Your Checklist to Keep Tax Time Low Stress

Your Checklist to Keep Tax Time Low Stress

The tax season is just around the corner and we all know how gruelling it can be sometimes. With a lot of businesses running around till the last minute to get their paperwork in place, this period can get extremely stressful. Keeping that in mind here are few things you need to do to help you keep this period stress free.

First things First

Make sure you’re constantly in touch with your accountant. They’ll keep you updated on the proceedings and what needs to be done before the 31st of March, including what you can claim and what you can’t. This is an eventful period, and your accountants will be busy themselves, so the better prepared you are, the smoother the process and result will be.

Don’t spend your hard-earned cash on unnecessary interest and penalties. Make sure your accounts are up to date, tidy up loose ends and ensure you file your return on time.

 

Your assets and stock

Review your inventory. The value of your stock affects your business’s taxable profits. Conduct a thorough stocktake before the year-end and ensure you get rid of any out-to-date or damaged items, and write them off.

This is the right time to for you to ditch surplus assets. If it’s possible to sell these assets, great, otherwise simply ensure that you’ve written them off.

 

Your Spending

If you’re planning to buy any new equipment or assets, make sure you do it on or before the 31st of March. Making these purchases in the current financial year will help in reducing your taxable income and help you gain a full month’s depreciation.

It can also be cumbersome to keep track of all your expenses, so if you haven’t already gone digital, now would be the right time to do so. Scanning receipts and saving electronic invoices in your cloud saves time and space. Not to forget all the papers, and trees you’d be saving too.

 

Your Staff

The last step on the list is your staff. Check your payroll system and ensure it only includes current employees. Review their details further and ensure that everything which is logged in, is correct and up-to-date. Also do not forget to ensure that any former staff has access to company systems. If you find any discrepancies, make sure you correct them immediately.

Be in constant touch with all your employees. Special bonuses at this time of the year can be a great motivational tool for your employees. However, make sure to get the tax right on any lump sums being made. Remember that any bonuses for the current year, and holiday pay or long service leave paid out within 63 days after March 31st can be deducted against your current year income.

 

We hope these tips can help in making your life a little stress free, especially during this period. In case you have any other concerns or queries regarding your filings for this financial year, get in touch with us immediately, by either mailing us on info@jzr.co.nz or calling on +64-9-972-2236.

Written by Rowain Pereira

Tax

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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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Are You a New Zealand Tax Resident? Why Is It Important To Know

Are You a New Zealand Tax Resident? Why Is It Important To Know

Why is it important?

Like most other countries, one of the ways that New Zealand imposes tax is by the concept Tax Residency. It means that all New Zealand tax residents are liable to pay tax to the Inland Revenue Department (IRD) on their worldwide income.

Your worldwide income includes any income that you derive in a foreign country even if you do not bring the money into New Zealand.

This is very important because it will drastically change the amount of tax you will have to pay to the IRD. This will be particularly relevant if you have significant assets overseas, or if you’re a new migrant to New Zealand, who still have financial ties to your country of origin.

Your worldwide income could include the following:

  • An amount of interest you derive from funds you have in an offshore bank account
  • Rental income (a rental property in Australia? Or China?)
  • Salary and wages paid both by New Zealand companies and offshore companies

Common Misconception

A common misconception that people have is that they confuse the definition of “resident” for immigration purposes with “tax resident” for tax purposes. The definition of a New Zealand resident for immigration purposes is different to the definition of “tax resident”, which is defined in the Income Tax Act 2007. What this means is that whilst you may be on a student or work visa in New Zealand, you might still nonetheless be considered a tax resident of New Zealand. Conversely, you might hold a permanent resident visa but, in some circumstances, still not be a tax resident of New Zealand.

Therefore, this leads us to the next question.

What is the definition of a “tax resident”?

If you want to find out if you are a New Zealand tax resident or not, then you have to look at the definition in sYA1 of the Income Tax Act 2007. Essentially, if you meet either one of points below, then you will be a tax resident of New Zealand.

  1. Be physically present in New Zealand for 183 days in any 12 month period; OR
  1. Have a Permanent Place of Abode (PPOA) in New Zealand

Things to watch out for

Note how the first point mentions that the 183 days is counted in any 12 month period. So it’s not 183 days in a calendar year or tax year. This is an important distinction because you could have triggered this inadvertently if you’re not careful.

The term “Permanent Place of Abode” in layman’s terms is a lasting or enduring place where the taxpayer usually live. A person could have more than one permanent place of abode in different countries. So say if you split your time between New Zealand and Australia, and have a regular place to live in each country, then it could be very possible that you have a permanent place of abode in both New Zealand and Australia.

Common Issues

Properties Owned Overseas

Being a New Zealand tax resident not only means that you will need to pay tax on your overseas income, but it also means that New Zealand tax law apply to your overseas assets as well.

Many of you might have heard of the bright-line test for residential properties, where if you buy and sell within 5 years, then you will need to pay tax on the capital. However, not many people know that if you’re a New Zealand tax resident, then this rule applies to your properties owned overseas as well. So if you bought and sold a residential property in Australia for example, within 5 years after 29 March 2018, then you will need to report that gain to the IRD and pay tax on it.

Rental or Business Income from overseas

Another common issue that we see is clients having rental properties or business income from overseas. In that situation, taxes might have already been paid in that foreign country, and in order to avoid double taxation, we can help you determine if a foreign tax credit might be available and then to accurately ascertain that tax credit amount to reduce your tax payable.

Own shares in a foreign company?

Another common issue that some clients face is if they also own shares in an overseas company. In particular, if they own shares in an overseas privately held company. There are separate rules dealing with such cases which can be very complex and you might need to pay tax on paper gains which you have not received a cash receipt for. So be very careful in that case, and contact us to make sure all the right disclosures are made to the IRD, and that you’re not paying more tax than you should.

Transitional Resident

There is another rule called the “transitional resident” rule, which exempts overseas income from taxation within 4 years of a person first becoming a New Zealand tax resident. There are some strict rules around who can qualify for this, and when the 4 years start and when it ends. There are also some exceptions to this transitional resident rule. So please make sure to contact us if you’re in this situation and we can help you determine which rules apply to you. This could potentially mean thousands if not tens or hundreds of thousands of dollars. So getting the right advice is crucial.

We hope this answers all your queries. Watch this space and stay tuned, because we will be back to talk about what happens when you’re a tax resident in New Zealand as well as another country.

Written by Gordon

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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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REMINDER: Rental losses ring- fenced from 2019/2020 tax year

REMINDER: Rental losses ring- fenced from 2019/2020 tax year

The new law on ring-fencing rental losses is now in force, which means:

  • In most cases ring-fenced deductions will be carried forward and can only be used against residential rental or sale of property income in future years.
  • Property investors will, in most cases, no longer be able to reduce their tax liability by offsetting residential rental property deductions against their other income, such as salary or wages, or business income.

What does this mean? Here’s an example to guide you through: 
Tony owns a three bedroom rental property in Pakuranga, which he lets out at $570 per week. After paying the interest on his mortgage, property management fees, rates and other outgoings, he ends up with a $3,000 tax loss. Tony also works as an IT Manager for the Big Company Limited and receives a $100,000 annual salary.

Before the rule change, Tony would have been able to offset his $3,000 tax loss against his $100,000 annual salary, so that his total taxable income would be $97,000 ($100,000 – $3,000 = $97,000). This way, Tony would most likely have been able to claim a tax refund at the end of the year, because Big Company Limited would have deducted taxes from his salary at an assumed taxable income of $100,000 (rather than the actual taxable
income of $97,000).

The new rules stops that from happening. Instead, the $3,000 tax loss would be carried over to the next tax year, where it can only be offset against any rental profits / taxable property gains.

The new rules apply from the start of the 2019-2020 income year and apply to:

  • Mainly rental properties but can also include other residential land.
  • Individuals, partnerships, trusts, look-through companies and close companies.

Own a rental property? We’re happy to talk you through your tax implications so you don’t get caught out.

Written by Gordon

January 14, 2020

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