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

Stay Up to Date With The Latest News & Updates

Join Our Newsletter

Stay up to date with all of the latest news and insights related to your business. Sign up below and we promise to only send you content 

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

Related Articles

What’s New for Property Owners: Airbnb to Boarders

If you own a property which is being rented out for short stays (up to four weeks) this article will highlight all your necessary tax commitments, as well as all the new property rules which might come into effect this financial year. Highlights: If your tax due at...

Are You a Landlord? Keep-up with the Changes

With one third of Kiwi’s renting their homes (some even for a lifetime), it’s important to have clear and fair rules for tenancies. This article will highlight some of the recent changes that have been made to rental property rules. The government’s tenancy law...

Accounting: A Digital Transformation

It’s 2020 and the accounting industry is experiencing a digital transformation, one which is changing the way we function. The shift from traditional accounting to implement technology has changed the way accountants’ function on a day-to-day basis in the industry....

Stay Up to Date With The Latest News & Updates

Join Our Newsletter

Stay up to date with all of the latest news and insights related to your business. Sign up below and we promise to only send you content 

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

Related Articles

What’s New for Property Owners: Airbnb to Boarders

If you own a property which is being rented out for short stays (up to four weeks) this article will highlight all your necessary tax commitments, as well as all the new property rules which might come into effect this financial year. Highlights: If your tax due at...

Are You a Landlord? Keep-up with the Changes

With one third of Kiwi’s renting their homes (some even for a lifetime), it’s important to have clear and fair rules for tenancies. This article will highlight some of the recent changes that have been made to rental property rules. The government’s tenancy law...

Accounting: A Digital Transformation

It’s 2020 and the accounting industry is experiencing a digital transformation, one which is changing the way we function. The shift from traditional accounting to implement technology has changed the way accountants’ function on a day-to-day basis in the industry....

Stay Up to Date With The Latest News & Updates

Join Our Newsletter

Stay up to date with all of the latest news and insights related to your business. Sign up below and we promise to only send you content 

Getting holiday pay right

Getting holiday pay right

Do you have staff taking leave over Christmas? Are systems in place to make sure everyone gets what they’re entitled to? Even if someone else handles your payroll, you are responsible for making sure holiday pay and leave payments are handled correctly.

Remember:

  • Whether your staff work full-time, part-time, casual, on-call, or shift work, they’re entitled to any benefits that come from working on public holidays.
  • If your employee agrees to work on a public holiday that falls on a day they would normally work, they will need to be paid time and a half PLUS receive another paid day off later, otherwise known as a day in lieu. If an employee works on a public holiday, and it is not a day they would usually work, the employee is only entitled to the time and a half. The entitlement to time and a half has to be included in employment agreements.
  • Employees can choose to take their day in lieu:
    • on a mutually agreeable date that is not a public holiday
    • on another day on which they would normally be working
    • for a whole working day, regardless of how much of the public holiday they actually worked.
  • If your business is having a closedown period, employees are entitled to a paid public holiday if they would ordinarily work on the day of the public holiday.
  • Make sure your payroll system:
  • is flexible enough to handle different working arrangements (eg, changing employee work schedules)
  • records all relevant time worked and payments made
  • has accurate and up-to-date information.
  • If you realise an employee hasn’t been paid the right amount, be up front and correct the mistake immediately.

At JZR, we believe in getting the basics right, which is why we use Smart Payroll. Based in New Zealand, Smart Payroll is a cloud based software that makes it simple to pay employees and contractors and send reports to the IRD. At the click of a button all calculations are done and your employees are paid. PAYE and Kiwisaver is also included with the program and at the end of it all, your reports are filed with the IRD, so you don’t have to remember a thing. We have a dedicated payroll solutions service designed to take care of your payroll hassles. Please get in touch with us at info@jzr.co.nz or call us on 09-9722236 if you want to find out more.

Written by Gordon

December 17, 2019

Related Articles

What’s New for Property Owners: Airbnb to Boarders

If you own a property which is being rented out for short stays (up to four weeks) this article will highlight all your necessary tax commitments, as well as all the new property rules which might come into effect this financial year. Highlights: If your tax due at...

Are You a Landlord? Keep-up with the Changes

With one third of Kiwi’s renting their homes (some even for a lifetime), it’s important to have clear and fair rules for tenancies. This article will highlight some of the recent changes that have been made to rental property rules. The government’s tenancy law...

Accounting: A Digital Transformation

It’s 2020 and the accounting industry is experiencing a digital transformation, one which is changing the way we function. The shift from traditional accounting to implement technology has changed the way accountants’ function on a day-to-day basis in the industry....

Stay Up to Date With The Latest News & Updates

Join Our Newsletter

Stay up to date with all of the latest news and insights related to your business. Sign up below and we promise to only send you content 

Five simple ways to finish the year feeling relaxed (not rushed!)

Five simple ways to finish the year feeling relaxed (not rushed!)

Is less stress at the top of your Christmas list? For the sake of your sanity and the best interests of your business, follow these steps to remain calm and collected as the year comes to a close.

  1. Outsource! Look at everything you need to do before 25th Is it doable without losing the plot? Write a list of what you can pass on externally to consultants / contractors or someone (less busy) in your team.

 

  1. Say No. Often there’s a sense of guilt when we refuse and invite, opportunity or request but if you take everything on, you’ll suffer. It’s already a busy time of the year, so the next time someone asks you something – check to see if it’s something you want to do or feel you have to do. Then if you can, politely say no.

 

  1. Lean on your support network: Will you be working longer hours in the lead up and during the festive season? If you need to be able to prioritse your business over everything else, you’ll need a hand to make sure other areas of your life stay standing. Talk to your family. Enlist their help if you need it. You could even do a skill-swap with friends – mow their lawn in exchange for a meal.

 

  1. Leave some tasks till 2020: There’s often a feeling of, ‘I just want to get this done by the end of the year’ running through our veins in December but taking time to relax over the holidays means letting a few things go. Write a ‘to-do’ list then break it into three categories: must do, should do, can probably wait.

 

  1. Hide your phone: The best present you can give yourself over the Christmas break is presence. Time away from work, spent doing what you love to do, and truly relaxing. Putting your devices in the drawer (even just for an hour!) will do you the world of good before launching into the new year.

 

Remember, Christmas is best enjoyed relaxed and when spent with family. So bring in 2020 stress-free and happy with the list of tips!

Written by Gordon

December 17, 2019

Related Articles

What’s New for Property Owners: Airbnb to Boarders

If you own a property which is being rented out for short stays (up to four weeks) this article will highlight all your necessary tax commitments, as well as all the new property rules which might come into effect this financial year. Highlights: If your tax due at...

Are You a Landlord? Keep-up with the Changes

With one third of Kiwi’s renting their homes (some even for a lifetime), it’s important to have clear and fair rules for tenancies. This article will highlight some of the recent changes that have been made to rental property rules. The government’s tenancy law...

Accounting: A Digital Transformation

It’s 2020 and the accounting industry is experiencing a digital transformation, one which is changing the way we function. The shift from traditional accounting to implement technology has changed the way accountants’ function on a day-to-day basis in the industry....

Stay Up to Date With The Latest News & Updates

Join Our Newsletter

Stay up to date with all of the latest news and insights related to your business. Sign up below and we promise to only send you content 

Checklist: Can your business survive the holiday period?

Checklist: Can your business survive the holiday period?

Checklist: Can your business survive the holiday period?

Written by Gordon

December 20, 2018

 

While the Christmas/New Year period is traditionally a slow time of year for business, you still need to meet your expenses.

Ensure your bases are covered before you clock off for the year.

Plan ahead

Do a budget to figure out how much you are going to need to cover your overheads. This is especially important if it’s going to be several weeks before you start earning a crust again.

A cashflow forecast will help you identify any issues before they become problems.

 

“While the Christmas/New Year period is traditionally a slow time of year for business, you still need to meet your expenses. Ensure your bases are covered before you clock off for the year.”

 

Get your cashflow in order

You can achieve this by:

  • Prioritising jobs you can complete quickly so you can invoice clients straightaway.
  • Incentivising early payment for completed work by offering a discount.
  • Chasing outstanding invoices.
  • Seeing if you can re-negotiate payment terms with suppliers.
  • Reducing unnecessary spending.

Don’t forget taxes

IRD expects GST and provisional tax payments to be made on January 15. Interest of 8.22% and late payment penalties apply if you don’t.

Here’s a tip: If paying both is going to hurt the bank account, prioritise paying the GST. You can utilise the services of an IRD-approved tax pooling provider such as Tax Management NZ to pay the provisional tax later. They reduce IRD interest by up to 30% and eliminate late payment penalties.

As always, we’re happy to work with you so you have nothing to worry about while you enjoy your summer break.

Related Articles

What’s New for Property Owners: Airbnb to Boarders

If you own a property which is being rented out for short stays (up to four weeks) this article will highlight all your necessary tax commitments, as well as all the new property rules which might come into effect this financial year. Highlights: If your tax due at...

Are You a Landlord? Keep-up with the Changes

With one third of Kiwi’s renting their homes (some even for a lifetime), it’s important to have clear and fair rules for tenancies. This article will highlight some of the recent changes that have been made to rental property rules. The government’s tenancy law...

Accounting: A Digital Transformation

It’s 2020 and the accounting industry is experiencing a digital transformation, one which is changing the way we function. The shift from traditional accounting to implement technology has changed the way accountants’ function on a day-to-day basis in the industry....

Stay Up to Date With The Latest News & Updates

Join Our Newsletter

Stay up to date with all of the latest news and insights related to your business. Sign up below and we promise to only send you content