MORE TAX CHANGES AFOOT!
The IRD and the Government have recently introduced a multitude of tax changes. Some of the important ones are;
ACC WEEKLY COMPENSATION
If you are self-employed – ACC can reduce your compensation entitlement at claim time if the business continues to operate and/or if you keep working part-time. ACC CoverPlus extra is a product we encourage every single one of our eligible business owners to take out. This is because of three very interesting and important points:
1. Clients weekly compensation entitlements cannot be reduced at claim time, and
2. Clients can self-insure their own level of cover, and
3. Clients may be able pay their levies on a lower classification unit
If you have any queries regarding your ACC cover please give one of the team a call on 578 5416 or Miranda at ACC made Easy can provide you with a comprehensive review and advise the best option for you.
USE OF HOME
There is a proposal to change the rules for claiming “use of home”. For years, IRD has said that to make a claim for this cost you must set aside a room as an office. This isn’t quite true.
A court case some years ago settled this matter. You can apportion the cost of a room used for business between your business use and family use, based on the time each activity uses the room. Now, the IRD is planning to get its rule enshrined in the law, so if the law changes, you will need to have a room set aside as an office, if you want to claim for the use of a room for business.
To make claiming this cost simpler, the department plans to set a rate for utilities per square metre ($x for power etc). You will add your adjustment for rents, rates and interest. You won’t have to use the IRD calculation but it might save you hassles if you do. The bigger the power bill, the more likely you won’t want to use the IRD rate.
SHAREHOLDER / EMPLOYEES
Currently, you are either a provisional taxpayer or you get a PAYE salary. A mixture of the two is not strictly permitted unless the provisional income is at least half the PAYE salary. In
practice, it makes very little difference and for this reason, the IRD is proposing to do away with the restrictions and allow shareholder employees to take a PAYE salary and then top up their incomes at the end of the year, once the profit is known.
We look forward to this change becoming law.
ARE YOU A XERO USER?
Graceteam are able to offer clients on a standard Xero plan a 20% discount.
If you are not getting a discount on your standard Xero subscription call Shelley at our office to transfer your subscription to Grace Team.
Woohoo!! You can now file your GST direct from Xero without having to log in to the IRD website and fill in the form. All you need is a linked My IR login, simply go to the IRD website and register.
Xero reports are better than ever. All the reports have now been combined into one location, all of the new reports are highly customisable so give your account manager a call if you would like to set up some special reports.
Got a spare 6 minutes? Xero have released a suite of 16 short videos for small business on all aspects of everyday Xero. If you are stuck on something the relevant video is likely to have the answer and they are between 2 and 6 minutes long, these are in your Xero training. Give us a call if you need a hand finding them.
It may seem extraordinary but if someone forgives you a debt, from a tax perspective, you have taxable income unless the debt is forgiven for natural love and affection. In this context the lender can only have natural love and affection for their relatives or a trust where those relatives are beneficiaries.
If you’re structuring a business deal, don’t include debt forgiveness. For example, A says to C: “I’ll sell you my shares for $40,000 and forgive you the debt you owe me of $10,000”. It would be better to sell the shares for $30,000 and insist on the debt being repaid.
TAX ON CAPITAL GAINS
Are capital gains taxable? Yes, in some circumstances they are. For example, if you buy a property with the intention of selling it for a profit, regardless of how long you have had it, that profit is taxable. Recently it was reported The Reserve Bank as saying 40% of loans are interest-only and 47% of loans are to investors.
If you buy a rental property and finance it substantially with an interest-only loan and don’t make any effort to reduce the debt, some – including the IRD – might argue your investment was made with the intention of getting a capital gain. That would mean your gain, when you sell, might be taxable. There may be other valid reasons why the debt is structured this way. Just be careful.
READ EVERY WORD OF INSURANCE POLICIES
Strangely, one of the biggest risks in business is our insurance policy. We’re all familiar with the problems Canterbury people have had with their home insurance. If ever there is a document you need to read very carefully it is your insurance policy.
We’ve heard of someone buying travel insurance for a six-week period only to find, when a claim was lodged, that the policy was limited to a maximum of one month away from the country. Read every word of your insurance policy and if there’s anything which is not clear or looks as if it’s not covered, raise the matter with the insurer or agent. Make sure you get a response in writing. A telephone conversation is not enough.