Tag Archive for: compliance

Changes in GST record keeping

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Good news for the trees, the planet and your storage cupboard!! IRD are introducing changes in GST record keeping in two stages that will reduce the amount of paper storage required for businesses.

There have been some smaller changes regarding GST effective 30.3.22

Buyers of goods had to keep a physical tax invoice to be able to claim GST for anything over $50. With the changes, a bank statement, contract, supplier agreement or electronic tax invoice is sufficient for expense claims.

Sellers still need to produce tax invoices over $50.

There are also changes to Buyer-created invoices (where the buyer determines the price perhaps by weight of the goods etc.) and also shared tax invoices. These are more detailed, and do not apply to many, so if this applies to you, click on the link above.

More changes are coming….

Many more changes are coming in April 2023, these changes mean no more invoices for purchases under $200. You can use a bank statement line to show who you paid and when. However, remember to note on your payment what it was for.

For purchases between $200 – $1000 you will need to keep a record as before, but an electronic record is sufficient. For those who use Xero, there is already provision to store your invoices in Xero. No more printing out! The buyers details are not required.

Over $1000 a full copy of the supply with all details are needed. No paper required.

Of course these are all proposals. IRD have yet to fully explain all the changes, so we will keep you up to date as changes are finalised.

These changes in GST record keeping are a step in the right direction in reducing paperwork and compliance. Let’s face it, the trees on the planet can be used for better things than tax invoices.

A great source of business news

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If you’re looking for information about about law changes, setting up a business, places to get help and so much more then you should check out www.business.govt.nz/news

This is a government run site that highlights all the information business owners need.

We recommend subscribing to the regular e-newsletter.

Residential Tenancies Amendments Act 2020

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If you own a residential rental property you should be aware of the significant changes enacted last year, but here is a summary of the major changes and dates.

NOTE: – These are different to the Healthy Homes requirements that are covered under different legislation

Landlords and tenants need to understand the recent changes to tenancy law and how this will affect them.

All landlords, including boarding house landlords, must comply with various legal obligations as governed by the Residential Tenancies Act (the Act). Starting from August 2020, parts of the Act are being changed by the Residential Tenancies Amendment Bill.

The changes are taking effect at three key dates:

Phase 1: 12 August 2020

Phase 2: 11 February 2021

Phase 3: By 11 August 2021

Phase 1: Law changes take effect 12 August 2020

Transitional and emergency housing exempt from the Act

From 12 August 2020, transitional and emergency housing will be exempt from the Residential Tenancies Act where the housing is:

  • funded (wholly or partly) by a government department, or
  • provided under the Special Needs Grants

This exemption is applicable for all people (new and existing clients) in transitional and emergency housing that meets the criteria above.

Providers of transitional and emergency housing will still be able to opt into parts of the RTA if they wish, by agreeing in writing with the client which parts will apply.

Rent can only be increased every 12 months

From 12 August 2020, rent increases are limited to once every 12 months. This is a change from once every 180 days (six months). Any rent increase notices given to tenants from 12 August 2020 must comply with the new 12-month rule. If a notice was given before 12 August 2020, it is still within the 180-day rule.

Phase 2: Law changes take effect 11 February 2021

Changes to multiple parts of tenancy law

From 11 February 2021, multiple changes to tenancy legislation will take effect. More details will be available closer to the time. The changes will cover:

Security of rental tenure

Landlords will not be able to end a periodic tenancy without cause by providing 90 days’ notice. New termination grounds will be available to landlords under a periodic tenancy and the required notice periods will change.

Changes for fixed-term tenancies

All fixed-term tenancy agreements will convert to periodic tenancies at the end of the fixed term unless the parties agree otherwise, the tenant gives a 28-day notice, or the landlord gives notice in accordance with the termination grounds for periodic tenancies.

Making minor changes

Tenants can ask to make changes to the property

and landlords must not decline if the change is minor. Landlords must respond to a tenant’s request to make a change within 21 days.

Prohibitions on rental bidding

Rental properties cannot be advertised without a rental price listed, and landlords cannot invite or encourage tenants to bid on the rental (pay more than the advertised rent amount).

Fibre broadband

Tenants can request to install fibre broadband, and landlords must agree if it can be installed at no cost to them, unless specific exemptions apply.

Privacy and access to justice

A suppression order can remove names and identifying details from published Tenancy Tribunal decisions if a party who has applied for a suppression order is wholly or substantially successful, or if this is in the interests of the parties and the public interest.

Assignment of tenancies

All requests to assign a tenancy must be considered. Landlords cannot decline unreasonably. If a residential tenancy agreement prohibits assignment, it is of no effect.

Landlord records

Not providing a tenancy agreement in writing will be an unlawful act and landlords will need to retain and provide new types of information.

Enforcement measures being strengthened The Regulator (the Ministry of Business, Innovation and Employment) will have new measures to take action against parties who are not meeting their obligations.

Changes to Tenancy Tribunal jurisdiction

The Tenancy Tribunal can hear cases and make awards up to $100,000. This is a change from $50,000.

Phase 3: Law changes take effect by 11 August 2021

Tenancies can be terminated if family violence or landlord assault has occurred

The below provisions must come into effect by 11 August 2021, but may come in earlier if the Government agrees (using an Order in Council):

Family violence: tenants experiencing family violence will be able to terminate a tenancy without financial penalty.

Physical assault: a landlord will be able to issue a 14-day notice to terminate the tenancy if the tenant has assaulted the landlord, the owner, a member of their family, or the landlord’s agent, and the Police have laid a charge against the tenant in respect of the assault.

More information

Reform of the Residential Tenancies Act 1986 (Ministry of Housing and Urban Development) Residential Tenancies Amendment Act 2020 (New Zealand Legislation website)

Tenancy.govt.nz (MBIE/Tenancy Services have developed a factsheet that summarises the changes) Source: tenancy.govt.nz/law-changes

Accountants to comply with AML/CFT legislation

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Some time ago New Zealand has passed a law called the Anti-Money Laundering and Countering Financing of Terrorism Act 2009 (AML/CFT).

The purpose of the law reflects New Zealand’s commitment to the international initiative to counter the impact that criminal activity has on people and economies within the global community.

The first sector required to comply with this legislation was the Finance sector (Banks, Financial Planners etc), lawyers are required to comply with the requirements of the AML/CFT Act from the 1st July 2018 and recent changes to the Act mean that from 1 October 2018 accountants are required to comply too.

The intent is for the entire professional services community (lawyers, accountants,banks, etc) to help combat money laundering and terrorist financing, and to help Police bring the criminals who do it to justice so even though the vast majority of our clients are honourable people we know well, and have had a long relationship with, this legislation requires us to do a number of things with regards to every client

The law says that we must assess the risk we may face from the actions of money launderers and people who finance terrorism as well as identify potentially suspicious activity and that means more paperwork for us and a requirement for you to supply us with more information.

For most of our clients we will be asking for certain information when you bring in your annual accounts work, while we need to have compliant processes in place by the 1st October we have a year or so to collect this information about all clients. New clients will need to provide the information BEFORE we can carry out any work.

To complete the risk assessment we must obtain and verify information from prospective and existing clients about a range of things. This is part of what AML/CFT calls “customer due diligence” (‘CDD’).

CDD requires us to undertake certain background checks before providing services to clients or customers. Accountants and other professionals must take reasonable steps to make sure the information they receive from clients is correct, so we need to ask for documents that show this and we need to keep the information on file for a minimum of five years.

If your business activities change significantly then we may need to update the CDD

The minimum information we will need to obtain from you and verify to meet these legal requirements includes:

  • your full name; and
  • your date of birth; and
  • your address.

To confirm these details, documents such as your driver’s licence or your birth certificate, and documents that show your address, such as a current bank statement will be required.

If we complete work for a company or trust we will need information about the company or trust too, including the people associated with it (such as directors and shareholders, trustees and beneficiaries).

We will need to ask you about the nature and purpose of the proposed work you are asking us to do for you; in most cases it will be business advisory and annual accounts/tax work.

We may need information confirming the source of funds for certain transaction to meet the legal requirements and we may also need to ask you for further information depending on a range of variables required by the legislation.

If we are not able to obtain the required information from you, it is likely we will not be able to act for you.

Before we start working for you, we will let you know what information we need, and what documents you need to show us and let us photocopy.

While we may shake our heads at some of the requirements, the Act is bringing New Zealand into line with other countries and if you have any queries or concerns please contact our Practice Manager, Neil Hodgson, who is our AML/CFT Compliance Manager.

From our business perspective there is a huge amount we need to put in place, including various compliance programmes and reporting systems, staff training programes all of which will be audited every two years (NOTE – this is not an audit of you, it is an audit of our systems). We need to keep records regarding AML/CFT for a minimum of five years and this will be held in individual client files as well as in our various compliance documents.

And just so you know they aren’t picking on you we even have to carry out Department of Justice checks and credit checks on our staff as part of our compliance programme.

Personal Liability for Employment Breaches

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Most business owners, directors, managers and employees are unaware that they can be personally liable for penalties and the payment of legislative entitlements. A person who incites, instigates, aids, or abets any breach of an employment agreement is personally liable for a penalty of $10,000 for each breach.

IRD Compliance Focus

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Each year IRD target a few specific issues relating to tax payer compliance, carrying out investigation and audit activities to recover unpaid tax and penalties.

For every $1 spent by Inland Revenue on compliance focus activities they are recovering approximately $8 from non-compliant tax payers.

In the next year they will receive a funding boost from the government to increase their compliance focus work, which is likely to increase the scope and frequency of IRD investigations and audits.

IRD have indicated that key areas which they will be targeting over the coming year include:

 

The Hidden Economy

This includes any illegal activities or income earned outside of tax system (i.e. “cashies”). The IRD have signalled they have recently had success prosecuting several industries that deal largely in cash, such as takeaway restaurants, beauty salons and builders.

With increased funding Inland Revenue will have greater resources to identify offenders and conduct more investigations into these types of businesses.

 

Property Investment

Previously, residential property sales were only regarded as taxable if it was the purchasers “intention” at the time the property was purchased to resell it for a profit.

However, with the introduction of the Bright Line legislation in October this year, IRD now have an objective test to supplement the intention test, to help determine whether the sale of a residential property is taxable.

Therefore, Inland Revenue are ramping up audit activity in this area to try and catch any property speculators who in the past have hidden their intentions to make tax-free gains on the sale of property.

 

GST Refunds

Inland Revenue will be focusing on tax payers who receive large GST refunds and those who receive GST refunds on an ongoing basis.

For large GST refunds they are likely to request documentation (such as copies of invoices and receipts) to verify the GST claim.

The risk with taxpayers who consistently receive GST refunds is that they may no longer be eligible to be GST registered and should therefore have deregistered for GST (e.g. if the business has ceased or it has slowed down so much that it is a “hobby” rather than a taxable activity).

For any clients who think they might be at risk of audit by the IRD, we urge you to make sure that you are declaring all of your income and complying with all relevant tax laws.

 

It is never too late to come clean to IRD, as up until an audit notification is received from them, taxpayers can make a voluntary disclosure of any mistakes or omissions from tax returns, which can significantly reduce the amount of penalties and interest Inland Revenue will charge on any underpaid tax.

If you are not sure you have met all of your tax obligations or have any questions about Inland Revenue’s compliance focus please contact our office.