Work through the points below to straighten things up for the end of the tax year. Ask us if you would like more information.
Write bad debts off in your debtor ledger before balance date so you can claim a deduction. Make sure your records show you have taken reasonable steps to recover the debt prior to write-off. Note the details so we can check the GST adjustments.
You can claim deductions for holiday pay, bonuses, redundancy payments, long service leave etc., if you commit to them before year end and pay them within 63 days of balance date. Check holiday pay has been calculated correctly.
Can you pre-pay expenses such as stationery, postage and courier charges before 31 March? You may be able to claim for them. Check with us. There are limits to how far some prepaid expenses are claimable, such as on rent, insurance, plant and equipment maintenance contracts, travel and accommodation.
Are you still using all of them? Can some be written off?
If you offer prompt payment discounts to debtors and maintain a discount reserve, this may be deductible. Make sure your records are clear. In the first year a deduction of the actual discount percentage is allowed. In subsequent years, the deduction is calculated as an approved percentage. Different rules apply if the credit period offered to customers is more than 93 days.
Complete planned maintenance or repairs before year end for a tax deduction. Ask us if you aren't sure whether the expenditure is classified as repairs and maintenance (which would be deductible) or as a capital expense (which wouldn't).
Dispose of obsolete stock by year end or write it down to its net realisable value (the lesser of cost or market value). If your stock is worth less than $10,000 and turnover for the year less than $1.3m, you won't need to include your stock movement for tax purposes.
Don't forget to note your odometer reading at year end. If you keep logbooks noting business and personal use, mileage and costs, ensure these are all in order.
Look for credit notes issued to customers after balance date but related to sales made prior to balance date. Note these so you can reduce your taxable income for the current year.
Is this year's income a lot higher than last year's? If so let us know. It might be a good idea to consider making a voluntary provisional tax payment.
Did your group of companies have losses in 2016? Groups of companies may offset profits and losses against each other if you make loss offset elections and subvention payments by 31 March. We can help you with this.
Check contracts for the terms on retentions owing. Have you invoiced retentions but they are not payable till work is complete in a subsequent tax year? They won't count as assessable income for this year. However, If they are payable this year they are assessable income. Note retentions you have invoiced which are not receivable till the next tax year.
Review planned dividend payments. Your imputation credit account must be in credit at 31 March or penalties arise. Contact us before 31 March so we can help you.
Inland Revenue are rolling out other changes to how New Zealanders file and manage their GST as part of ongoing business transformation. More than half New Zealand's businesses now file their GST through Inland Revenue's secure online service myIR, or direct from their accounting software. If this includes your business, you may have noticed there's a new myGST tab on your myIR account. This will provide access to all your GST information.
Taxpayers are now able to use this to register for GST, register as a preparer of tax returns, amend GST returns and accounts, file and pay GST at the same time, set up payment plans, and track GST payments and refunds online.
This is on top of the recent changes for some taxpayers who are now able to prepare and send GST returns to Inland Revenue from their accounting software.
If you would like to talk about how your GST is currently being managed and how the changes might work in practice for you, please contact us.
Faster GST refunds
It is now compulsory for Inland Revenue to provide GST refunds by direct credit to a taxpayer's identified account, resulting in faster GST refunds. Obviously it's important that Inland Revenue has your correct banking details. If you would like us to confirm they have your current account details please let us know.
From here on, Inland Revenue will only make GST refunds by cheque if they do not have a customer's bank details or if there are extenuating circumstances, such as hardship.
Are you ready for the tax changes taking effect from 1 April 2017?
1 April 2017 heralds some important changes for taxpayers and their advisers. Most of the changes are business friendly and are designed to reduce compliance costs. The changes are contained in the recently enacted Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act.
The following list of changes has been extracted from the 2017New Zealand Master Tax Guide(Wolters Kluwer).
The current residual income tax limit of $50,000 before use of money interest is imposed will be increased to $60,000, and this safe-harbour rule will be extended to non-individual taxpayers.
Use of money interest will be removed for the first two provisional tax instalments for all taxpayers who use the standard (uplift) method to calculate and pay provisional tax.
Contractors subject to the schedular payment rules will be able to elect their own withholding rate. The schedular payment rules will be extended to contractors that work for labour-hire firms. Contractors not covered by the schedular payment rules will be able to opt in to the rules with the consent of their payer.
The 1% incremental late payment penalty will be removed from GST, provisional tax, income tax and working for families tax credit overpayments.
The Commissioner will be able to disclose tax debt information for the most serious cases of non-compliance to credit reporting agencies, and provide information to the Registrar of Companies in certain circumstances.
The self-correction threshold for minor errors will be increased from $500 to $1,000.
The threshold for annual FBT returns will be increased from $500,000 to $1,000,000 of PAYE/ESCT.
Taxpayers will be able to choose whether to apply the existing 63-day rule for employee remuneration.
The motor vehicle expenditure rules in subpart DE of the Income Tax Act 2007 will be extended to allow certain close companies to use the rules as an alternative to paying FBT.
A simplified method for the calculation of deductions for premises and vehicles that are used for dual purposes is being introduced.
RWT exemption certificates will not need to be renewed annually.
NZ Superannuation age going up to 67
On 6 March 2017, the Prime Minister, the Rt Hon Bill English, announced that the Government will progressively lift the age of eligibility for NZ Superannuation by six months each year from July 2037 until it reaches 67 in July 2040. This means everyone born on or after 1 January 1974 will be eligible for NZ Superannuation from age 67.
In a related media statement, the Minister of Finance, the Hon Steven Joyce, said that progressively lifting the age of entitlement to New Zealand Superannuation from 65 to 67 is the responsible and fair thing to do for New Zealand.
There will be no change to other settings such as indexing NZ Superannuation to the average wage. Universal entitlement without means testing will also remain unchanged,
The age that KiwiSaver funds can be accessed will remain at 65.
The change will be legislated for in 2018, after the election on 23 September 2017.
Included in the legislation will be provision for parliamentary consideration of any need for any temporary transition requirements in 2030.
Mr English said that the proposed changes will bring New Zealand into line with other countries like Australia, the United Kingdom, Denmark, Germany and the United States, which are all moving to a retirement age of 67.
Source: Wolters Kluwer
Changes to Contractor Taxation – Effective from April 2017
The Government, as part of its change to modernise the tax system, recently passed a bill which changed the rules around Contractor Scheduler Payments. As a result, a labour hire or recruitment company, who sources and supplies its clients with contractors, now has an obligation to deduct the appropriate Withholding Tax from the contractor's pay.
What does this mean for a contractor?
The new bill requires every Contractor, subject to the schedule payment rules, to complete a Tax Rate Notification form (IR330C) which elects the Withholding Tax rate to be deducted from their payments. The tax rate is based on a projection of total annual earnings which best fits their individual tax liability.
If a contractor does not provide the company with an IR330C form, a 45% rate of Withholding Tax is applied. Contractors may not be financially prepared to manage, anything from, a 20% to 33% deduction from their April pay. Furthermore, a Contractor's March invoice dated 31 March but paid in April falls in the April 2017 tax period so will have Withholding Tax deducted. If a Contractor has already paid provisional tax on their anticipated earnings to March 31 2017, they will be double taxed. We have queried the IRD as to how to handle this scenario and will update this announcement when we get an answer.
• When your company pays your contractors in April, you must have communicated the change and implications to all your contractors.
• You must have distributed the IR330C form
• The contractor must have completed the IR330C form and elected the appropriate Withholding Tax rate and returned the form.
• You must have collected the IR330C
• You must ensure the tax rate supplied by the contractor is accurate by comparison to their earnings.
• You must calculate and deduct the appropriate withholding tax, which then needs to be filed and paid to the IRD before the 20th of May 2017.
Source: The Detail
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.