Inland Revenue Archives – Page 2 of 3 – Johnston Associates Chartered Accountants

21st September 2015 by Janine

Taxation (Land Information and Offshore Persons Information) Bill

The Taxation (Land Information and Offshore Persons Information) Bill has had its first reading in Parliament and is on track to be implemented on 1 October 2015. As the Bill currently stands, it will affect most property transactions settling from 1 October 2015.

If you are going to be affected by this Bill take you should take the necessary steps to obtain an IRD number if you do not already have one. If you are an ‘offshore person’ you will also require a New Zealand bank account number.

All Trusts will need their own IRD numbers whether Transferor or Transferee. That includes non-income generating ‘passive trusts’ that own the main home, regardless of who is in occupation.

Resident IRD applications must be posted to IRD. However, non-resident (offshore) IRD number applications can be emailed to IRD, click here for more information. Non-resident (offshore persons’) applications are likely to take longer because of the need to open a New Zealand bank account and meet anti-money laundering and Foreign Account Tax Compliance Act requirements.

The only exception to requiring an IRD number is a transaction involving private individuals where the property has been, or is intended to be used as a main home. There will be additional exemptions for estates etc. in the Regulations. However, these have not yet been produced.

Please contact us if you have any questions regarding the Taxation (Land Information and Offshore Persons Information) Bill, and whether you need to take any further action, please contact us.

20th August 2015 by Janine

Tips for starting out and thriving in small business

New Zealand is a nation of small businesses…

97 per cent of enterprises in New Zealand are small businesses. These 459,300 enterprises include those with no employees, micro (1-5 employees), and small (6-19 employees) enterprises.

New Zealand Government Small Business Sector Report 2014

These businesses generate about a third of the country’s GDP; and most importantly they are the backbone of entrepreneurial talent and innovative ideas.

Here at Johnston Associates South, Chartered Accountants for Nelson & Marlborough, we’re proud to be called upon to advise many start-ups, and love seeing our small business clients grow sustainably.

If you’re thinking of starting up in business, we want to help. We called upon four of our team to give you their top tips for “starting out and thriving in small business…”

Get the cash flowing. One of the most important facets of running a successful business is cash management. If you’re starting out you need to initiate cash flow as soon as possible. Consider asking for deposits on work or high-ticket retail items up-front, with balances due on delivery. If you need advice on jump starting your cash flow contact us… Did I mention that if you’re starting out in business it’s really important to get the right advice from your trusted Chartered Accountant… Us! – Dean Steele

The devil’s in the detail! All the most successful projects start with a plan. That said before you get too bogged down in the detailed planning for your business, you should first consider what you want from the business and how you are going to achieve those goals. Certain key issues will determine your business’ ability to compete in the marketplace, whether you are setting up a new business, or acquiring an existing one. Remember our business advisory team can help you with this and so much more. – Ben Douglas

Your records matter… Keep good records. Before starting out I’d recommend you discuss with your Chartered Accountant the form your business records should take. It’s important to think about not only the filing of documents, payment of wages, banking and other records – but also the extent to which you should maintain records that will assist your Chartered Accountant in preparing your financial statements. – Brad McNeill

Prepare for one of the certainties in life… Taxes! Tuck away twenty per cent of all sales or payments received in an interest-bearing account for tax and ACC. That way you’ll always have funds available when you need them. You’ll avoid falling behind in payments and incurring interest, penalties and grief from IRD debt management staff. – Kelvin Scoble

6th July 2015 by Janine

Common tax traps to avoid

It’s the latest post from Kelvin, our resident Tax Consultant.

TaxTrap

As a tax advisor I’m often asked by people at social events what the most common errors are that I see in the course of my work.

This is not an easy question to answer because taxpayers come in all shapes and sizes, the rules are many, varied and occasionally complex, and some scenarios simply have to be seen to be believed.

Notwithstanding that, however, if we focus on SME and individual taxpayers, and if we think of them in the context of Inland Revenue’s current compliance focus and the types of perennial risks tax auditors are very good at spotting, here’s a quick grab bag of issues which immediately spring to mind:

Property transactions: the new two-year disposal rule and a doubling in Property Compliance Project funding over the next five years means the ranks of IRD auditors are set to swell. This sector is now in the full glare of a very bright compliance spotlight. Combine that with IRD’s extensive information-gathering powers and sophisticated analytical techniques and it quickly becomes obvious how critical it is to get the tax treatment of land transactions right first time. Mistakes are costly (the PCP currently returns roughly $6 in additional tax for every $1 expended) so the golden rule continues to be get good advice as early as possible. Bottom line – only a fool would assume that all of the increased attention will be directed at Auckland and Christchurch.

Hidden economy: basically cash transactions and suppressed income. The heat will continue to go on the hospitality sector while a big (and very visible) push has just started on tradies. Don’t wait for the IRD to come knocking on this one. Their default assumption if they find any mischief is likely to be tax evasion. That means potential criminal charges and serious consequential outcomes.

International: for present purposes that means immigrants and Kiwis returning home after extended periods overseas. Lots to think about here including tax holidays for transitional residents, the correct tax treatment of all worldwide income, potential application of Double Tax Agreements, special rules for foreign currency loans and bank accounts, other special rules for overseas investments and interests in foreign superannuation schemes, and what IRD may want to know if you use foreign credit cards to pay for goods and services here in NZ.

Trusts: after a long period of serious analysis about where trusts fit in the NZ tax landscape, there are signs this has become an area of targeted enquiries by IRD. Although they remain tight-lipped over this particular stream of work, obvious areas of interest to IRD auditors include the accumulation and use of tax losses and “Penny-Hooper” issues arising from the diversion of personal services income.

GST and zero-rating for land: while the CZR rules are complex around the margins, frankly I’m amazed how often people get this wrong. This sets them up for preventable problems that are time consuming and costly to resolve. Seek advice on your position before any contract to buy or sell land goes unconditional.

GST and “lifestyle” choices: main warning signs here are low or no annual income, irregular sales and perpetual refunds. List of usual suspects here is headed by registered owners of small rural landholdings, homestays, charter boat operators and other interests that look more like private recreational pursuits than genuine taxable activities. Beware also the obligations you have to pay GST on any assets that are retained on deregistration.

Other GST issues: these tend to be more technical and less well known to the average punter. They include special time and value of supply rules for transactions between associated persons, deferred settlement rules and annual adjustments to correctly account for any non-taxable use of business assets.

Look-Through Companies: correct application of Owners Basis rules and tax issues arising from buying or selling LTC interests.

Please note that this column is general in its nature and there will always be exceptions to any rule expressed or inferred above. Tax is all about detail and it is very rare for any two situations to be precisely the same. If you are in any doubt please discuss your concerns with your advisor.

11th June 2015 by Janine

Keeping great records.

RecordKeeping As your Nelson and Marlborough based Chartered Accountants it’s time for us to start concentrating on the preparation of your Annual Accounts, and so we’ll be asking you to complete the Johnston Associates South 2015 Client Questionnaire, so we can begin preparing some of your records.

Why it’s important to keep your records.

Business Growth. Keeping good records will ensure you have all the information you need to manage your business and make sound decisions in terms of business strategy.
You’ll save money. Time is money and having everything to hand will save you costs somewhere along the line.
To prove your deductions are legitimate. The IRD carry out routine business audits, if this happens to you, having your financial records organised and on hand will definitely make the process smoother and faster.

How long do you need to keep them for?

Accounting records and all the associated documents must be maintained for the current accounting period and the last 7 completed accounting periods of the company

What should you be keeping?

details of all income received (copies of invoices issued etc);
all tax invoices and receipts for purchases, insurance, power, phone and all other costs incurred; (For GST you do not need to hold a tax invoice for items costing less than $50, but you do need to maintain a record of such payments. For income tax, you should have invoices for all expenses, whatever the amount).
credit and debit notes;
bank statements;
cash books or computerised accounting records;
wage records for any employees;
interest and dividend payments;
a list of business assets and liabilities;
motor-vehicle log books;
details of entertainment expenses for clients, staff or suppliers;
any other necessary documents to confirm entries in your accounts.

But there’s more…

The Companies Act 1993 sets out the statutory record keeping requirements for all registered New Zealand companies. These requirements include the retention of;

Company Constitution
Minutes And Resolutions
Written Communications To Shareholders
Register Of Directors
Register Of Interests
Share Register
Financial Statements
Accounting Records

If you do have any questions regarding your obligations, or what records are prepared by us as part of your Annual Accounts please feel free to contact us.

2nd March 2015 by Janine

Update for Overseas-Based Student Loan Borrowers

As your Nelson based Chartered Accountants it’s our job to keep you abreast of changes that may affect you. Are you an overseas-based Student Loan borrower?

The government’s clampdown on overseas-based Student Loan borrowers has moved up another gear with John Key and Tony Abbott confirming an extension of information sharing arrangements during their annual leaders meeting late last month.

The arrangements are designed to give Inland Revenue more teeth to enforce the collection of Student Loan debt and follow on from a suite of tough measures introduced in last year’s budget, including potential arrest at the border for borrowers who persistently fail to meet repayment obligations.

Inland Revenue’s moves to beef up its capability across the Tasman drive off the fact that two-thirds of the nearly $700 million in delinquent non-resident Student Loan debt currently resides with Kiwis in Australia. The latest round of talks confirmed that tax officials in Australia would be able to provide up to date contact information to their colleagues in New Zealand.

Inland Revenue’s expanded reach means it has progressively initiated more legal proceedings in Australia in its own right. While this is to be expected some aspects which are less widely understood are that Inland Revenue also has the ability to use statutory powers granted to the ATO to enforce New Zealand court judgments for Student Loan debt. This may be done through a combination of charging orders on assets, compulsory deduction orders on salary payments, seizures of property and, in worst case scenarios, forced bankruptcy.

Because targeted funding and increased enforcement capabilities have made Inland Revenue more active and more effective in this space, the collection of Student Loan arrears is expected to remain a major focus for compliance and enforcement activities over the months and years ahead.

We note that arrangements similar to the trans-Tasman framework are also being made with other countries, including the UK, although they are in most respects works in progress.

Given the surge of activity in this area we recommend that anyone who needs further information about Student Loan obligations for non-resident borrowers consults the IRD website HERE.

24th January 2013 by Janine

Do you have a bill to pay by 7th February?

7_Feb_Cal

As your Nelson and Marlborough based Chartered Accountants we would like to remind you about an important date coming up. Do you have an end-of-year bill to pay for your income tax, Working for Families Tax Credits, or student loan? To avoid penalties and interest it’s important that you pay before the deadline.

If you’re not sure how much you owe and and when your payment is due, as a Johnston Associates South client, you can find out by asking us to check your account details against those held with the Inland Revenue.

As a client of Johnston Associates South you might have more time to pay. Call us if you are at all unsure.

Why do you have to pay?

If you have a bill due 7^th February it will be for income tax, Working for Families Tax Credits or your student loan. There are a few common reasons why you might have an end-of-year bill to pay.

You’re earning either a salary or wages or are on a benefit
You’re self-employed or earning business income
You receive Working for Families Tax Credits
You have a student loan

Inland Revenue

New Zealand is a nation of small businesses…

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