|
ACC Premium Returns to List of Tax Facts
What is ACC Premium?
The Accident Compensation Corporation (ACC) gives full personal injury cover for all residents and visitors to New Zealand.
Do I need ACC Premium?
If you are an employer, you are responsible for maintaining a safe work place and providing ACC cover for work related injuries. As a sole trader, you will be given ACC cover as soon as you start trading. You will need to pay for this cover when you submit your first tax return.
What will my ACC Premium Cost?
ACC Premium costs are worked out on a classification unit rate which is based on the cost of work related injuries within your classification unit. Your classification unit rate will depend on which industry your business is in. You will also pay the Residual Claims Levy which covers injuries occurring before 1999 and follows a rate set for your industry. The Health and Safety in Employment Levy costs 5c for every $100 of liable earnings.
Want to find out more about ACC Premiums?
Give us a call and we’ll happily go over it with you, or find all the information you’ll need at the ACC Website.
Depreciation Returns to List of Tax Facts
What are Depreciation Allowances?
Depreciation allowances are given for most assets within your business which have a lifespan of more than 12 months and you are required, by the IRD, to claim your depreciation allowance on all applicable assets.
Which assets do I need to claim depreciation allowances on?
Generally, you will need to claim a depreciation allowance on all company assets with life spans longer than 12 months.
However, there are exceptions to this rule.
For example, you will not claim a depreciation allowance on land or on low-value assets which cost less than $500.
For full details on depreciation allowances and what you need to claim, please check the IRD Depreciation Guide.
What do I need to do?
You are required to keep a fixed asset register which shows how your assets are depreciating.
The tax value of each asset will be lowered in line with the ongoing calculated depreciation since purchase.
Your fixed asset register should show the depreciation allowance you’ve claimed for each asset, along with its adjusted tax value.
Need some help?
Entertainment Returns to List of Tax Facts
What are Entertainment Expenses?
An entertainment expense is a cost which has been incurred for business reasons and can be deducted from your income.
You can claim for entertainment expenses in the following circumstances:
• The expense was incurred mainly in connection with specific business transactions
• You were entertaining an existing or prospective client or supplier
• The circumstances made it necessary to discuss business along with entertainment
• You entertained employees for goodwill reasons – parties, functions, etc
How much can I deduct?
Entertainment expenses are either fully deductible or 50% deductible – depending on the type of expense incurred.
Examples of entertainment expenses which are only 50% deductible include:
• Corporate box costs
• Holiday accommodation charges
• Pleasure Craft
• Food and Beverages consumed in certain circumstances
Should I keep records?
Yes, definitely.
You should keep records, receipts and invoices for all business expense claims.
For all entertainment related expenses, you must also keep details of:
The Health and Safety in Employment Levy costs 5c for every $100 of liable earnings.
• The date the expense was incurred
• Names of people being entertained
• Details of the business they represented
• The positions they hold
• Reason for the entertainment
Got a question?
Get in touch and we’ll happily explain further about entertainment expenses.
You can also find out more from the IRD Entertainment Expenses (IR268) booklet.
Fringe Benefit Tax Returns to List of Tax Facts
What is Fringe Benefit Tax?
Fringe Benefit Tax (FBT) is a tax on the benefits which employees may receive as a result of their employment.
This includes benefits which are provided by somebody other than the employer.
Do I need to pay FBT?
If you are an employer you’ll need to pay Fringe Benefit Tax on all benefits given to your employees which are additional to their salary or wages.
Which benefits are liable for FBT?
You are liable to pay Fringe Benefit Tax on most benefits you give your employees over and above their salary or wages, however the following are the categories which most commonly incur FBT.
• Motor vehicles
• Low interest loans
• Subsidised/discounted goods & services
• Employer contributions
• Entertainment
• Private Telecommunications
Need more information?
Contact us and we’ll be happy to discuss Fringe Benefit Tax with you further.
You can also check out the Fringe Benefit Tax section of the IRD website for more detailed information.
Gift Duty Returns to List of Tax Facts
Should I pay Gift Duty?
Gift Duty has now been abolished, meaning you will no longer need to pay it on gifts given after September 30th 2011.
What about gifts made earlier than that?
If you made gifts before October 1st 2011 you may still need to pay Gift Duty.
Even if Gift Duty is not applicable to the gifts you have made, you could still need to record details of these gifts with the IRD.
If you made gifts of more than $12,000 in any 12-month period before October 1st 2011, you must fill in a Gift Statement (IR196).
What if I made gifts to charitable trusts?
If you made gifts exclusively for charitable purposes, these gifts are exempt from Gift Duty.
However, from July 1st 2008, gifts made for charitable purposes do need to be registered by the Charities Commission for the gifts to be exempt from gift duty.
Still not sure?
Contact us and we’ll be happy to discuss the current situation with Gift Duty further.
GST Returns to List of Tax Facts
What is Goods and Services Tax?
Goods and Services Tax (GST) is the tax paid on the supply of goods and services in New Zealand.
GST is applicable to all registered people on any taxable activity they carry out.
Do I need to register?
If your annual turnover is more than (or expected to be more than) $60,000, you are required to register for GST.
How much is GST?
GST is currently set at 15%, although it can be zero-rated for exports.
Are there any other exemptions?
Yes.
Certain supplies of goods and services are exempt from GST. These include:
• Certain financial services
• The sale/lease of residential properties
• Wages/salaries and most Directors’ Fees
How much is GST?
You can file your GST returns monthly, every two months or every six months.
Depending on your circumstances you may be required to file your GST returns monthly or you may not have the option of six monthly returns.
How do I account for GST?
There are three ways of accounting for your GST:
• Invoice Basis
• Payments Basis
• Hybrid Basis
Kiwisaver Returns to List of Tax Facts
What is the KiwiSaver?
The KiwiSaver is a voluntary, work-based savings initiative open to all New Zealanders under the age of 65.
How does it affect me?
If you are an employer, you must now ensure that all new employees are enrolled in KiwiSaver, unless they are:
• Under 18
• Casual agricultural or Election Day workers
• Private domestic workers
• Casual or temporary employees whose contract is 28 days or less
Existing employees are able to join the scheme at any time by informing their employer.
How do the contributions work?
Employee Contributions
An employee can choose to make contributions of either 2%, 4% or 6%. Should no option be chosen, the default contribution is 2%. (Note: this has changed to 3% on April 1st 2013)
Employer Contributions
Employers must make a contribution of 2% but this will has risen to 3% on April 1st 2013.
Employer contributions will be subject to Employer Superannuation Contribution Tax (ESCT) at the employees’ marginal tax rate.
Government Contributions
The government contributes a tax-free amount of $1000 to new members and pays annual member tax credit of up to $521.43.
There is also government funding for first home deposits when relevant criteria is met.
Is there anything I need to do now?
Yes, you must:
• Give interested new and existing employees an Employee Information Pack (KS3)
• Pass employee details to the Inland Revenue so they can be enrolled
• Deduct contributions from employee gross salaries and pay via PAYE
I’d like to know more about the KiwiSaver
Please get in touch and we can explain more about your KiwiSaver obligations.
You can also find out more from the KiwiSaver for Employers section of the IRD website.
PAYE Returns to List of Tax Facts
What is PAYE?
PAYE is an abbreviation for Pay As You Earn and it is the basic tax taken out of your employee’s salary or wages.
Each employee will have their own tax code and this code will determine how much PAYE you need to deduct from their gross salary or wages.
How do I get an employee’s tax code?
When a new PAYE employee starts working for you, you must have them complete a Tax Code Declaration (IR 330). You will then be issued with the employee’s current tax code.
Should an employee fail to complete a tax code declaration you must deduct PAYE at the standard non-declaration rate.
What else do I need to do as an employer?
You must also file an Employer Monthly Schedule with the IRD, which details each employee’s gross earnings and deductions.
If your gross annual PAYE is more then $100,000, you must file your schedule electronically, using the IRD’s IR File system.
Not sure what to do?
Give us a call and we can have a look together at how your PAYE is working.
Alternatively, you can find lots more PAYE information on the IRD website.
Provisional Tax Returns to List of Tax Facts
What is Provisional Tax?
Provisional tax is simply a way of paying your income tax as the income is received across the year.
How does it work?
You pay instalments of income tax throughout the year and each instalment is based on what you expect your tax bill to be.
At the end of the year, the amount of provisional tax you have paid is deducted from your actual tax bill.
If, after deducting the amount you have paid from your final tax bill, you still owe tax, this figure is known as your residual income tax.
If your residual income tax is $2,500 or above, you will need to continue paying provisional tax the following year,
How do I work out my Provisional Tax?
There are three ways of working out how much provisional tax you will need to pay:
• Standard option
• Estimation option
• Ratio Option
Standard Option
The IRD will automatically use this option unless you have chosen one of the other two options.
The standard option takes your residual income tax for the previous year and applies an uplift of 5% to that figure.
Estimation Option
With this option it is up to you to estimate what your residual income tax will be.
All estimates must be fair and reasonable.
When working out your estimation it’s best to:
• Add together all your estimated income
• Calculate the tax on that total
• Subtract any tax credits (e.g. PAYE)
Note: if your estimation is too low and you underpay, you may be liable for interest on the underpaid amount.
GST Ratio Option
This is a less common option and is only open to those registered for GST.
If you are GST registered, you may be able to use the ratio option and pay your provisional tax at the same time as your GST payments. But only when:
• You’ve been in business and GST registered for the entirety of the previous two tax years
• Your residual income tax for the previous year is more than $2,500 but less than $150,000
• You file your GST returns either monthly or bi-monthly
• Your business is not a partnership
• Your IRD calculated ratio is between 0% and 100%
This method of payment does not suit everybody and we recommend you have a chat with us before deciding to use the ratio option.
Still need to know more?
We’re always on hand to help you understand your provisional tax options. Just give us a call.
There’s plenty more information available on the IRD website too.
Resident Withholding Tax Returns to List of Tax Facts
What is Resident Withholding Tax?
Resident Withholding Tax (RWT) is the tax on interest earned from your investments and bank accounts.
The bank or investment company will deduct this tax from the interest they pay to you.
You may also deduct withholding tax from the dividends you pay to your shareholders.
How does Resident Withholding Tax affect me?
If part of your income is made up from interest you’ll need to:
• Give your IRD number to the bank or company which pays you the interest
• Elect which tax rate they should use to make their deductions
How do I elect the correct tax rate?
RWT tax rates vary depending on you and the type of business you’re in.
To find out more about RWT and your tax rate, give us a call and we can look at it with you, or find out more from the RWT section of the IRD website.
Tax Credits (rebates) Returns to List of Tax Facts
Can I claim tax credits?
Companies, trusts and partnerships cannot claim tax credits.
However, you as an individual may be due tax credits if you have:
• Made donations to an approved charity of $5 or more
• Paid for childcare or a housekeeper
To claim in either of the above instances, you must have earned taxable income during the claim period and lived in New Zealand at any time during the tax year.
What should I do next?
If you claimed tax credits on a charitable donation, childcare or a housekeeper in the last financial year then the IRD will automatically send you a Tax Credit Claim form (IRD 526) for this year.
If this is your first claim, download the latest version of the IR526 here.
How do I elect the correct tax rate?
RWT tax rates vary depending on you and the type of business you’re in.
To find out more about RWT and your tax rate, give us a call and we can look at it with you, or find out more from the RWT section of the IRD website.
Tax Payer Penalties Returns to List of Tax Facts
What are tax payer penalties?
As you might expect – if you fail to pay your taxes by the due date, you may receive a penalty or interest charges on the amount you owe.
Are the different types of tax payer penalty?
Yes – if you receive a penalty, it will most likely fall into one of the following categories:
• Shortfall Penalty
Your actual amount of tax owing is higher than the amount you have paid.
This can occur if there is an understatement of tax or if the amount of a refund is reduced.
• Late Payment Penalty
Should you post or deliver a payment to the IRD after the due date, you may receive a late payment penalty.
• Late Filing Penalty
You may receive a late filing penalty if you do not file your return by the due date.
If you have underpaid your tax, you will need to pay interest on the amount of tax you owe.
The interest rate you’ll pay is based on market rates.
• EMS non-payment penalties
You may receive an EMS non-payment penalty if you file your employer monthly schedule but don’t pay the full amount owing, according to the schedule.
These penalties could be in addition to any other penalties which may become payable.
Need more info on tax payer penalties?
We’re here to help you avoid ever receiving tax payer penalties, but should you have been issued with a penalty, or you just wanted to discuss penalties further, please give us a call and we’ll happily talk it through with you.
You can also find out more from the Obligations, Interest & Penalties Guide on the IRD website.
|
RESOURCES
