International Automatic Exchange of Information

New Zealand has signed up to the Automatic Exchange of Information (AEOI) – a global OECD initiative to combat tax evasion.

Inland Revenue has been running an AEOI awareness campaign since 9th June 2018 with a primary focus of this campaign being to generate awareness among New Zealand tax residents most likely to have offshore accounts or financial interests, so they can take steps to determine if their tax affairs are in order and disclose if they identify issues. New Zealand tax residents with complex international tax affairs should contact us for support or advice.

This awareness campaign has included online advertising on relevant websites and via Facebook. These ads include a link to IRD’s campaign landing page.

As part of AEOI financial institutions will provide Inland Revenue with information about foreign tax residents with financial accounts in New Zealand, in line with the Common Reporting Standard (CRS).

IRD are now exchanging information with many other countries so it is vital you tell us about any income or assets you may have in other countries, if you don’t then chances are IRD will find out about it and that may cause you a few problems, something no one likes happening with IRD

The requirement of New Zealand Tax Residents to report world-wide income hasn’t changed, but IRD are now more likely to find out about it even if you don’t declare it. Please make sure information regarding ALL overseas income, bank accounts or assets is provided to us for your tax return preparation, even if you think it’s non-taxable income!

AIM Method of Calculating Provisional Tax

Many of our clients may have seen or received information from IRD about the AIM method of Provisional Tax calculation

This method will become available for use on 1st April 2018. We are not recommending it to our clients for the following reasons:

  1. Most SMEs (Small Medium Enterprises) qualify to use Standard Provisional Payments without any Use of Money Interest
  2. Depending on your business you may have to do things such as a physical stock take every two months
  3. While IRD are promoting that this is an easy method to use in fact, in our opinion, it is not and also the option is not available through Xero and MYOB for clients to use – it is only available to firms such as ours to use.

If you want to discuss the AIM option please give Sari or Anna a call.

Tax Refund Companies – First published on Stuff website 13.06.17

The matter of how Tax Agents, particularly tax refund companies has been raised in the media again and the most recent article comes with a warning about how your refund could be paid into their bank account even if you do your own tax return online.

At Savage & Savage we never receive client tax refunds into our account, not even our Trust Account. All client refunds go directly to the client and that is why we ask for your bank account details in our client questionnaire each year. And we most certainly do not take fees from your refund.

It is important you fill in your bank account details on the Client Questionnaire Forms each year as we never assume you haven’t changed bank accounts.

To see the original article as posted by Fairfax Media on their Stuff website click here

The article is copied here;

You might still have to pay a tax refund company a fee – even if you do your return yourself.

Casey Kaumatule thought she was being sensible and saving money when she decided to take matters into her own hands and do her partner’s tax return herself, online.

She opted to do it via the Inland Revenue website rather than paying a tax refund company to handle it.

“We got a good amount that was owed to us. But when I checked, I noticed it was paid to a different bank account. I rang IRD and the tax return money had been sent to Savvy Tax Agents. They did my partner’s tax return before and their account wasn’t removed.”

She spoke to the firm, which agreed to waive the fee it would normally charge to release the money that had been sent to it. Kaumatule said it was her mistake not to have checked the details, but it was still frustrating.

Another woman, Samantha Dallas, was also caught out. She said she was not sure when she had signed up with the tax refund firm, but discovered after she had processed her personal tax statement that they were listed as her tax agents.

“I think all tax should just be done through IRD. We already get taxed and private tax agents make it feel like you are getting taxed on your tax.”

People who sign up to have a tax refund company prepare their tax returns usually agree to have those firms act as their tax agents from then on, with their bank accounts set up to process future refund payments.

That means, even if they do their return themselves in future, the agent can end up with the refund.

Consumer NZ spokeswoman Jessica Wilson said it was something her organisation had received complaints about.

Many companies charge a fee to release tax refunds that have been put in their banks accounts in error.

“Problems arise when people aren’t aware they’re giving the company the authority to act as their tax agent – and it remains so until the arrangement is cancelled,” she said.

“There’s an onus on tax refund companies to keep their customers informed the arrangement is still in place. If a company hasn’t done so and receives the refund as a result of a return the customer has filed, we think it shouldn’t deduct a handling fee.”

NZ Tax Refunds, or WooHoo, charges a $25 handling fee in these circumstances.

Managing director Gabrielle Purchas said her firm would automatically push money back to Inland Revenue when a client had not completed the return within its system.

She said it was an administrative burden for her organisation to have to deal with and was something that could be overlooked. “We send it straight back to IRD if we can see it hasn’t been requested.”

Savvy Tax Agents said it would do the same but would not charge.

An Inland Revenue spokesman said it was clear on its MyIR online service whether a person’s account was linked to a tax agent.

“The best advice would be that if you have used a tax refund company in the past then you should check all your details are correct on MyIR before you start applying for a refund yourself.

“Once the customer has reached the My Tax Agent tab on MyIR, they can see who their tax agent is but to de-link they would need to give us this instruction by phone or through secure mail in MyIR.”

 – Stuff

Deductibility of Farmhouse Expenses

IRD have released a Statement considering the deductibility of expenses relating to a farmhouse that forms part of a farming business. The general rules of deductibility and apportionment applies, ie you will be able to claim a percentage based on values and usage.

However, the minimum deduction of 25% for all farmers has been reduced to, and now available only in situations where the compliance cost of calculating private use element outweighs any likely deductions,  20% for farmhouse expenses ie power, while rates and interest remains at 100%. These deductions are allowed for some sole traders and partnerships when the value of the farmhouse is 20% or less than the total value of the farm. If the value of the farmhouse is more than 20% of the total value of the farm, all expenses that relates to both the farm house and the farm (rates, insurance, power, interest) must be apportioned.

Tax Refund Companies

Yes, it’s that time of year again – the tax refund companies are back advertising!

Remember, if you are a client of ours, that we automatically check your tax situation so will advise you if there are any refunds due.

These tax refund companies take a percentage of any refund due. So, if you have a friend or family member who is thinking about using a tax refund company let them know that they can check on IRD’s website whether they are due a tax refund or not, at no cost.

Payroll – End of Year & Start of New Year

Employer monthly schedules and ir-files filed with IRD are based on the payment date of the pay run (not the pay period end date). After you have finalised the last pay for March and printed your end of year reports (make sure this includes leave liabilities/balances), go ahead and file your ir-file with IRD as usual.

The next step is to review and update your employees’ salary and wage information. Ensure all employees on minimum wage have their rates updated to the new minimum wage of $15.75. The new rate needs to be applied from 1 April. If 1 April falls in the middle of a pay period, you can either pay different rates by inserting an extra line with the different rate, or apply the new minimum rate for the whole pay period.

If you have contractors using the WT tax rates on schedular payments (including those hired by labour-hire firms), they are from 1 April able to choose their own tax rate, subject to minimums. New contractors, existing contractors (if they need to change tax rate or starting a new contract) and those opting in to the schedular payments rules need to complete the IR330C Tax Rate notification for Contractors form.

ACC levies, ACC threshold and student loan repayment threshold are automatically updated if you are using payroll software.

Want to read more?

Tax and Contractors

IRD Contractor Changes 

 

7 April Tax Payments

IRD will again be sending reminder letters or texts to some entities with tax to pay on the 7th April. This means you may receive two payment notifications, one from us and one from IRD for the same payment. Please follow the instructions on the email/letter received from Savage & Savage.

Inland Revenue GST Online Changes & Services Unavailable

Inland Revenue is improving their GST online services. While the update takes place, all IRD systems will be unavailable from 3pm on Thursday 2 February until 8am on Tuesday the 7 February. You will not be able to access any myIR online services or contact IRD through their call centers. The system update will cause draft returns to be deleted so make sure you complete any draft GST returns before 2 February.

If you are using myIR to file your GST return(s), from the 7th February you will be able to:

  • Pay your GST at the same time you file your return
  • Arrange GST installment plans online
  • Add file attachments online
  • Choose to receive email and/or text message reminders

If you have provided others with administrator or user access (not your accountant) to your myIR account, you’ll need to review and confirm the level of access you want them to have by 1 February or they will not have access to the improved GST services from 7 February.

The myIR mobile app will no longer be available, you will need to file  your GST through your myIR account.

If you have any queries about the changes or how to use the new system, please contact us.

Could your Volunteer or Woofer be an Employee?

Did you know, that anyone working in return for food and accommodation is likely to be an employee? This means they are entitled to the same minimum employment rights as a paid employee and you need to register as an Employer, file Employer forms with IRD and pay PAYE, check they are allowed to work in New Zealand, keep time and wage records and enroll them in KiwiSaver if they are eligible. You need to make sure they receive minimum entitlement including that the value of what they are getting is not less than minimum wage, and pay sick leave and accrue holiday pay! If you do not deduct PAYE, you still need to calculate the amount of PAYE on the market value of accommodation etc provided and pay it to IRD.

This is not an exhaustive check list, please contact us if you need further information or have any queries.

Gifts of Food & Drink

IRD have recently clarified their position on gifts of food and drink, ie hampers, Christmas ham etc, and these gifts now fall under the Entertainment rule and are only 50% deductible as there is a private benefit. It makes no difference whether the gift is to staff, suppliers or customers. Gifts other than food and drink are still 100% deductible as long as it’s business related, keep in mind FBT for staff. As before, any meals, drinks and entertainment are only 50% deductible, unless it is morning or afternoon tea or meals while travelling, however not if accompanied by a potential or existing business contact in which case it is only 50% deductible.