Taxation

ACC Premiums

Employer invoicing by ACC takes place in July and is based on employee earnings for the year ended 31 March.

The IRD provide ACC with relevant earnings data from employer monthly schedules from which ACC calculates the total levies due. This information is:

▪ Total earnings before tax

▪ Total earnings not liable to earning levy

▪ Withholding payments

▪ Total of earning exceeding the maximum threshold on which ACC levy is applied

You pay ACC Premium for:

▪ ACC Workplace Cover Levy - to cover work-related personal injury costs for your employees - your classification unit rate x each $100 of liable earnings.

▪ Residual Claims Levy - to fund the ongoing cost of historical injuries suffered by employees - your residual claims levy rate x each $100 of liable earnings.

▪ Health and Safety in Employment Levy - to fund the Occupational Safety and health Service of the Department of Labour - 5c x each $100 of liable earnings.

▪ Compensation for the first week of lost wages, if an employee suffers a work-related personal injury and is off work.

The Classification Unit Rate is based on the actual cost of work-related injuries that occur within your classification unit. A classification unit is a group of businesses that operate within a similar industry.

The Residual Claims Levy Rate covers ongoing costs for old injuries that occurred before 1999. In 1999 the ACC funding was changed to cover the full lifetime costs of injuries that occurred in that year.

Depreciation

Depreciation allows for the wear and tear on a fixed asset and must be deducted from your income. You must claim depreciation on fixed assets used in your business that have a useful lifespan of more than 12 months.

Not all fixed assets can be depreciated. Land is a common example of a fixed asset that cannot be depreciated. You will have to keep a fixed asset register to show assets you will be depreciating. This should show the depreciation claimed and adjusted tax value of each asset. The Inland Revenue Department determines all depreciation rates.

In most circumstances, you can choose between the diminishing value and straight-line methods of calculating depreciation. You do not have to use the same depreciation method for all your assets, but you must use whatever method you choose for an asset for the full year. The method used for an asset can be changed from year to year.

For more information about depreciation, the methods of depreciation and the depreciation rates, please visit the IRD-website or contact us .

Donations – individuals

If you made financial donations to a charity which is registered in New Zealand or if you worked and paid for childcare or a housekeeper during the last tax year and have the receipt of that donation, you can claim part of it back as a rebate.

You can claim a rebate for:
▪ Donations of $5 or more to an approved charity, or
▪ Payment for childcare or a housekeeper (under certain conditions).

The maximum amount you can claim is:
▪ For donations of $1,890 or more your rebate will be $630 from 2003 onwards.
▪ For donations of $1,500 or more your rebate will be $500 for 2002 and previous years.
▪ If you've paid $940 or more for childcare or a housekeeper, your rebate will be $310.

Rebates can be claimed by individuals (not companies, trusts or partnerships) who:
▪ Earned taxable income during the period being claimed for, and
▪ Were resident in New Zealand at any time during the tax year.

For more information visit the IRD website or contact us for further assistance.

Donations – companies

Companies are entitled to a deduction for donations made in an income year up to 5% of a company's net income. There are maximum limits available, please contact us for more information.

Entertainment

If you provide entertainment for staff or clients, some of these business entertainment expenses are tax deductible. There are fully- deductible expenses and expenses that are only 50% deductible.

Some examples of fully-deductible entertainment expenses are food and drink:
▪ while travelling on business
▪ at promotions open to the public
▪ at certain conferences

Some other entertainment expenses are only 50% deductible if they fall within the following:
▪ Corporate boxes
▪ Holiday accommodation
▪ Pleasure craft
▪ Food & beverages consumed at any of the above or in other specific circumstances eg. business lunches

There are a number of exemptions from these rules, please contact us for more information.

Fringe Benefit Tax (FBT)

Fringe Benefit Tax (FBT) is a tax on benefits that employees receive as a result of their employment, including those benefits provided through someone other than an employer where the business operates under a company structure.
The four main groups of fringe benefits are:
▪ Motor vehicles;
▪ Low-interest loans other than low-interest loans provided by life insurance companies;
▪ Free, subsidised or discounted goods and services, including subsidised transport for employers in the public transport business;
▪ Employer contributions to sick, accident or death benefit funds, superannuation schemes and specified insurance policies.

Gifts, prizes and other goods are fringe benefits. If you pay for your employees' entertainment or private telecommunications use, these benefits may also be liable for fringe benefit tax or may be taxable as monetary remuneration.

Refer to the IRD website or contact us for more information on how Fringe Benefit Tax is applied and calculated.

Gift Duty

Gift duty is a charge on any gifts over a certain value that one person makes to another. Any person making gifts with a total value of over $12,000 in any 12-month period must complete a gift statement for the IRD. Any person who gives gifts of more than $27,000 in any 365 day period is liable to pay gift duty.

For gift duty purposes, a gift is something given:
▪ When nothing is received in return, or
▪ When something is received in return, but its value is less than the value of the property given.

If something of lesser value is given in return for a gift, the value of the gift is the difference between the two values.

These items can all be gifts:
▪ Transfers of any items (for example, company shares or land)
▪ Any form of payment
▪ Creation of a trust
▪ A forgiveness or reduction of debt
▪ Allowing a debt to remain outstanding so that it can't be collected by normal legal action.

These types of gifts are not subject to gift duty:
▪ Small gifts, up to $2,000 total value to any one recipient in one calendar year, as long as  they are part of the giver's normal expenses
▪ Gifts for support and education of relatives (provided these gifts are not excessive)
▪ Gifts that create a charitable trust, and any gifts to a charitable trust
▪ Employer contributions to employee superannuation funds
▪ Retirement payments and special bonuses or gratuities
▪ Settling a home as a joint family home
▪ Any disposal of property under the Property (Relationships) Act 1976, as long as the recipient gets no more than 50% of the total relationship property

An exempt gift does not count towards the $27,000 of gifts that a taxpayer can make in a 12-month period before being liable for gift duty.

For more information on Gift Duty see the IRD website or please contact us for more information.

Goods and Services Tax (GST)

Goods and Services Tax (GST) is a tax on the supply of goods and services in New Zealand by a registered person on any taxable activity they carry out. The rate for GST is generally 15.0% although it can be zero-rated for exports.

Certain supplies of goods and services are "exempt supplies". These include:
▪ Certain financial services
▪ Sale or lease of residential properties
▪ Wages/Salaries and most Directors Fees

GST registration is required if the annual turnover of the business for a 12-month period exceedsm, or is expected to exceed, $40,000. If your turnover exceeds $250,000 pa you must file your GST return monthly or bi-monthly.

There are three methods of accounting for GST:
▪ Payment basis - claim GST when you pay for your purchases and expenses, account for GST when your customers pay you. This basis can only be used if the total value of your taxable supplies in any 12-month period is $ 1.3 million or less.
▪ Invoice basis - claim GST when you receive an invoice. Account for GST when you issue an invoice or receive a payment, whichever comes first.
▪ Hybrid basis - claim GST when you pay for your purchases. Account for GST when you issue an invoice or receive a payment, whichever comes first. Any registered person can ask to use the hybrid basis.

If you are selling or thinking of selling your products through your website please also refer to the section on GST and E-Commerce.

Visit the IRD-website for more information or contact us for further assistance.

GST and E-Commerce

If a GST-registered person sells goods via the internet and the goods are physically supplied to a customer in New Zealand, GST is chargeable at 15.0%. If goods are sold via the internet and physically supplied to customers overseas, the sales can be zero-rated for GST purposes. It is important to prove the goods have been exported (entered for export by the supplier and not an internediary) and sufficient evidence should be held to prove the export.
If a GST-registered person sells digital products (such as music, software or digital books) to a New Zealand customer they must charge 12.5% GST. (These products are treated as services for GST purposes). If digital products are sold via the internet and downloaded by an overseas customer they can be zero-rated but it is important to prove that the products are "exported" otherwise GST must be charged.

For more information on GST and E-Commerce, please visit the IRD-website or contact us.

PAYE on salaries and wages

Pay As You Earn (PAYE) is the basic tax taken out of your employees' salary or wages. The amount of PAYE you deduct depends on your employees' tax code(s).

PAYE employees must complete a Tax code declaration (IR 330) as soon as they start working for you. If an employee fails to complete the tax code declaration, you must deduct PAYE at the non-declaration rate. Every month you must file an employer monthly schedule detailing each worker's gross earnings and deductions.

If you are a small employer with gross annual PAYE deductions of less than $100,000, the schedule and payment are made on the 20th of the month following the deductions.

If you are a large employer with gross annual PAYE deductions of $100,000 or more, the deductions made from payments made to workers between the:
▪  1st and the 15th of the month are paid by the 20th of the same month.
▪ 16th and the end of the month are paid by the 5th of the following month (except December payment which is to be made by 15 January).  The employer monthly schedule is filed along with this payment.

Please visit the IRD-website for more information or contact us for further assistance.

Provisional Tax

Provisional tax is a way of paying your income tax through the year.

If your residual income tax (RIT) to pay is $ 2,500 or more and you have earned income which has either not been taxed or has not had enough tax deducted from it, you need to pay provisional tax for the following year.

Your residual income tax (RIT) for a tax year is the amount of tax you have to pay after subtracting any rebates and tax credits you may be entitled to (excluding other tax payments made during the year). It is calculated on your end-of-year tax return.

Provisional tax is generally paid in three instalments during the year, the dates for payment depending on your balance date. Most people have a standard balance date of 31 March. For using a non-standard balance date you need prior approval from the IRD.

If you have a standard balance date, your provisional tax due dates are:
▪ first instalment 7 July
▪ second instalment 7 November
▪ third instalment 7 March

Please contact us for further assistance or visit the IRD-website for more information.

Tax Returns - Companies

If you're in business, you'll need to complete and send the IRD an income tax return and attach either a copy of your financial records or a form that summarizes your income and expenses. Sole traders, partnerships, companies and non-profit organisations are the four main types of business. The rates for income tax vary depending on which type of business.

Please visit the IRD website for more information or contact us for further assistance.

Tax Returns - Partnership

When two or more people are in a business partnership, they must file an IR7 joint return of income showing the total income after expenses and distribution to partners. Each partner must file a personal tax return showing all income, including a share from the partnership. The partnership is not assessed for income tax, but partners are liable for income tax on their share of income from the partnership.

Please visit the IRD website or contact us for further assistance.

Tax Returns - Personal

Most people who earn salary or wages pay the correct amount of tax and don't need to do anything at the end of the tax year (31 March). However, if you earn income that has no tax deducted, or if you paid too much or not enough tax during the year, you'll need to file a return or get a personal tax summary. These will tell you if you have a tax refund or bill to pay.

If you earned income that hasn't been taxed (eg. rental or self-employed income), earned overseas income, run your own business or received withholding payments, you need to file an Individual income tax returns (IR3).

There are several occasions when you may be eligible for an income tax rebate. For example, when you're under 15 (or under 19 and still at school), earned less than $9,880 and worked for less than a full year or had more than one job. Or when you paid for childcare, a housekeeper, or made a donation for school fees or to a charity.

Please visit the IRD website or contact us for further assistance.