interest and penalties that may be imposed.
Cashflow will be uncertain during these times and making tax payments may not be an option also. Let us know if this is the case and we can communicate this through to the IRD at the same time.
The IRD will want to know a timeframe for when payment can be made. In these early days following the earthquake, analysing your cashflow may be very difficult and as such a month or two would not be unrealistic. This will give you the breathing space to sort out your affairs.
All outcomes with the IRD will be on a case by case basis, as the IRD has the final discretion on whether to undertake such actions. Communicating with them early is likely to yield the best results.
If you are a provisional tax payer and your business is affected by the earthquake then it is likely your profits will suffer. The next provisional tax instalment is 7th May. If you receive a provisional tax advice letter from us during April and you are affected, please contact us and we can discuss options for modifying the amount that may need to be paid.
Cashflow Management and Bank Financing
Managing cashflow through a crisis is an art. If your business or investments have been severely affected, your financiers will want to know the effect on their positions. Engaging in communication with them will be critical to ensure a positive outcome. We can assist you with cashflow forecasting where required. We are also aware that many of the banks are offering repayment holidays for a period of time whilst you get yourself back on your feet.
If you own residential rental property or business assets and the insurance is used to repair these assets, you will be entitled to a deduction for the repair, but you will also include the amount of insurance compensation as income. The end result is that is there is no tax loss or profit from undertaking repairs. If you have excess insurance monies beyond the repairs, this will not be assessable for tax.
If property or assets have been completely destroyed, any insurance payments will be considered as a deemed sale of that property or asset. The effect is that you may have depreciation recovery on depreciable assets if the amount received exceeds the depreciated book value. Depreciation recovery is income for tax purposes.
Any business interruption or loss of profit insurance is recognised as income for income tax purposes.
If you would like assistance or you would like to discuss these matters in further detail, please contact us HERE or on 09 522 7955.
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Gilligan Rowe and Associates is a chartered accounting firm specialising in property, asset planning, legal structures, taxation and compliance.
We help new, small and medium property investors become long-term successful investors through our education programmes and property portfolio planning advice. With our deep knowledge and experience, we have assisted hundreds of clients build wealth through property investment.Learn More