Important information suddenly appears in the media, television and radio news bulletins, various websites, and one could be excused for being misinformed.  It is important to verify what you hear and read.  Marriotts should be your first "port of call".

 

Earthquake Support Subsidy

Extension and second round.  THIS IS REALLY IMPORTANT.

 

As a client of Marriotts Ltd, to keep you up to date with opportunities relating to the next few weeks, there are tightened criteria in order to qualify and time is of the essence.

 

Click on the link www.workandincome.govt.nz/business/earthquake-recovery/ess-next-steps.html

 

ACC – Getting Help after Someone Dies from an Injury

ACC has two excellent brochures which apply to compensation which is available when someone suffers a fatal injury.  This is not an earthquake specific response but fatalities as a result of the earthquake are included.  The brochures (ACC 2403, ACC 586) are available from ACC website www.acc.co.nz, or you can contact Aaron Cassidy from our office to discuss.

 

Injured Employees returning to Work

ACC will assist businesses in planning the return to work process.  Contact ACC at returntowork@acc.co.nz to get in touch with an ACC Injury Management Consultant.

 

Income Tax

You can estimate your provisional tax as a result of earthquake interruption to your business.  Until 7 May 2011, the third instalment date, taxpayers may estimate income and, as a result of that estimate, reduce their tax exposure on that date.

 

Record Keeping

Depending on the type of insurance policy business owners hold, there may be a need to provide additional record keeping.  This may include stock taking, and the recording of debtors and creditors, at dates other than the usual balance date, e.g. 31 March.

 

It is a difficult and sometimes expensive exercise if various steps are not put in place at or around the time of the event in order to reconstruct information upon which an insurance claim is based.

 

All of these matters, and others, often need professional assistance and the staff and Principals of Marriotts are available and able to discuss business matters with you during these very trying times.

 

Insurance Proceeds and Income Tax/GST

In general, insurance proceeds received for assets that are not able to be repaired, are taxed as an "asset disposal", with both EQC and insurance payments treated as sale proceeds for both Income Tax and GST purposes.

 

Politics Surrounding Tax Relief - Buildings

Marriotts have discussed with their Institute's (NZICA) Tax Team regarding anticipated tax rule changes after the Canterbury earthquakes, in particular, relating to buildings.

 

The subject of special income rules for Cantabrians is subject to high level lobbying. Currently no legislation has been introduced that would give a deduction for situations where insurance proceeds received from earthquake damage was below the tax book value of buildings damaged beyond repair (loss on disposal situation – normally a non-deductible capital loss). This occurred in the Manawatu floods in 2007, but it required legislation to implement this.

 

We can therefore expect more press releases in due course.

 

Revenue account property taxpayers (building developers, retailers, etc) are taxed on all insurance proceeds received and these taxpayers can write-off work in progress and stock that has been damaged beyond repair.

 

Non-Building Assets

Assets other than buildings can still give rise to a deductible loss on sale, if insurance proceeds are less than the assets book value.

 

Property Insurance Rules for Repaired Assets

If property is repairable – then the insurance proceeds received are taxable income to the extent of the repair expenditure. For GST purposes a GST invoice is required to clam repairs. 

 

If the insurance proceeds received exceed the repair expenditure, the book value of the asset is reduced by the excess (rather than have the excess returned as income).  If, after offsetting the excess, a negative result is reached, then the remaining negative asset value would be treated as taxable income. 

 

 

* Discuss with your Client Manager at Marriotts.

 

 

From the Team at Marriotts

Chartered Accountants