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McGregor Bailey Blog

AML - How does that impact me?

How anti-money laundering legislation impacts you

If you've seen the film The Wolf of Wall Street, you'll be familiar with the concept of money laundering – an illegal process where 'dirty money' received from criminal activities is passed through legitimate businesses and made 'clean.'

In response to a growing number of laundering incidents in New Zealand, the government has made changes to the law, which now affect accountants and small businesses like yours. As of this month (October 2018), we're required to put new preventative measures in place to help tackle money laundering and financing of terrorism.

What does this mean for you?

We might need to ask you for more information about your business than what we have in the past, especially if it involves large cash transactions ($10,000* or more in one transaction). You may also be asked for additional information about your identity.

If you're a real estate agent or your business involves sports and race betting or dealing in high value goods, take note - the anti-money laundering legislation will extend to you from next year. To find out what the changes mean for your business, give us a call.

Kreston - Setting up business in New Zealand

Setting up your Business in New Zealand

Click here to read about the issues to consider

More tax tips, traps and troubles

More tax tips, traps and troubles

 

Attention landlords

At present you must hold a residential property (that isn't your main home) for at least two years to avoid paying income tax on any capital gain. Labour has firmly stated they intend to increase this period to five years and also because it's just tweaking legislation already there it will be sooner rather than later.

 

The good news is they are not planning on making the legislation retrospective, so it will only apply to properties purchased after the law is changed. The Government also plans to abolish the tax benefits of negative gearing but has provided no specifics yet.

 

One scenario is to only allow rental property losses to be offset against rental property profits. Also, we don't know yet whether the law change will apply to residential rental only, or whether it will include commercial property

 

New ideas

The new Government has introduced Best Start, a $60 a week payment for a year following paid parental leave. If your household income is less than $79,000, the payment will continue until the child is three years old.

 

It has also enacted a "winter energy" payment of $450 a year spread over five months for people receiving superannuation or a main benefit. These payments will not be means tested. Couples will get $700 between them to spend how they wish.

 

Backdated holiday pay

If you back pay an employee or ex-employee for holiday pay, tax this as a lump sum.

 

IRD seeking more data, quicker

 

Inland Revenue is aiming to get as much data from you, in electronic format, as it can.

It also wants to get this data much more quickly, so it can make regular adjustments to the tax rates to cater for the Working for Families tax credit etc. More and quicker data would also enable the Government to get rid of secondary tax. Most of these changes will occur on 1 April 2019 or 2020.

 

You're going to have to file PAYE information electronically if your PAYE and ESCT deductions are $50,000 a year or more. This information will be required within seven working days of making the wage payment.

 

The department also wants details of interest and dividends reported monthly. It's going to require this information to be filed electronically, unless to do so would cause great hardship.

 

If you don't supply your IRD number to a payer of interest or dividends, there will be a non-declaration rate of 45% applied to the payment you get.

 

The banks will no longer be required to send out certificates of annual interest as these will be available on the Inland Revenue website and taxpayers will be able to access them through MyIR.

 

Disclaimer

This publication has been carefully prepared, but it has been written in general terms only. The publication should not be relied upon to provide specific information without also obtaining appropriate professional advice after detailed examination of your particular situation.

Brightline test to be extended

Bright-line test to be extended, 15 February 2018

On 15 February 2018, the Minister of Revenue, the Hon Stuart Nash, confirmed that the bright-line test on residential property sales will be extended from two years to five years.

Supplementary Order Paper No 13 is to be introduced to the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Bill currently making its way through Parliament.

The objective in extending the current bright-line test from two years to five years is to ensure that speculators pay tax on the gains from property speculation and also to improve housing affordability for owner-occupiers by reducing demand from speculators.

The proposed five-year bright-line test has the same structure and design features as the two-year bright-line test. These design features includes the following:

• The five-year period for the bright-line test runs from the date of settlement to the date a person enters into an agreement to sell the property. An additional rule applies for sales "off the plan".

• The extended bright-line test only applies to properties for which an agreement to purchase the property was entered into from the date of enactment of the Bill.

• The bright-line test only applies to residential land. Residential land includes empty land planned to be used for residential purposes but excludes business premises and farmland.

• The bright-line test does not apply to a person's main home. A person can only have one main home. The main home exception is available to properties held in trust.

• There are exceptions for relationship property and inherited property.

• Taxpayers are allowed deductions for property subject to the bright-line test according to ordinary tax rules.

• Losses arising from the bright-line test are ring-fenced so they may only be used to offset taxable gains from other land sales.

Extending the bright-line test from two years to five years has a consequential effect on the current residential land withholding tax rules. These rules generally require a conveyancer to withhold tax from the proceeds of the sale of residential land by an offshore person when the disposal would be subject to the bright-line test. Consequential amendments have been made to these rules to align them with the extended bright-line test.

The Minister noted that the extension to the bright-line test will apply to residential investment properties purchased from the date on which the Bill receives the Royal assent, which is expected in March. The Minister said that the passage of the Bill will also enable the Tax Working Group to factor the change into any consideration of a capital gain tax.

Source: taxpolicy.ird.govt.nz

2017 Budget Report

2017 Budget Report - Family income and tax rates

The Package will make changes to tax thresholds, Working for Families and the Accommodation Supplement to help Kiwi families get ahead.  It is a first step towards simplifying the income tax system.

The Family Incomes Package is carefully designed to assist low and middle income earners with young families and higher housing costs.

It will benefit 1.3 million working-age families in New Zealand by, on average, $26 per week.

There have been no changes in tax rates, but the thresholds where the progressive tax rates kick in will increase from 1 April 2018. The changes are intended to correct, or at least mitigate, the effects of "fiscal drag". Fiscal drag is the effect of rising wages pushing people into a higher tax bracket.

The tax rate changes are combined with a simplification to, and increased funding of, Working for Families. The Independent Earner Tax Credit, which less than a third of eligible people actually claim during the year, is being scrapped. The Family Tax Credit is being aligned so that it is the same no matter how old a taxpayer's children are (up to 18 years of age).

The final component of the Family Incomes Package sees an increase to the Accommodation Supplement.

The following elements make up the Package:

  • Increasing the bottom two income tax thresholds:
    • From $14,000 to $22,000; and
    • From $48,000 to $52,000.
  • Discontinuing the Independent Earner Tax Credit (IETC).
  • Family Tax Credit (FTC):
    • Increasing payment rates for children aged under 16, so that they align with the rates for children aged 16 to 18 years; and
    • Increasing the abatement rate from 22.5 cents to 25 cents in the dollar and decreasing the abatement threshold from $36,350 a year to $35,000 a year.
  • Housing costs:
    • Increasing the maximum Accommodation Supplement (AS) payments and updating locations of Accommodation Supplement areas to reflect increases in housing costs; and
    • Increasing the weekly payments of Accommodation Benefit for eligible Student Allowance recipients by up to $20.

Superannuitants will gain from the tax threshold increases and some will also gain from the Accommodation Supplement increases.

For further information and analysis of the budget go to the 2017 CCH Budget Report

http://www.wolterskluwer.co.nz/category/budget-report/

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