As part of their COVID-19 response, the IRD has introduced a number of measures aimed at alleviating the financial pressure on those who are self-employed.
Tailored tax rates and exemptions
Self-employed workers who have had their income significantly affected by COVID-19 and no longer fit in their current withholding rate can apply for a tailored tax code. This can be done through myIR Secure Online Services.
Additionally, self-employed citizens may be able to apply for a certificate of exemption for schedular payments (not salary or wages) if they have a good record of filing tax returns and paying tax.
Provisional tax
The threshold for provisional tax has been increased from $2,500 to $5,000. If you are a current provisional taxpayer with payments under $5,000, you must pay your tax bill by 7 February following the year you file. The increased threshold is aimed at lowering compliance costs for smaller taxpayers, and it means that some taxpayers will no longer have to pay provisional tax for the 2020-2021 income year and onwards.
Loss carry-back scheme
Self-employed workers who expect to make a loss in the 2019-2020 or 2020-2021 financial years may be eligible for the loss carry-back scheme. The scheme will enable businesses to carry their losses back one year to the preceding income year, offsetting profits that were made the previous year. Your loss carry-back can be claimed by:
- Including the carried back loss in your tax return. The IRD will then provide you with a refund of overpaid tax.
- Asking for a refund of any provisional tax you paid for 2020 if you plan to carry back a loss from 2021.
