• Grace Team Accounting

June 16 round up


Here's our monthly round up of all things topical from holiday pay changes to property investment and cloud based programs.


HOLIDAY PAY

Just a reminder that in some scenarios, holiday pay should be treated as Extra Pay and PAYE should be deducted using the rates for Extra Pay.

These scenarios include:

  • Holiday Pay lump sums that are paid before the holiday is taken (ie paying 2 weeks holiday pay)

  • Holiday Pay lump sums that are paid on the termination of an employees employment

  • The treatment of “cashed up” annual leave, should continue to be treated as an “extra pay”.

Your payroll software should be updated to reflect these changes but if you have any queries regarding wages payments please phone Sue on 578 5416.

WHAT IS A GIFT?

Inland Revenue says there are three elements to a gift:

  1. It has been made voluntarily.

  2. It is by way of benefaction – the receiver gets some benefit out of the gift.

  3. The donor doesn’t get a significant benefit in return.

One of IRD’s concerns is school donations. Donations made to a general school fund are real donations so long as they are not a substitution for fees. Similarly, a donation for a school trip is not seen as a donation because the student gets the benefit of the trip.

PAY YOUR PAYE...OR GO TO JAIL

If you’ve got a business which involves paying staff and you are getting into financial difficulty, pay your PAYE immediately it is due. Recently a taxpayer was initially sentenced to 14 months in jail because he used $120,000 of PAYE to fund his business instead of paying it to IRD. Although the businessman admitted he was at fault and had attempted to come to an arrangement with IRD, the High Court, reducing the penalty, still made him do 300 hours

community service and four months of home detention.

THINKING OF INVESTING IN PROPERTY

In the current market it is very tempting to get caught up in the big gains to be had in the property market. Just a reminder that you need to be very clear in your intention as the tax implications of the brightline rules for property can impact on transaction. If you are considering investing or selling please contact us to review.

CLOUD BASED PROGRAMS HELP YOU KEEP UP

Keeping up with technology has always been an issue for small businesses. As a rule, it’s worth having the latest and the best you can realistically afford. This ensures you are at least level, and possibly ahead, of your opposition and your clients who expect you to be keeping up.

Nowadays it’s a bit easier to keep up because many programs are cloud-based. This means you don’t buy a program on a disk or download from the internet, but you “lease” it online. Instead of paying a one-off price, you pay a monthly fee to use it. Microsoft Office, which costs about NZ$10 a month for use on one computer, is an example.

While it seems like you’ll be paying forever (which you will as long as you need the program), the big advantage is that you’ll get regular updates to the program. Essentially, you’ll never get left behind. Another advantage is that you’ll never lose your work because it’s stored in the cloud (online). If your computer or laptop gets stolen, no problem. Your work can be retrieved. You’ll also get a reasonable amount of cloud storage so you can regularly back up your work, store your photos or other personal stuff.

The downside is you’ll keep paying when once you might have kept a program running for years without having to upgrade it. The overall cost would have been lower than the lease

arrangement.


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