Here in Otago we only felt a (significant) tremor on September 4 at 4.38am, but in Canterbury they felt the full impact of the 7.1-magnitude earthquake, and the damage that it and the many aftershocks that followed have left behind has yet to be quantified.
Having worked up there this past week, some 10 days after the tragic event, it was clearly apparent that the impact on both the people and landscape is profound and long-term.
The Government and the country as a whole have responded quickly to offer assistance and relief.
The New Zealand Red Cross Canterbury Earthquake Appeal has been established and has received donations from New Zealanders both at home and abroad.
For those in New Zealand, the donations are tax deductible.
For individuals, any donation over $5 entitles the donor to a tax credit.
You will be entitled to a claim amounting to the lesser of 33.333% of the donation made, or 33.333% of your taxable income.
Any company making a donation will be entitled to a deduction also, but the maximum deduction a company can claim is limited to the amount of its net income, calculated before taking into account the deduction for the donation made.
Relief is being offered for those taxpayers that are struggling to meet their taxation filing and payment obligations because of the damage suffered following the earthquake.
A lenient view is to be taken on late filing and imposition of penalties.
The Inland Revenue has phone lines set up to take calls from taxpayers that cannot access their records, or whose records have been destroyed and cannot therefore complete their returns on time.
The Inland Revenue has also provided an 0800 number for taxpayers to contact if they are expecting a GST refund in the next few months if they wish to change their filing frequency to access the GST refund more quickly.
If taxpayers affected by the earthquake are therefore registered for GST on a two-monthly or six-monthly basis, and are expecting a GST refund in the next few months, they should contact the Inland Revenue or their adviser to organise to change their GST filing periods to bring forward an entitlement to a refund.
If you have a building or business in the Canterbury region and you receive an insurance payout for damage to that business or building, you should make sure that all insurance payments are dealt with correctly for GST and income tax.
A reminder that insurance payments received before September 30 will be returned (if necessary) for GST at 12.5%, and payments received on or after 1 October will be returned (if necessary) at 15%.
Repairs made to a building damaged by the earthquake will generally be deductible for income tax purposes, but if the building is improved as a result of the work, the costs associated with the improvement will not be deductible.
Furthermore, the rules around the treatment of capital contributions (for example, from landlords) have recently changed, meaning that you have a choice of treating such as assessable income (but spread over 10 years) or reducing the cost of the underlying assets for tax purposes.
Any special grants received from the Ministry of Social Development will not be subject to income tax.
Any government grants to businesses are likely to be subject to GST.
The taxation relief being offered to those suffering following the earthquake will no doubt continue to be announced as needs require, but the response to date has been both prompt and immediate.
Without doubt, I am sure our collective thoughts and best wishes are with the good folk of Canterbury as they work through the practicalities of the earthquake, including some having to make life changing decisions about the future of their businesses (and staff).
However, I must finish with the comment that even though it was undoubtedly a terrible tragedy, I felt proud of the way in which community spirit and can-do attitudes came to the fore in the face of such adversity.
Scott Mason is a tax consulting principal at WHK Otago.
