What is the Wage Subsidy Scheme Developed by the Government and How Can You Apply for it?

What is the Wage Subsidy Scheme Developed by the Government and How Can You Apply for it?

What is the Wage Subsidy Scheme?

Last week, finance minister Grant Robertson announced a wage subsidy scheme which will be available for all employers that have been significantly impacted by COVID-19.

A few updates have been made to the scheme since it was announced last week which have been listed below.

The scheme intends to:

  • support employers adversely affected by COVID-19, so that they can continue to pay their employees
  • supports workers to ensure they continue to receive income, even if they are unable to work

The modified wage subsidy scheme is available to all businesses affected by COVID-19 which includes the following:

  • self-employed
  • contractors
  • sole traders
  • registered charities
  • incorporated societies
  • post-settlement governance entities

The subsidy scheme was modified as of 27th March, 2020, 3PM (NZDT) to help businesses that need to shut down under Alert Level 4, pay their workers for an extended period of time. The scheme will support employers and their staff to maintain an employment connection and ensure an income for affected employees, even if the employee is unable to work any hours.

The scheme excludes state sector organisations. The new modifications introduced as of 27th March state that businesses accessing the scheme must still undertake best endeavours to pay employees 80% of their pre-COVID income. If that is not possible, in case of businesses which have no activity whatsoever during the shutdown, they must pass on at least the whole value of the wage subsidy to each affected worker. Businesses must also undertake to keep employees in employment for the period of the subsidy. In addition to this, the previous separate sick leave payment scheme has been folded into this Wage Subsidy Scheme.

The subsidy is $585.80 per week for a full-time employee (20 hours or more) or $350 per week for a part time employee (less than 20 hours).

The payment issued by the government will be made as a lumpsum, covering a period of twelve (12) weeks. This essentially means that employers will receive a payment of $7,029.60 for a full-time employee and $4200 for a part time employee.

There is no more a maximum amount of assistance (previously $150,000) which a business can apply for. The cap which had been placed initially was lifted, and there have been no further modifications to this criteria which means the modified scheme is also uncapped. Businesses can also make new claims for any employees that they did not apply for under the original scheme.

Employers will be eligible for the scheme if they can show a 30% revenue drop attributable to COVID-19. Before receiving a subsidy, employers must take measures to manage the implications of COVID-19 on their business. These measures might include (but are not limited to) talking with their banks and drawing on internal cash reserves.

How can you apply for it?

You can apply for the Wage Subsidy Scheme by filling up the application form by clicking on the link:

For employers

For self-employed individuals

In order to make a successful application for the wage subsidy scheme, kindly ensure you fill up the right form, or your application won’t go through and you won’t qualify for the scheme.

To ensure that you fit the eligibility criteria, please read the decleration form carefully before making your submission. It is important to note here, that signing the declaration form without meeting the eligibility criteria, will have criminal implications.

Declaration Form: https://www.workandincome.govt.nz/online-services/covid-19/wage-subsidy-declaration.html

 Here are some steps on how you can go about the application process:

Step 1:

While filling the form you are to select one of the below situations:

  • your staff are in self-isolation (or caring for others)
  • your business’s revenue has dropped due to COVID-19.

Step 2:

While applying online you will need to provide the following information:

  • your IRD number
  • your business name
  • your business address
  • the names of your employers
  • your employee IRD numbers
  • contact details for your business and employees

Step 3:

After receiving all the details, the government will check whether you qualify for the Wage Subsidy scheme. They may get in touch with you if they need further information regarding the application you’ve made, in which case they will contact you by phone.

Step 4:

If your process is approved:

  • you will receive an email and text to confirm that the application has been approved and a payment has been made.
  • you will receive the payment after a short duration

if the application is declined, you will also be notified of the same.

Tax Treatment for Businesses

The wage subsidy scheme, and the previous COVID-19 leave scheme, are not taxable income in the hands of the employer and the amounts received are exempt from GST. When the employer passes the subsidy on to the employee, the amounts are not tax deductible expenditure to the employer. PAYE should be deducted from the employee’s pay when it is paid out.

Tax Treatment for Individuals

Payments made under the subsidy scheme to those that are self-employed is taxable income.

What Happens If You’ve Already Applied for the Scheme before 27th March, 2020, at 3PM?

If a business has already applied to for the original scheme, they are required to continue to use the funding received to pay their employees for a full 12-week duration as agreed to in the initial application. Any applications made prior to 3PM, Friday, 27th March will be assessed against the original criteria of the subsidy scheme when it was announced.

Application made on the 27th of March post 4PM will have the new criteria and obligations applied to their application.

 

If you have any questions regarding the Wage Subsidy Scheme or how to apply for it, you can get in touch with us on +64-9-972-2236 or email us on info@jzr.co.nz

 

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Working From Home: Here’s How to Make it ‘Work’

Working From Home: Here’s How to Make it ‘Work’

With the outbreak of COVID-19 internationally, and a lockdown ensuing March, 25th 2020, businesses around New Zealand, will have no option but to work from home. It’s key at this point in time to activate the social distancing measures laid out by the government to keep the spread of the virus in check.

It’s also 2020, and technology has moved leaps and bounds. This means that working from home or remotely is now easier than ever. There are certain challenges associated with remote working like the not being able to meet with clients face to face or getting your employees aligned and ensuring their productivity levels aren’t dropping, but all these issues are easily addressable in 2020 with the right tools and technology.

As an accounting and consultancy firm, our approach towards our practice is a 100% cloud based. This allows us to be more efficient in completing core accounting tasks and thus drives us with more capacity towards spending time on doing things which actually add value to your business.

We’ve outlined some great tools which your business can use or implement during this period to ensure that nothing much really changes apart from the act of physically commuting.

 

Cradle for Communication

Cradle is a great VOIP tool your business can use to keep your call records tracked and up to date. Cradle lets you skip the voice menu or receptionist when your customers call you. At JZR, we also use the system to prioritise and setup a call hierarchy system, which ensures when a call is made to the number, you can select who’d receive the call first before it comes to you.

Cradle is also a great indicator of your employee’s presence. It lets you know who’s online at their workstations and available to take calls.

 

Dropbox for Business

Having a file system sharing in place while working remotely is crucial for any business during this period to function normally. Whether its documents, videos, PDFs, images or videos, it’s a secure way of sharing files with the rest of your team. At JZR, we use Dropbox to ensure that files can be shared and accessed easily by all team members, wherever they are.

 

Xero for Accounting

Xero is an easy to use accounting software used by a lot of small and medium sized businesses, and a popular tool we use at JZR as well. Xero makes tracking payments and financial information a whole lot easier. Xero gives you a clear financial overview with its unique dashboard display feature which allows business owners to see how much money is coming in and going out. The software is easily accessible at anytime and from anywhere, and lets you easily create and track invoices.

 

Slack for Internal Communication

Communication is one major element that always seems to take a hit while working remotely. But not anymore. Slack lets you create channels where you can add all your team members, and then create smaller groups within the channel which can be departmentally specialised. You can chat, send photos, files and tag specific members when you need a response ASAP.

Slack is easy to use and a great way of keeping in touch with your team members throughout the day.

 

Google Hangouts, Skype or Zoom for Video Meetings

Communication with clients is a vital aspect of maintaining a positive relationship and ensuring that all tasks are up to date. With the outbreak, face to face meetings are definitely off the radar, but there’s a simple solution to this- video calls. Google Hangouts, Skype and Zoom are all great video communication tools you or your business can use to constantly keep in touch with clients or even for the purpose of any internal meetings or catch-up sessions.

Video conferencing is always a great way to reduce the number of back and forth email communication or any confusion that it may bring along with it. It’s a great and simple way to keep in touch with your clients as well as your team mates.

 

Asana or Trello for Task & Project Management

If you’ve got a project you’re working on, or trying to stay updated with team members on tasks within that project, Asana or Trello are the right tools for you. Both the applications let you create tasks, assign users to those tasks and organise them in priority of which they need to be completed.

This helps the entire team, stay up-to-date with the proceedings on particular task or project.

 

 

In conclusion, whether you’re forced to work at home or simply enjoy the freedom that comes with working remotely, these tools will help you get by your day-today tasks, just like any normal work day in the office.

If you’re business is facing any other issues or problems in the wake of this outbreak, please feel free to get in touch with us by contacting us on +64-9-972-2236 or email us info@jzr.co.nz.

 

 

Written by Rowain Pereira

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Upcoming Tax Changes In The Wake of COVID-19

Upcoming Tax Changes In The Wake of COVID-19

The Government has just announced a $12.1 billion dollar response package in the wake of the Coronovirus pandemic with the economic implications it’s slated to have. As part of this package, the government has also announced tax changes that are designed to help small businesses through this period.

We have provided a summary of the announced tax changes and what they might mean for you.

Reintroducing depreciation on commercial and industrial buildings

All depreciation deductions will be reintroduced for new and existing industrial and commercial buildings, including hotels and motels.

A Bill containing this measure will be introduced shortly. The law will allow owners of commercial and industrial buildings (including hotels and motels) to start reducing their provisional tax payments for the 2020-21 income year immediately. There is no application process as the increased deduction will be available as part of normal tax filing processes.

For example, John owns a motel with a tax book value which is lesser than $3 million. Under the existing law, it is not depreciated.  However, from 2020/21 John will be able to depreciate the current value of his building at the rate of 2%. This essentially means that John’s company can claim a deduction of $60,000 in the 2021/22 year reducing his taxable profit. The final result means John’s company will end up paying $16,800 lesser in taxes as the company tax rate is at 28%.

 

Immediate Deductions for low value assets

Taxpayers will be able to deduct the full cost of more low-value assets in the year they were purchased, rather than having to spread the cost over the life of the asset. Currently, taxpayers are able to claim immediate deductions on the purchase of assets valued at lesser than $500. The threshold for this will now be increased to include assets that cost up to $5000 (for the 2020/21 income year).

The temporary increase in the threshold, is designed to incentivise taxpayers to bring forward investments to encourage spending. The threshold is being permanently increased to $1,000 (from 2021/22).

For example, Capes Comics Limited is a comic book store that sells comics and other merchandise, and is looking to expand by investing in a new display cabinets worth $4,600 which the owner believes will help in increasing sales of high-value action figures that will be put up on display.

With the Covid-19 restrictions, the owner gets anxious about investing the sum, considering the fact that he can only deduct the cost of the cabinets though tax depreciation over time, and not immediately.

With the new regulations issued by the parliament, this means that Capes can claim an immediate deduction for the cost of the cabinets, which means they can reduce the tax being paid on the cabinet in this year by $1,288, instead of having that amount spread out over the years.

 

Change to provisional tax threshold

The government has increased the threshold for having to pay provisional tax from $2,500 to $5,000 for the 2020/2021 financial year only.

For example, Jenny is a tour guide who provides tours around Wellington through her touring company Jenny Tours & Travels Limited. She gets a majority of her customers from cruise ships visiting Wellington. For 2019/20 Jenny Tours & Travels tax liability was $8,000 but because of the recent outbreak of Covid-19 it’s 2020/21 tax liability is expected to be half the amount.

The increase in the threshold for provisional tax essentially means that Jenny Tour & Travels will not be a provisional tax payer for 2020/21 income year, so instead of paying tax throughout the year, the company will not have to pay the tax until the 7th of April in 2022 (assuming she has a tax agent to help her), improving the company’s cashflow during the year.

 

Writing off interest on some late payment tax

The commissioner of Inland Revenue will be given the power to waive interest on late tax payments for taxpayers who’ve had their ability to pay their taxes on time significantly affected by the Covid-19 outbreak. The relief will apply to interest on all tax payments (including PAYE & GST) due on or after the 14th of February, 2020.

For example, Jessica owns a tiny restaurant. Due to the outbreak, the last few weeks has seen a sharp decline in the number of customers who visit the restaurant. Due to the decline in her number of customers, Jessica’s turnover is about half of what it was a year ago, which means she won’t be able to pay her tax bill in full. She’s tried to get an extension to the business overdraft from the bank, but unsuccessfully.

Keeping these circumstances in mind, the IRD has a range of options to help customers who are struggling to meet tax payments. After evaluating these options, Jessica is able to enter into an instalment agreement to pay off her tax bill over a six-month period. This new measure will allow Inland Revenue to write off any use of money interest on this debt.

 

If you’re a small business owner and are facing hardship because of the Covid-19 outbreak, please feel free to get in touch with us at 09-972-2236 or info@jzr.co.nz. We would love to help.

Written by Rowain Pereira

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The New Kilometre Rate for Claiming Motor Vehicle Expenses

The New Kilometre Rate for Claiming Motor Vehicle Expenses

Are you an employee who frequently uses his/ her car for business expenses? We’re going to be outlining the process for claiming tax on your work vehicle expenses.

Here are some important points which you need to consider:

  1. If you’re using a vehicle for business purposes, you can claim tax back on expenses incurred.
  1. If the vehicle is solely being used for business purposes, the entire running cost can be claimed. However, if the vehicle is being used for personal travel as well as business purposes, the running costs of the vehicle will have to be split between business and private use.
  1. There are two ways by which you can calculate the business usage of the vehicle:
  • Actual costs which requires you to keep accurate records, which include the details of personal and work-related expenses. The reasons for business travel and distances involved will also have to be provided while filing your claim.
  • A logbook can be maintained to record all business trips, based on which an actual percentage of business use can be calculated. Alternatively, you can also keep a logbook for at least 90 consecutive days, to work out the business use of your vehicle which can then be used for the next 3 years (as long as the nature of the business varies by less than 20% over that period of time).
  1. Once you’ve ascertained what the percentage for the business use of your vehicle is, you can use the IRD’s kilometre rate (shown in the table below) to work out the amount which can be claimed. There are 2 rates defined by the IRD, which are:
  • Tier One Rate: Tier One is calculated by combining the vehicles fixed and running costs. This tier applies for the business portion of the first 14,000 kms travelled by a vehicle in a year.
  • Tier Two Rate: Tier Two accounts for just the running costs of the vehicle and can only be applied for the business portion of the any travel in excess of 14,000 kms.

Kilometre Rates (from 2019 onwards)

Vehicle type

Tier One rate:

First 14,000 kms

Tier Two rate:

After 14,000 kms

Petrol or Diesel

79 cents/km

30 cents/km

Petrol Hybrid

19 cents/km

Electric

9 cents/km

 

To make the process of claiming your business usage of the vehicle easier, make sure you record odometer readings at the end of every year to help you determine your business mileage vs personal mileage.

If you’re a business which provides its staff with vehicles (including yourself), it is prudent to ensure you’ve got your fringe benefit tax position right.

You can get in touch with us to know what exemptions may apply for specific types of vehicles, or in instances where restrictions are placed on the use of company owned vehicles. Mail us your queries on info@jzr.co.nz, or simply call +64-9-972-2236

 

Written by Rowain Pereira

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Benefits of using a Chartered Accountant

Benefits of using a Chartered Accountant

Chartered Accountant (CA) is a prestigious professional designation that recognised around the world. There are strict requirements to become a member. Being a Chartered Accountant means that someone has completed a significant amount of study and work experience, which usually takes at least 7-10 years.

CA’s are known for their high ethical standards and technical expertise, with on-going learning to ensure that they are up-to-date with current tax and business developments.

Chartered Accounting Firms
JZR Accountants & Consultants is a Chartered Accounting firm, and are recognised as such by Chartered Accountants New Zealand and Australia (CAANZ). We are also an approved training organisation by CAANZ.

The implications of entrusting your financial affairs to an accountant that does not have the necessary competence and qualifications can be enormous and can be the difference between your accounts being handled professionally and above board, versus you being disadvantaged through lack of knowledge or care.

Some great advantages include:
1. Reliable Advice – When it comes to your finances, you need to know your money is in safe
hands – CA’s must comply with professional development standards, ensuring their knowledge and skills are always kept up-to-date and gives you the reassurance that the advice you are receiving is both accurate and informed.

2. Highly Regulated – You’ll benefit from professionally qualified persons that are bound by a strict code of ethics and professional standards. They also undergo monitoring of compliance and quality reviews of their professional practice.

3. Highly Experienced – To qualify as a CA, you will have gained a vast amount of experience
and will be comfortable working with high performing businesses as well as those under
financial pressure. CA’s are required to put in considerable hours of hard work and in addition to being tertiary qualified, take many official exams in order to get certified after university. There is then another level of competence to offer services directly to the public. That’s a lot of time spent honing their craft.

4. Integrity – Your accountant will be dealing with your business finances (and likely your personal information too) so you need to have confidence that they can be both trustworthy and discreet. CA’s are bound by a strict code of ethics to uphold a set of professional principles, endeavouring to always put their clients’ interests above their own.

5. Peace of Mind – To focus on your responsibility as a business owner and to make sure that your financial affairs are in order can take a big chunk out of your time. So, get back to the fun stuff and hire a CA to take care of the number crunching for you.

 

Qualified Tax Professionals
Hiring a qualified accountant such as a CA is crucial for small as well as large business owners. CA tax professionals bring profitable results to the company and also deals with complicated tax issues.

Income tax matters hold a crucial place in the business. Slight negligence can put into great trouble. So, it is a better decision to hire a good CA to managing all your tax matters.

Doing income tax filing by yourself will waste precious time and as the deadlines of income tax filing come near, it then becomes difficult for you to find the correct tax figures resulting in a lot of confusion. We at JZR Accountants & Consultants are also registered tax agents with the IRD, which means that we can help to reduce your stress and look after your income tax filings.

Extension of Time (EOT)
Being a registered tax agent also means that all our clients receive what’s called “an extension of time” with the IRD.

Extension of time arrangements means tax returns and terminal tax payments can be made at a later date than normal. We have set out the details below.

Tax returns due:

  • Normal – 7 July in the same year (e.g. 31 March 2019 year end due 7 July 2019)
  • With EOT – 31 March the next year (e.g. 31 March 2019 year end is due 31 March
    2020)

Payments due:

  • With EOT – 7 April the next year (e.g. 2019 end of year due 7 April 2020)
  • Without EOT – 7 February the next year (e.g. 2019 end of year due 7 February 2020)

By having an EOT is very beneficial especially for the purpose of a business’s cashflow.

 

Tax Laws
CAs practicing in the area of taxation (such as JZR) knows all the latest updates of income tax. Furthermore, they also help you in getting the correct amount of tax refunds or make sure the right amount of tax is paid. Not more than what the law stipulates, whilst upholding strict ethical standards and adhering to all laws and regulations.

Being a small business owner, it becomes difficult for you to know all the changing and updated laws of taxation and a CA will inform you of all the updates in the field of taxation. This will help you to stay on the right side of the law.

 

Liaison with IRD
Liaison with the IRD is a regular process irrespective of whether it is a small or large business. Every now and then the IRD request additional information or make enquiries about certain tax related transactions.

It sometimes feels that the IRD is speaking in another language, full of jargon and sometimes not a lot of business sense, so your CA is well prepared to liaise with the IRD by way of acting as a go between, whilst adding their experience to get you the best results.

 

 

If you want to work with a Chartered Accounting firm that are experts in their field and are
dedicated and cares about your business, then please do not hesitate to contact us for an
obligation free chat. We look forward to speaking with you.

Written by Johan Potgieter

January 23, 2020

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Tax Types you need to know if you’re a business owner

Tax Types you need to know if you’re a business owner

Taxation is usually a complex subject. So, as part of our New Years present to all of you, we thought we could simplify the different tax types.

Some of the most common taxes are as follows:

Income Tax

Income tax is payable on profits for businesses and on personal income earned by
individuals. The rates of tax that applies depends on the type of entity or if you are an
individual.

Companies and Trusts pay tax on income at a rate of 28% and 33% respectively whereas
individuals pay tax at the marginal rates between 10.50% and 33%.

End-of-year tax (this is also known as terminal tax) is payable before 7 February the
following tax year, or 7 April the following year if you have a tax agent.

Provisional Tax
Provisional tax breaks up the income tax you pay to IRD by letting you pay it in installments during the year as opposed to one big sum at the end of the tax year.

Any taxpayer – whether they be an individual, company or trust – who earns income where tax is not deducted when it was received like self-employed or rental income may have to pay provisional tax.

You become a provisional taxpayer if the income tax due for the previous year (this is known as your residual income tax) was more than $2500. There are some other rules that applies to first year of business.

The payment is based on the provisional tax method you’ve chosen. There are four methods available to calculate your payments: Standard uplift, estimation, GST ratio method and the accounting income method (AIM).

In most cases, you will pay three installments of provisional tax throughout the year: 28
August, 15 January and 7 May, However, this may vary depending on the calculation
method and how often you file your GST returns.

The calculation methods, dates and provisional tax rules will be discussed in more detail in
more blogs to come.

Goods and Services Tax (GST)
GST is a tax on most goods and services supplied in New Zealand by registered persons. It
also applies to most imported goods, and certain imported services. GST of 15% is added to the price of taxable goods and services. If you're a GST-registered business, you pay GST on your supplies and collect GST on your sales. The difference between these two is what you pay to Inland Revenue.

You are required to register for GST if your turnover was more than $60,000 (average
$5,000 per month) for the last 12 months or expected to exceed that amount in the next 12 months.

There are 3 methods of accounting for GST: Payment, Invoice and Hybrid basis of which the payment basis is the most common and the filing frequency for GST is monthly, two and six monthly. The method and filing frequency are subject to rules that apply based on turnover.

Pay As You Earn (PAYE)
Employees earning a wage or salary are taxed directly from their pay. This is known as
PAYE (pay as you earn).  As an employer, you’re responsible for deducting and paying
PAYE on your employees’ behalf.

Different rules can apply to some payments, eg. lump sum payments like bonuses or
redundancy payouts, or to special types of workers. The amount of PAYE you deduct
depends on the employee’s tax code and how much they earn.

Each pay period you need to calculate and deduct PAYE. Each payday you send Inland
Revenue the pay details for your employees. This is called payday filing, and you can do all
of this directly from your accounting software (like SmartPayroll), or online through Inland
Revenue’s myIR service.

The easiest way to file your PAYE returns is to use a payroll software such as Smartpayroll.

Fringe Benefit Tax (FBT)
Benefits given to employees other than their salary or wages are fringe benefits which are
levied on the value of the fringe benefit provided to employees.

The main groups of taxable fringe benefits are:

  • motor vehicles available for private use
  • Free, subsidised or discounted goods and services
  • Low-interest loans
  • Employer contributions to sickness, accident or death benefit funds, superannuation
    schemes and specified insurance policies.

You’ll have to file an FBT return either quarterly or annually, depending on the election
made.

FBT can be calculated at 49.25% single rate (flat rate), or at multi rates depending on the
income of the employees.

FBT is tax deductible by the employer as an expense in their income tax return.

Written by Johan Potgieter

January 21, 2020

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