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Johnston Associates South Chartered Accountants

Serving the Nelson Marlborough and Blenheim regions

News

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New law will make dirty money easier to spot

Money laundering is big business in New Zealand. Every year $1.35 billion of fraud and drug-related money is laundered through seemingly legitimate businesses. In response, the Government introduced specific Anti-Money Laundering and Countering Financing of Terrorism legislation to address this risk.

Previously, only a few types of organisation had to comply with the legislation. Following amendments to this legislation passed last year, it is now confirmed that this legislation extends to these groups taking effect from these dates (or earlier if the Government legislates by an Order in Council):

1 July 2018: lawyers, conveyancers and businesses that provide trust and company services
1 October 2018: accountants who provide particular kinds of business services
1 January 2019: real estate agents
1 August 2019: businesses trading in high-value goods, sports and racing betting

If you are in any of these categories, of course you must make sure that your business complies. We can point you in the right direction. But please also note that as your accountant we are in one of the categories that must comply with the changes. And to do this, be aware that we will sometimes need to ask you for more information than we have in the past. This is because we need to be able to document that we have verified your ID and both you and your business entities are all above board.

For more information don’t hesitate to contact us.

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Provisional tax changes explained

We are fielding a few queries about the provisional tax changes that apply from the 2018 tax year onwards.
Below is a summary of the new rules for taxpayers who use the standard method to calculate their payments.

Smaller taxpayers (including companies and trusts)

Inland Revenue (IRD) has changed what it calls the ‘safe harbour’ provision.

If:

  • Your actual income tax liability for the year is less than $60,000; and
  • You paid the tax amount required as per the standard method at your three provisional tax dates.

Then:

  • You will not be charged IRD interest if you did not pay enough provisional tax, provided you pay the final balance by your terminal tax date.

The safe harbour threshold was previously $50,000 and applied to individuals only.

Medium and larger taxpayers

The second change affects medium and larger taxpayers.

If:

  • Your actual income tax liability is $60,000 or more; and
  • You paid provisional tax for that year based on the standard method.

Then:

  • You won’t be charged IRD interest if you paid the amounts of tax due as per the standard method at your first and second instalments, even if your actual liability is higher.
  • The final balance will be due at your third provisional tax date. IRD interest applies on any underpayment or overpayment of tax from the third provisional tax date.

Capping the liability at the first and second instalments provides certainty, particularly if your income is volatile or seasonal.

Having the final balance due at the third provisional tax instalment is sensible because you should have a good estimation of your actual liability by then.

For more information please contact our tax experts.

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End Of Tax Year Checklist

The end of the tax year is on 31 March 2018. Here are a number of ways you can straighten things up in advance:

Think about. …Deductions

Bad Debts
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.

Employee Expenses
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.

Expenses
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.

Fixed Assets
Are you still using all of them? Can some be written off?

Repairs/Maintenance
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).

Stocktake
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.

Vehicles
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.

Think about.…Income

Credit Notes
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.

Increased Income
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.

Losses
Did your group of companies have losses in 2017? 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.

Retentions
Check contracts for the terms on retentions owing. Have you invoiced retentions but they are not payable until 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 until the next tax year.

If you have any questions or concerns regarding your end of tax year preparation then don’t hesitate to contact us – we are here to help.

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Claiming expenses when away on business

You can claim for lots of daily expenses when you’re travelling for work. If you take a holiday as part of the same trip, you can only claim for the parts of the trip that were work-related.

What can you claim?

In general, when you’re away from home you can claim for:

  • flights
  • taxis, or mileage if you use your own car for business travel
  • accommodation
  • meals and snacks.

Accommodation

If you’re attending a work-related meeting, conference or training course that requires an overnight stay, you can claim the cost of accommodation, eg hotel, motel or short-term rental.

If an employee is working away from home for an extended period, eg on secondment, you can claim for accommodation, or any accommodation allowance you pay, as long as they won’t be gone for more than two years (or three years for capital projects).

Food and drink

If you or one of your employees buys a meal while travelling on business, the cost is 100% deductible. But you can only deduct 50% of the cost of food and drink if either:

  • the trip is mainly for the purpose of enjoying entertainment, eg a team bonding trip
  • the meal or function involves an existing or potential business contact as a guest
  • a celebration where you won’t be working, eg a reception, or a staff Christmas party
  • you or your employees can also claim for snacks and refreshments, eg tea and coffee, while they’re away if you normally provide these refreshments at work.

Entertainment

On a work trip, you can claim the cost of entertainment if its purpose was to:

  • build up business contacts, eg taking a potential client out for dinner
  • keep your employees happy, eg providing tickets to a show
  • promote your goods or services, eg offering food to entice customers to a stall at an expo.

If the entertainment is helping you earn your income, it’s usually deductible when it’s time to work out your tax.

Within New Zealand, entertainment expenses can be either 50% or 100% claimable — check with Inland Revenue.

If you’re travelling overseas, you can claim 100% of work-related entertainment expenses.

For expert tax advice speak to our experienced tax team – we’re here to help.

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Business Advisory – Assistant Client Manager

We are recruiting…
Business Advisory – Assistant Client Manager

Required for one of the fastest growing accounting firms in the top of the South Island. This progressive three partner CA firm has an impressive reputation in the market for the quality of its business advisory, and professional accounting services in the Nelson, and Marlborough regions. The firm offers leading technical expertise in a number of areas, including financial accounting, management reporting, tax, management consulting, and advisory.

We work with a wide range of clients across industries such as aquaculture, manufacturing, construction, agriculture, horticulture, viticulture, forestry, retail, property development, and hospitality to name just a few.

We have a great opportunity for a bright individual, at a junior level, to join our advisory team in Nelson. We seek an Accountant with a depth of experience and an understanding of the complexity of finance operations, reporting requirements, and best practice around systems, controls, maintenance and configuration.

Your strong relationship management skills will compliment your ability to interpret business needs and your customer service approach will enable you to provide the appropriate level of business support, financial modelling, and reporting that our clients require.

This is a multifaceted role which will suit a candidate with strong hands-on financial ability, along with commercial nous to work within an environment which is busy, and yet has a youthful energy about it.

Ideally, you will have:
– The ability to communicate and liaise effectively across the organisation, and with clients.
– A solid and proven background in the core accounting roles.
– A commercial understanding around systems, inventory, cost control, budgeting, forecasting, and reporting.
– Excellent system skills with the ability to interpret data quickly and efficiently.
– A mind for numbers and the ability to translate numbers well for nonfinancial stakeholders
– The ability to manage multiple projects and work effectively to deadlines
– A strong customer focus and be known for your ability to build & maintain effective relationships.
– Attention to detail.
– Self-motivated and enjoy working as a team.
– Thrive on quality and success.
– Experience with a number of accounting systems such as CCH iFirm, MYOB, AO, Banklink and Xero is advantageous but not essential as full training will be given to the suitable candidate.

What you need:
– 3+ years of BAS experience in a New Zealand CA environment.
– Excellent verbal and written skills, and the ability to liaise with a range of clients.

This role offers a competitive salary for the right candidate as well as ongoing professional development, and external training courses. We are an ATE and will support your professional development through in-house and external training.

To register your interest and to find out more about this opportunity, please contact Ben Halliday: bhalliday@jacal.co.nz

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Several ways taxpayers can get caught out

Taxpayers who earn income from various sources may get caught short if they don’t plan ahead. This could come about in various ways:

• Airbnb
• Overseas investment
• Shares in an overseas company

AIRBNB INCOME

If you rent rooms or homes through Airbnb, you may not realise that the IRD considers you to be a landlord. Your rental income must be included in a tax return.

If you’re unsure of your tax obligations please consider speaking to one of our tax experts.

OVERSEAS RENTAL PROPERTY

You must declare any rental income you get from properties overseas. You can claim deductions for rental-related expenses, and you may also be able to claim a credit for tax paid in the other country on that income.

Complexities can arise when loans and mortgages are held overseas. Call us if this applies to you.

OVERSEAS TRUSTS

Under New Zealand law, trust matters are settlor-based. This means New Zealand tax treatment of the trust depends on where the settlor of the trust lives. As a trust does not have a legal personality, there is no concept of residency for trusts. However, a trust is recognised as a taxpayer, so New Zealand generally verifies the residency of the trustee to determine which income of the trust is subject to New Zealand tax.

IF YOU OWN SHARES IN A FOREIGN COMPANY

You will have to pay tax in New Zealand on foreign share dividends unless:
• You are a transitional resident, or
• The shares are subject to the foreign investment fund or controlled foreign company rules.

Dividends paid by overseas companies to transitional residents or non-New Zealand tax residents are not taxable in New Zealand for the transitional period.

The rules surrounding Foreign Investment Funds and Controlled Foreign Companies are complex and you should get professional advice on the taxation of offshore investments, whether from us or your financial advisor.

OVERSEAS-ISSUED CREDIT/DEBIT CARD

Having an offshore credit or debit card may or may not trigger New Zealand tax obligations. Note, though, that even if foreign withholding tax has been deducted on foreign income, that does not necessarily mean the income is no longer taxable in New Zealand.

It can be tricky to work out your tax position. Call us if you’re not sure, we’re here to help.