Tax and Accounting Services, Auditing, Business Development, International Business Consulting, McGregor Bailey, Auckland, New Zealand

Don't Trip! GST mistakes to avoid

Thu, 17 Dec 2020 22:00:00 GMT

The obvious and unexpected benefits of having a personal budget

Thu, 10 Sep 2020 23:00:00 GMT

Managing a cash crisis

Mon, 31 Aug 2020 23:00:00 GMT

Questions to ask as your small business recovers from COVID-19

Wed, 26 Aug 2020 23:00:00 GMT

Government announces new wage subsidy and other support measures

Tue, 25 Aug 2020 23:00:00 GMT

Mandatory contact tracing for NZ businesses

Sun, 16 Aug 2020 23:00:00 GMT

Mandatory contact tracing for NZ businesses In order to help prevent the spread of Covid 19 in New Zealand, the government now requires businesses to have QR code posters to support contact tracing. From 12pm on Wednesday 19 August, all businesses and services providers are required to display the official NZ COVID Tracer QR code posters in prominent places at or near the main entrances of each of their premises. The posters are free to create. You will need a separate one for each of your premises or unique locations. All you need is your driver's licence, address and contact details. Mandatory contact tracing for NZ businesses https://qrform.tracing.covid19.govt.nz/

6 Reasons To Look at Your Financial Reports

Tue, 11 Aug 2020 23:00:00 GMT

Cash is not profit and vice versa

Thu, 30 Jul 2020 23:00:00 GMT

Government delivers 2020 Budget 'Rebuilding Together'

Thu, 14 May 2020 23:00:00 GMT

Wellbeing Budget 2020 Rebuilding Together

In the lead up to the Budget, the Prime Minister commented ' New Zealand is about to enter a very tough winter'.

This year's budget is all about jobs and the government is expected to borrow heavily to deliver it. The forecast surplus of $1.3b had turned into a deficit of $2.7b.

What's in the budget?

Wage subsidy extended but targeted - $3.2 billion dollars to support a targeted extension of the Wage Subsidy scheme. From June 1 businesses that suffered a 50% drop in revenue over a 30 day period will be able to apply for a further eight week period. (The initial 12 week scheme was available for businesses that could show a 30% revenue reduction).

Research and Development - $150 million short-term temporary loan scheme to incentivise businesses to continue R&D programmes. The loans will provide one-off finance and will be administered by Callaghan Innovation.

Trade - $216 million boost to New Zealand Trade and Enterprise to expand the scope and intensity of support provided to exporting firms.

Ecommerce support for small businesses - $10 million in funding to support small businesses to improve their e-commerce service offerings, and incentives/grants to encourage ecommerce adoption.

Infrastructure and housing - $3 billion more for infrastructure, including building 8000 state and social houses over the next 4 to 5 years.

Training - $1.6 billion in a Trades and Apprentices Package including financial support for businesses to retain their apprentices, free apprenticeships and training in targeted critical industries. There is a specific $50 million fund for Maori Apprentices and Trades Training.

Environment jobs - 1.1 billion to create 11,000 green jobs including regional environmental projects, biosecurity and pest control roles, and DOC's 'job for nature' fund.

$400 million Tourism Recovery Fund – including a transition programme to support businesses to plan for the next steps, a fund to ensure key tourism assets survive and a domestic tourism campaign.

For full details you can access Finance Minister Grant Robertson's Speech here .

COVID-19 An Important Message

Mon, 16 Mar 2020 22:00:00 GMT

We are concerned that a number of businesses are at risk given the spread at which the crisis has developed and continues to affect our everyday lives. There are many articles around about the effect of the coronavirus from a health perspective and we do not wish to repeat these, nor are we experts in health issues. Countries are in lockdown; governments are reacting to the situation and various financial help is being offered worldwide. People are unable to gather, sporting events are cancelled, some businesses have already gone under and fear is driving panic buying. If you are a business owner, now is the time to show your true leadership and the first step is Don't Panic !

The next step must be to sit down in a quiet spot away from any disturbance and think about how the pandemic is affecting your business. Try to understand how it could or is affecting your business, your staff, your suppliers, your customers, both directly and indirectly. Our philosophy in helping and advising clients is based around three steps:

Planning, measuring performance and growing profits.

Every plan should be written down and we suggest these plans cover 3 scenarios. Firstly, what if the coronavirus only has a small impact on your business – say up to a 15% cut in turnover. Secondly, what if the effect is medium – say affects turnover by 25-40%. Thirdly, what if the effect on your business is high – say affecting turnover by 50-60%. Your plans should include the effects and solution for each level. Where are we now, where do we want to be and what are the strategies to achieve that.

There are a number of areas the plans should cover. These include:

1. People Plan

a. What are the essential parts of the business that must keep operating for your customers?

b. Can the team work from home? What do we need to action if this is to happen?

c. Can we keep staff isolated? Do we have a virus containment policy?

d. What plans can we put in place to reduce staffing numbers if required? – split shifts, sick pay, annual leave entitlements.

e. What are our meeting policies with our teams, suppliers and customers?

f. Can we cover essential functions of the business if key employees become sick?

g. Ensure your staff are well aware of your plans and what is happening daily.

2. Financial Plan

a. What is our cash position? Do we have sufficient reserves to cover 2-3 months operating costs?

b. Do we have sufficient cash to cover loan and finance payments, tax payments etc?

c. What stocks do we have on hand? What are supply chain lead times in replenishment? How many weeks of stock on hand do we have?

d. Are our suppliers affected? Can we order more stock if required?

e. Be in constant contact with your customers. Check orders on hand. Check their future expectations.

f. Calculate break even points for each of the three scenarios.

g. Know how much down time you can cope with and when to take action.

h. Can you negotiate with large creditors to preserve cash?

3. Leadership

a. Remain calm and in control.

b. Be firm.

c. Don't panic.

d. Roll out information to staff and clients regularly.

e. Update policies and procedures as required.

f. Stay up to date with the facts.

g. Continue looking ahead, the next day, the next week, the next month.

It is now vital to keep your financial information up to date and know your exact financial position at any time. Quality data means quality decisions. Compare actual results to the plan regularly. Do we have KPI's or OKR's and are they providing lending information about our financial performance? Act according to the results being achieved. Analyse the results. Can we put in place strategies and actions to improve our performance? Measuring free cashflow is vital and knowing the effects of working capital issues on our cash reserves is important.

Right now, don't give up on any marketing plans. Every downturn creates an opportunity. Spend time analysing any opportunities to improve your business. Look at your costs? Analyse and implement improvements using the 7 lean wastes every business has. Now is the time to improve your business model if possible. Be agile and adapt to the changing business conditions. This virus and recession will pass, the unknown is when. What can we do to improve margins and increase customers? When trading conditions improve, will we be in a position to take advantage of them?

The important message is sitting back and doing nothing is not an option in these trying times. Those that do will have a greater chance of their business not surviving the pandemic. Remember the 3 P's – Planning, Measuring Performance and Growing Profits. We are here to help at any stage, so don't hesitate to contact us. We are available by telephone, email and video chat as well as in person should you need help on any of the above. Things are changing daily and rapidly, so don't leave it too late to take action.

All the best from the Team at

McGregor Bailey

Business Continuity Package - COVID-19

Mon, 16 Mar 2020 22:00:00 GMT

The $12.1 billion package includes:

· Initial $500 million boost for health

· $5.1 billion in wage subsidies for affected businesses in all sectors and regions, available from today

· $126 million in COVID-19 leave and self-isolation support

· $2.8 billion income support package for our most vulnerable, including a permanent $25 per week benefit increase and a doubling of the Winter Energy Payment for 2020

· $100 million redeployment package

· $2.8 billion in business tax changes to free up cashflow, including a provisional tax threshold lift, the reinstatement of building depreciation and writing off interest on the late payment of tax

· $600 million initial aviation support package

The business cashflow and tax relief measures that have been announced include:

1. Giving Inland Revenue the discretion to remit use-of-money interest (UOMI) for customers significantly adversely affected by the COVID-19 outbreak.

Under the current proposal, the Inland Revenue may agree to write-off UOMI at our discretion, if they consider a business or individual has had their ability to pay tax on time significantly constrained by COVID-19. This proposal would cover all payment to the Inland Revenue where UOMI is charged, whether they're taxes (such as income tax or GST), or other payments (such as Working for Families) on or after 14 February 2020.

Under the current proposal, you will not have to be in a particular region or industry to get this relief. Once legislation has passed the Inland Revenue will be creating guidance on this proposal.

2. Increasing the provisional tax threshold from $2,500 to $5,000 from 2020/2021.

Currently, taxpayers with a residual income tax of NZ$2,500 or more are required to pay provisional tax throughout the year. This threshold will be increased to NZ$5,000 from the 2020/21 tax year, meaning that less businesses will need to front the cash to meet their provisional tax obligations.

3. Increasing the small asset depreciation threshold from $500 to $5,000 for the 2020/21 tax year as a temporary measure. From the 2021/22 income year, the existing NZ$500 threshold for an immediate write-off will be increased to NZ$1,000 on a permanent basis.

The temporary increase (to $5,000) is designed to incentivise taxpayers to bring forward investments to encourage spending. This will reduce compliance costs for businesses and encourage businesses to continue investing.

4. Allowing depreciation on commercial and industrial buildings from 2020/2021.

Depreciation deductions at 2% diminishing value will be reintroduced for new and existing industrial and commercial buildings, including hotels and motels. This will help support businesses with cashflow in the near-term and assist with the broader economic recovery by stimulating business investment in new and existing buildings.

Building owners will be able to adjust provisional tax payments immediately in anticipation of the additional deductions that will become available.

The above changes will be contained in a tax bill to be introduced soon.

Twelve-week wage subsidy scheme

Wage subsidies will be available for all employers that are significantly impacted by COVID-19 and are struggling to retain employees as a result. The scheme will be open to sole traders and the self-employed as well as firms.

· Amount of support: $585.80 per week for a full-time employee (20 hrs or more) or $350.00 per week for a part time employee (less than 20 hrs). The payment will be made as a lump sum for a period covering 12 weeks. The maximum amount any one employer can receive is $150,000.

· Employers must have suffered or are projected to suffer at least a 30% decline in revenue compared to last year for any month between January 2020 and the end of the scheme in June 2020. Applications can also be made on the basis of forecast revenue loss within the period of the scheme.

· Some of the key undertakings required by the employer are:

Employers will need to declare that, on their best endeavours, they will continue to employ the affected employees at a minimum of 80% of their income for the duration of the subsidy period. This is the equivalent of keeping people working 4 out of 5 days of the week.

Employers must also have taken active steps to mitigate the impact of COVID-19 (e.g. engaged with their bank/financial advisor) and sign a declaration form to that effect.

Employers can apply from today. Applications can be made through an online portal on the Work and Income website www.workandincome.govt.nz. MSD will aim to make first payments no later than five working days from when applications are received. Applications can be made from today (17 March) for the next 12 weeks.

Eight-week scheme for workers, contractors and self-employed taking COVID-19 leave

The COVID-19 leave payment scheme runs for the next eight weeks, providing financial support to businesses that have workers unable to work because they are in self-isolation, are sick with COVID-19, or caring for others with COVID-19. The scheme applies to employees, contractors and the self-employed.

· The payments will be $585.80 per week for full time and $350 per week for part time workers.

· The payment does not affect any paid leave entitlements that are owed and is available even if an employee is on paid leave for part of the period. It is not available to those who can work from home during the period of self-isolation and who can be paid normally by their employer.

· Employers apply for the leave on behalf of any employee who is self-isolating or sick. Payments can be backdated to 17 March 2020. MSD pays employers, who will then be required to pass it on to affected employees. MSD will pay on a fortnightly basis once it receives an application.

· Other key parameters of the scheme are:

Eligibility is open to all employees legally working in New Zealand (through their employers), the self-employed and contractors.

Eligibility will only be for workers who are not able to work from home.

The entitlement is for:

– those who self-isolate in accordance with public health guidance and who register with Healthline

– those who are ill with COVID-19, and

– those who cannot work because they are caring for a dependent in either of these circumstances.

Those who leave New Zealand to travel overseas from 16 March 2020 will not be eligible for this payment for self-isolation on their return.

Workers taking sick leave before 17 March 2020 can only access the scheme for time spent on sick leave from 17 March 2020. It will not be accessible for those who have travelled overseas since 16 March 2020.

Contact your McGregor Bailey advisor should you require any assistance or have any questions.

Further information on the Business Continuity Package can be found at: Treasury COVI-19 Business Continuity Package

Five new ways to pay instead of using cheques

Fri, 31 Jan 2020 22:00:00 GMT

Pay your taxes by cheque? Five new ways to do it.

If you normally write a cheque to pay for your taxes, it's time to decide how you will pay in the future. As of 1 March 2020, the IRD will no longer be accepting cheques. By the end of the last financial year (June 2019), only around 5% of payments received by IRD were by cheque, so they made the call to phase them out.

Here are five faster, cheaper and safer ways to pay your taxes:

No more cheques for IRD

Thu, 31 Oct 2019 22:00:00 GMT

No more cheques for IRD

If online banking worries you because of the risk of a hacker stealing your money, you could have a special bank account and put your tax money in it only when you are ready to pay it.

Inland Revenue has advised us the payment options will be:
myIR: Direct debit and card payments can be made from myIR.
Online banking: One-off or scheduled recurring payments can be made using online banking.
Money transfer: Your clients based overseas can pay us using a money transfer service. Search for "Make a payment" on our website for more information.
Credit or debit card via our website: Payments can be made by credit or debit card through our secure payment website. Go to our website and search for "Make a payment" and select "Pay using credit or debit card".
Westpac: EFTPOS or cash payments can be made at any Westpac branch or Smart ATM.

If you need some help, call us.

Some interest rates are going up

Thu, 10 Oct 2019 22:00:00 GMT

Some interest rates are going up If you underpay your tax you will be charged 8.35% (was 8.22%) interest compounding monthly. This new rate was introduced on 29 August 2019. At the same time, the rate payable to those who have overpaid was decreased from 1.02% to 0.81%. IRD says the new rates are consistent with the floating first mortgage new customer housing rate and the 90-day bank bill rate. Those who have an annual tax bill of $60,000 or more should beware of this Use of Money Interest (UOMI) charge and aim to minimise it. If you have a 31 March balance date (most people) and if you pay your provisional tax in accordance with the amount calculated by Inland Revenue (5% more than last year for those who have got their accounts done or 10% more than the year before for those who have not got their accounts done), you will not be bothered with UOMI for your first (28 August) and second (15 January) instalments of provisional tax. However, you will get caught if your third instalment of provisional tax is not sufficient (see below) by 7 May. Therefore, if your tax for the year is likely to exceed $60,000, make a best guess at your income for the year ending 31 March 2020 by 7th of May 2020 and if necessary, top up your 7 May payment.

Capital Gains Tax Ruled Out

Tue, 16 Apr 2019 23:00:00 GMT

Capital Gains Tax Ruled Out

The Labour-led Coalition Government will not proceed with the capital gains tax recommended by the Tax Working Group.

The Prime Minister, Jacinda Ardern, said that that the three parties in Government had been "unable to find a consensus". She expressed regret that she could not get the CGT over the line:

"While I have believed in a CGT, it's clear many New Zealanders do not. That is why I am also ruling out a capital gains tax under my leadership in the future."

Despite the focus on CGT, the Tax Working Group had made a number of other recommendations for amending the tax system. The Prime Minister said that "the majority of [these other] recommendations will either be investigated further or have formed part of our work programme."

Read the press release in full

https://www.beehive.govt.nz/release/government-will-not-implement-capital-gains-tax

Tax Working Group Final Report Released

Thu, 21 Feb 2019 22:00:00 GMT

TAX WORKING GROUP FINAL REPORT RELEASED

The Tax Working Group's report was released this morning. It made the following key recommendations with regards to the New Zealand tax system:

Other possible areas earmarked for reform are changes to the loss continuity rules for start-ups, bringing back depreciation deductions on buildings if capital gains tax is extended, expanding deductions for 'black-hole' expenditure, and concessions for nationally significant infrastructure projects.

CAPITAL GAINS TAX PROPOSALS

The capital gains tax proposed by the TWG would apply when an asset is disposed of (or when there is a change of use that takes the asset in or out of the capital gains net).

Scope of the Capital Gains Tax

The proposed capital gains tax covers:

The following assets are specifically excluded from the scope of the CGT:

What is an excluded home?

An "excluded home" for the purposes of the CGT rules is defined as the place that a person owns, where they choose to make their home by reason of family or personal relations or for other domestic or personal reasons. The definition draws from that used in the s 72(3) of the Electoral Act 1993.

A person, or a family unit, can generally have only one excluded family home. There is no upper limit on the value of an excluded home. The so-called "mansion effect', where people invest more capital in their main home where it can generate untaxed capital gains, is noted but not addressed in the report.

Home used for income-earning purposes

Where a person uses part of their home for income-earning purposes (eg has a home office, had flatmates or boarders, or uses part of the house for Airbnb income) two options are proposed by the TWG:

In determining the use, both floor area and time spent on income-earning purposes will be taken into account.

Capital gains tax rate

Capital gains will be taxed at a person's marginal tax rate.

Valuation Day

The rules for taxing more capital gains would apply to gains and losses that arise after the implementation date ("Valuation Day"). This approach requires taxpayers with existing assets to:

The report recommends that Inland Revenue provide a number of valuation options, depending on the asset. For land, this could include Quotable Value (QV) valuations or ratings valuations, as well as other valuation methods outlined in the report. The TWG also recommends a "median rule" should apply to calculate the capital gain (or loss), the purpose of which is to smooth capital gains and prevent taxpayers from being subject to tax on artificial paper gains or losses.

How to calculate the CGT

The capital gains is taxable when the asset is sold or otherwise disposed of. Expenditure incurred in acquiring the asset will be deductible at the time of sale. Other capital expenditure (such as making improvements after acquisition) are also deductible at the time of sale. Holding costs (interest, rates, insurance, repairs and maintenance expenditure) are deductible in the year they are incurred.

Losses arising should be able to be offset against taxable income, but the TWG recognises that there is a revenue risk involved with this. Ring-fencing losses is therefore recommended as possible option to mitigate this risk.

Capital gains should be included in provisional tax calculations in the same way as other income.

Entities affected

All New Zealand resident individuals and entities would be caught by the GST rules, including companies, trusts, partnerships and look-through companies. (The qualifying company regime would have to be repealed, but transitional rules put in place to allow QCs to pass out all capital gains derived prior to the CGT rules being introduced).

Trusts distributions and trust settlements, being essentially gifts, could be caught by the new GST rules and liable to tax if specific carve-outs are not made for trusts.

Rollover Relief

The general rule is that the capital gains tax would be imposed when an asset is disposed of (or when there is a change of use that takes the asset in or out of the capital gains net). The TWG has recommended that rollover relief be included in the design of the CGT rules, essentially deferring the taxation of the capital gain until there is a later disposal. (For example, if land is transferred under a will, CGT would be deferred to such time as when the land is subsequently sold). The preferred view of the TWG is that:

Link to Report Here: https://taxworkinggroup.govt.nz/resources/future-tax-final-report

CCH Tax Update: Capital Gains Tax - Tax Working Group

AML - How does that impact me?

Wed, 26 Sep 2018 23:00:00 GMT

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.

Kreston - Setting up business in New Zealand

Sun, 26 Aug 2018 23:00:00 GMT

Setting up your Business in New Zealand

Click here to read about the issues to consider

More tax tips, traps and troubles

Thu, 15 Feb 2018 22:00:00 GMT

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

Wed, 14 Feb 2018 22:00:00 GMT

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

Thu, 25 May 2017 23:00:00 GMT

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:

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/

Mileage Rates for 2017

Sun, 30 Apr 2017 23:00:00 GMT

2017 review of Commissioner's mileage rates

Mileage rate for motor vehicles increased

For the 2017 tax year (1 April 2016 to 31 March 2017 ), the mileage rate for both petrol and diesel fuel vehicles has increased to 73 cents per km.

This year we are also able to set mileage rates for hybrid and electric cars. The mileage rates for these vehicles are:

For both Hybrid and Electric vehicles, our data shows that although these types of vehicle have lower running costs, these are offset by higher fixed costs.

If you're an employer you can use the above rates when reimbursing employees for the use of their private vehicle for work-travel for the current tax year (1 April 2017 to 31 March 2018).

The mileage rate is reviewed after a tax year ends so the rate reflects the average motor vehicle operating costs for that year. If you've filed your 2017 income tax return using the 2016 rate of 72 cents per km, you can request an amendment.

If the mileage rate doesn't reflect your actual costs, or your work-travel is more than 5,000km per year, you must keep a record of your actual vehicle expenses.

For more information about mileage rates go to http://www.ird.govt.nz/technical-tax/op-statements/os-review-mileage-rate-2017.html

2016 Xmas Closing Dates

Wed, 30 Nov 2016 22:00:00 GMT

Wishing you a safe and happy Christmas and a wonderful new year ahead!

2016 Budget Report - Tax

Thu, 26 May 2016 23:00:00 GMT

2016 Budget Report – Tax

Finance Minister Hon Bill English revealed no tax surprises in the 2016 Budget Speech. The key tax measures in Budget 2016 were revealed by the Prime Minister John Key last month in a pre-Budget announcement. Presented as a "business-friendly tax package", the announcement included the following:

The Finance Minister also referred to:

Limited tax changes

Tax cuts may be a while away

Ministerial statement "When it is affordable, and when economic conditions permit, the Government would like to lower income taxes with a focus on lower and middle income earners who have faced fiscal drag as their incomes continue to rise. However, reducing debt is currently a higher priority than reducing revenue. The Government is also cautious given the wide band of uncertainty around economic and fiscal forecasts. The new operating allowances mean there isn't an explicit provision for tax cuts in the forecasts, but the Government will continue to consider options around lowering tax rates and thresholds – either in Budget 2017 or after - if the fiscal situation improves further."

SMEs tax simplification

Ministerial statement "Further support for businesses - particularly small enterprises - comes through a $187 million SME- friendly tax package, which the Prime Minister announced last month. This provides a better balance of incentives to encourage taxpayers to pay the right amount of tax. Provisional tax will be reformed, with a new pay-as-you-go option allowing small businesses to pay tax as they earn income. Use-of-money interest will be eliminated or reduced for the vast majority of taxpayers. Contractors will be able to choose a withholding tax rate that suits their own circumstances. And the ongoing 1 per cent monthly late-payment penalty will be scrapped from 1 April 2017 for new debt - although immediate penalties and interest charges will continue."

Changes to provisional tax

Changes to withholding tax

Changes to late payment penalties

The reduction of taxpayers' exposure to UOMI and LPP, representing a valuable step towards a better designed payment system, has been well received, but the view is that the Government could have gone further. The extent of business demand for changes to withholding tax and other previously announced measures is uncertain.

The Making Tax Simpler: Better Business Tax issues paper notes that provisional tax is a source of stress because of the uncertainty and unpredictability of income, with the UOMI and penalty rules imposing further stress. Businesses following provisional tax rules as set out in statute have been hit unfairly with high UOMI charges. Proposals for extension of the safe harbour amount and its use by non- individuals, together with imposing UOMI charges only from the third instalment where the provisional tax uplift method is used, are welcome, particularly for small businesses with seasonal or volatile income-earning patterns.

AIM is technologically revolutionary, with payments generated by accounting software and authorised by the user. The technology does not yet exist and Inland Revenue will need to work with software providers, hence the longer lead time. Some small businesses may appreciate AIM, but it will put pressure on the accuracy of information within accounting systems. Cashflow implications of monthly/two-monthly tax payments may be challenging. The Government clearly favours greater use of withholding taxes as part of Inland Revenue's business transformation, with the proposed reforms being only the start.

The above changes will apply from 1 April 2017 (unless otherwise stated) with feedback on the April 2016 issues paper required by 30 May 2016. This package is expected to cost $187m over the next four years.

For further information and analysis of the budget go to the 2016 CCH Budget Report

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

2016 Review of Commissioner's Mileage Rates

Wed, 11 May 2016 23:00:00 GMT

2016 review of Commissioner's mileage rates

On 4 May 2016, Inland Revenue stated that a recent review of the Commissioner's mileage rate has resulted in a reduction to the rate to 72 cents (from 74 cents for 2015) per kilometre for both petrol and diesel fuel vehicles for the 2016 income year. The reduction is largely due to lower average fuel costs during the 2016 income year compared to the 2015 income year and to some extent more efficient motor vehicles. The 2016 income year for business taxpayers with a standard 31 March balance date runs from 1 April 2015 to 31 March 2016.

Points to note are as follows:

• The Commissioner is required by statute to set a mileage rate for persons whose business travel is 5,000 or less in an income year.

• The mileage rate is set retrospectively for persons required to file a return for business income, so that the rate reflects the average motor vehicle operating costs for an income year.

• Persons who meet the criteria have a choice of using the Commissioner's mileage rate or using actual costs if they consider that the Commissioner's mileage rate does not reflect their true costs. Taxpayers that choose to use actual costs are required to keep records to support any expenditure claimed.

• The Commissioner does not propose to amend the returns for taxpayers who have already filed their 2016 returns using the 2015 mileage rate.

• The Commissioner accepts that employers may use the 2016 vehicle mileage rate as a reasonable estimate of costs when they reimburse employees for the use of their private vehicle for business related travel for a current income year (post-1 April 2016).

• Employers may use an alternative estimate other than the Commissioner's vehicle mileage rate when reimbursing employees for use of their private vehicle for employment related use.

Getting Your PIE Tax Right

Tue, 16 Feb 2016 22:00:00 GMT

If you're investing in a PIE, be sure to get the right tax rate (Prescribed Investor Rate/PIR). Y ou should check with us when we do your tax return each year as it can change from year to year and there are no refunds of overpaid tax.

If your income is less than $48,000, use a rate of 17.5% unless you have so much PIE income that it exceeds $22,000. If husband and wife have PIE income in their joint names but their taxable incomes are taxed at different rates, it's better to split the PIE investment into two halves and invest separately, so one can be taxed at the lower rate. Otherwise, the whole of the investment has to be taxed at the rate applying to the higher taxpayer.

It is important to get your PIR correct on your PIE investments so contact us if you would like us to review your tax position and advise on the rate you should be using.

IRD Numbers for Property Sales

Tue, 09 Feb 2016 22:00:00 GMT

All vendors and purchasers of property other than their main home must now provide an IRD number as part of the land transfer process.

Non-residents

Offshore buyers must provide a New Zealand bank account number before they can obtain a New Zealand IRD number. And all non-resident buyers and sellers must provide their tax identification number from their home country, along with current identification requirements such as a passport.

Family trusts

Where a family's main home is owned by the family trust, the trust is not exempt from providing an IRD number.

It's quite common for a trust to own the family home, protecting the family from business or other relationship property risks. Up till now family trusts haven't needed IRD numbers unless they operated a business or owned rental properties. Now, when the family home is transferred into the trust or when the trust buys or sells property, the trust needs an IRD number. Trustees' own personal IRD numbers aren't acceptable.

The new requirements also affect changes of title. So, if a trustee dies or retires and the new trustee's name needs to be registered on the property title, the trust needs an IRD number to register the change.

If you are arranging for the family trust to buy, sell or transfer property, please contact us. If the trust does not already have an IRD number we can take care of this. Otherwise you could face costly and stressful delays while you sort out the paperwork.