Inland Revenue does publish information as to what aspects of small business activities it is taking a particular interest in and common mistakes it is finding. Its current focus is on the following areas:
· GST errors
· PAYE monthly schedules
· accurate record keeping
· accounting for contractors versus employees
· non-resident contractors tax
· the use of industry benchmarks
· child support
· KiwiSaver contributions and tax
· Student loan deductions
· Income of the self-employed
GST errors are a significant risk for you because a review of a GST return can easily lead to further inquiry.
Mistakes that are currently getting the attention of Inland include:
- figures being entered in the wrong boxes
- adding numbers together
- not including all the information
- sending the return in late
- not accounting for GST on the private use of assets owned by the business
- not registering for GST early enough
- not de-registering when the business closes
- not including taxable supplies in the GST return
- returning sales and expenses for a period not covered by the return.
If you discover that you have made a mistake you should contact us for advice and guidance as to how to correct it.
You cannot and should not underestimate the time it takes for a small business owner to "do the paperwork"!
It is also important to not underestimate the importance of having and holding the correct paperwork.
If you are GST registered you cannot claim an expense of more than $50 in you GST return unless you are holding a valid tax invoice and you must hold that tax invoice for 7 years. If you don't have it and Inland Revenue takes a look at you there will be consequences.
A tax invoice doesn't need to be issued for supplies of $50 or less, and a simplified tax invoice is acceptable for supplies between $50 and $1,000. For supplies worth more than $1,000, a tax invoice must show:
- the words "tax invoice" in a prominent place
- the name, or trade name, and registration number of the supplier
- the name and address of the recipient
- the date it is issued
- a description of the goods and services supplied
- the quantity or volume of goods and services supplied
- either the total amount including the tax charge, or the amount excluding the tax but showing the tax per cent to be included.
The information listed above is required by law and must be on both the copy held by you as the seller and the original given to the customer (and vice versa). If any of the information is missing the tax invoice will not be valid.
The mantra then is – "No invoice – no GST claim".
On the other hand, if for some reason you refund part of a purchase to a customer you must issue and hold a valid credit note. If you don't, you cannot claim the GST you previously charged the customer and paid to Inland Revenue.
Finally, you must not issue more than one tax invoice for a sale. If a customer loses their tax invoice and asks you for another you should copy your copy and clearly mark it with the words "COPY ONLY".
Sounds picky? – that's tax law for you!
From 1 October 2014 Inland Revenue is changing the way tax payments must be made.
From that date you will no longer be able to drop your GST return and cheque into Westpac. You will be able to continue to pay your GST by cash or eft-pos at Westpac but you will need to post the GST Return to Inland Revenue.
If you post any payments to Inland Revenue (income tax, GST, PAYE etc) after 1 October 2014 they must be received by Inland Revenue on or before the due date.
If Inland Revenue receives a payment after the due date you could suffer late payment penalties and interest.
We recommend that
as much as possible you pay all taxes by internet banking no later than the due date.
If you are unable to access internet banking you must ensure that your payments are received by Inland Revenue on time.
As mail can be delayed in the postal system you should allow plenty of time for the "mail to get through"!