A Quick Update on Accounting Updates
“People are very open-minded about new things, as long as they're exactly like the old ones.” —Charles F. Kettering
There has been lots of change in the accounting world over the past while, mostly due to the government changes to help businesses with the effects of Covid.
Following is a short summary of the changes that have taken place so far this year. If you have any concerns, please contact us to discuss.
Subsidies
There have been a number of wage subsidies or relief subsidies released. The common misconception on these was that they were tax-free, but this isn’t the case. Please don’t hesitate to contact us in regard to any of these.
Low Value Assets
Previously, if you purchased an item of equipment this could be written off fully in the year you purchased it if the value was under $500 (excluding GST). During the 2021 financial year (which we are doing accounts for now) the value increased to $5,000 (excluding GST) thus giving people higher expenses, less profit, and less tax.
For the 2022 year, this amount has decreased down to $1,000 (excluding GST).
Depreciation on Commercial Buildings
Depreciation on commercial buildings has been reintroduced from the 2021 year. If you have a commercial building where you previously claimed depreciation, we are now required to start claiming depreciation again.
While this means less profit and less tax in the years you own the building, when you sell this can mean an income of depreciation recovered and some extra tax to pay.
If you are thinking of selling your commercial property, please get in touch with us to discuss potential tax obligations.
Ring-Fencing Residential Losses
If you own a residential rental property or properties, any losses you make are no longer deductible against other types of income you earn. The loss can only be carried forward to future profits made by the rental property.
Top Tax Rate Increase
The top tax rate for individuals is increasing to 39%, and there are new rules around being able to deduct interest on residential rentals. We will keep you updated about this over the coming year.