AUTUMN / MARCH 2017
End of year checklist
Work through the points below to straighten things up for the end of the tax year.
Think about. …Deductions
Bad Debts
Write bad debts off in your debtor ledger before balance date so you can claim a deduction. Make sure your records show you have taken reasonable steps to recover the debt prior to write-off. Note the details so we can check the GST adjustments.
Employee expenses
You can claim deductions for holiday pay, bonuses, redundancy payments, long service leave etc., if you commit to them before year end and pay them within 63 days of balance date. Check holiday pay has been calculated correctly.
Expenses
Can you pre-pay expenses such as stationery, postage and courier charges before 31 March? You may be able to claim for them. Check with us. There are limits to how far some prepaid expenses are claimable, such as on rent, insurance, plant and equipment maintenance contracts, travel and accommodation.
Fixed assets
Are you still using all of them? Can some be written off?
Repairs/maintenance
Complete planned maintenance or repairs before year end for a tax deduction. Ask us if you aren’t sure whether the expenditure is classified as repairs and maintenance (which would be deductible) or as a capital expense (which wouldn’t).
Stocktake
Dispose of obsolete stock by year end or write it down to its net realisable value (the lesser of cost or market value). If your stock is worth less than $10,000 and turnover for the year less than $1.3m, you won’t need to include your stock movement for tax purposes.
Vehicles
Don’t forget to note your odometer reading at year end. If you keep logbooks noting business and personal use, mileage and costs, ensure these are all in order.
Think about. …Income
Credit notes
Look for credit notes issued to customers after balance date but related to sales made prior to balance date. Note these so you can reduce your taxable income for the current year.
Increased Income
Is this year’s income a lot higher than last year’s? If so let us know. It might be a good idea to consider making a voluntary provisional tax payment.
Losses
Did your group of companies have losses in 2016? Groups of companies may offset profits and losses against each other if you make loss offset elections and subvention payments by 31 March. We can help you with this.
Retentions
Check contracts for the terms on retentions owing. Have you invoiced retentions but they are not payable till work is complete in a subsequent tax year? They won’t count as assessable income for this year. However, If they are payable this year they are assessable income. Note retentions you have invoiced which are not receivable till the next tax year.
As you may be aware, last year the Government introduced a Bill containing proposed changes to various business taxes including changes to the withholding tax rules. This initiative is part of the Government’s plan to simplify business taxes for small to medium sized businesses, intending to make it easier for Contractors to comply with and self-manage their tax obligations. The legislation was passed this month, with the changes taking effect from 1 April 2017 and affects all payments from this date on.
These changes mean that you may be required to have withholding tax deducted from payments to you as a contractor (regardless of your trading structure i.e. company, partnership or sole trader).
See further detail at
http://www.ird.govt.nz/news-updates/contractor-changes.html.
As a Contactor you may be required to complete and return an IR330C by 31 March 2017 and advise the tax rate percentage to be withhold and sent to the IRD, on your behalf.
If you are required to have Withholding deductions and the IR330C is not submitted by 31 March 2017 then the default withholding rate of 45% will be deducted from your payments as specified by the IRD.
For any queries regarding these changes, please contact your Jacal team member.
Selling across the ditch – GST on low value goods
Do you sell goods to Australia?
If so, you may be affected by new Australian tax rules. At present, goods valued under AUD$1,000 do not generally have Australian GST applied to them where they are sold into Australia directly to the end customer. However new rules will now apply from 1 July 2017 to impose Australian GST on goods valued at $1,000 or less (‘low value goods’), where the supplier’s GST turnover (on low value goods sold into Australia) in a given year exceeds the threshold ($75,000 for most entities and $150,000 for non-profit bodies).
If this sounds like a slice of your business, you will be required to register for Australian GST, charging Australian GST (currently 10%) and remitting it to the Australian tax system. This applies whether your customers purchase goods from you online, over the phone or in person in a retail outlet here where your business ships the goods over to Australia. It applies whether the goods are physically here in New Zealand or sourced elsewhere overseas.
For New Zealand businesses exporting low value goods to Australia, the Australian Taxation Office (ATO) is talking about a GST registration process whereby you elect to be a ‘limited registration entity’ and return GST that way.
Along with registering for GST, you will need to look at how your software and record systems are set up and rethink your pricing and marketing.
The Bill hasn’t been passed yet but it looks as if it will. So if you sell low value goods to Australia and your GST turnover of low value goods sold into Australia is over or close to $75,000, please contact us to talk about how this might affect your business.
Transforming GST
Inland Revenue are rolling out other changes to how New Zealanders file and manage their GST as part of ongoing business transformation. More than half New Zealand’s businesses now file their GST through Inland Revenue’s secure online service myIR, or direct from their accounting software. If this includes your business, you may have noticed there’s a new myGST tab on your myIR account. This will provide access to all your GST information.
Taxpayers are now able to use this to register for GST, register as a preparer of tax returns, amend GST returns and accounts, file and pay GST at the same time, set up payment plans, and track GST payments and refunds online.
This is on top of the recent changes for some taxpayers who are now able to prepare and send GST returns to Inland Revenue from their accounting software.
If you would like to talk about how your GST is currently being managed and how the changes might work in practice for you, please contact us.
Faster GST refunds
It is now compulsory for Inland Revenue to provide GST refunds by direct credit to a taxpayer’s identified account, resulting in faster GST refunds. Obviously it’s important that Inland Revenue has your correct banking details. If you would like us to confirm they have your current account details please let us know.
From here on, Inland Revenue will only make GST refunds by cheque if they do not have a customer’s bank details or if there are extenuating circumstances, such as hardship.
Miles to go – changes proposed for motor vehicles
Currently close companies (such as LTCs and QCs) providing a motor vehicle for the private use of shareholder-employees must pay FBT on the value of the benefit provided. This value is based on the availability of the vehicle rather than its actual private use and this means higher FBT compliance costs for close companies.
New option for close companies
The recently introduced legislation changes this for the 2018 tax year (i.e. from 1 April 2017 for standard balance date taxpayers). Under the new rules close companies which provide one or two vehicles to shareholder-employees could elect to use the motor vehicle expenditure rules instead of paying FBT. This would mean that, like sole traders and partnerships, close companies could measure the business use of a motor vehicle and calculate the tax deductions allowable for motor vehicle expenditure based on business use.
New method for calculating business use to claim deductions
Also introduced is a new simplified method of calculating business use for vehicles. The new option would allow you to choose to calculate your business usage and resulting deductible expense differently. The new method does not have a ceiling (currently the ceiling in place is 5,000 kilometres of business use).
What you need to know
If you are self-employed or if you operate through a close company and this applies to you, you would need to know the total mileage travelled each year and be able to work out what proportion of that is business use.
The actual requirement would be for you to keep a vehicle logbook for three months every three years.
When it comes to calculating the tax deductible amount, the calculation is ‘two tier’:
1. for the first 10,000 kilometres, the rate is calculated on the proportion of business use for the vehicle (say 60%) multiplied by Inland Revenue’s first tier rate (for example 75 cents/km but the IRD will advise the rates each year)
2. for every kilometre after that, the rate is calculated on proportion of business use for the vehicle (e.g. 60%) multiplied by Inland Revenue’s second tier rate (for example 25 cents/km but again subject to change)
What you need to do
To gear up for the change, at close of business on 31 March, record your odometer reading. Diarise to do the same thing next year. You want to be able to tell us the total number of kilometres travelled in the tax year when you bring in your records. And, sometime during the year starting 1 April 2017, keep a logbook for each vehicle for a three-month period to record mileage, costs and when the vehicle is being used for business or private purposes.
If you’re in any doubt as to whether this affects you, please contact us.
IMPORTANT DATES
7th April 2017
- Terminal tax for March 2016 balance date
8th May 2017
- Final installment of 2017 Provisional tax for the 31st March 2017 balance date
- 31 March 2017 GST Return & Payment
Farewell to Rebekah on 12th May 2017
We farewell Rebekah, our front of office live wire after 4 years, Bex is off overseas and we wish her happiness and safe travels!
Disclaimer – While all care has been taken, Johnston Associates Chartered Accountants Ltd and its staff accept no liability for the content of this newsletter; always see your professional advisor before taking any action that you are unsure about.