CHRISTMAS 2018
TOPICS IN OUR NEWSLETTER THIS QUARTER
JACAL CLOSING & OPENING DATES
Our office will close on the 21st of December and reopen in the New Year on the 21st of January. For any urgent matters, a skeleton crew will be at the office from Monday 7th January. Thank you for all your support this year.
RING-FENCING OF RESIDENTIAL RENTAL LOSSES
Draft legislation has been introduced to restrict the way losses from residential investment properties can be used for tax purposes. It is possible the draft legislation will change as it works its way through the Parliamentary process, but its objective will remain.
That objective is to prevent rental losses being offset against other types of income to reduce the investor’s overall tax payable. The changes will take effect from the start of the 2020 income year – ie 1 April 2019 for most taxpayers.
We will be watching the progress of this draft legislation with interest. We expect the resulting law changes will have substantial implications for investors whose rental activities continue to generate losses, or whose future intentions – for example, changed debt or financing arrangements, acquisition of additional properties or planned repairs and maintenance expenditures – may result in negative rental returns in any given year. In a worst-case scenario the proposals have the potential to prevent residential rental losses from ever being used.
There are essentially three things an investor should do before these rules come into force on 1st April 2019.
Firstly, review the maintenance requirements on your buildings. If you are budgeting for repair work in the future that would be costly enough to create a loss in your portfolio, it may be sensible to consider undertaking this work in what remains of the 2019 tax year. You have only four months left to generate deductions that won’t be subject to ring fencing.
Secondly, if you are an investor with other business interests, consider booking a consultation to discuss the possibility of moving debts in your property entities to trading businesses. For example, you may have a trading company where you can refinance a shareholder loan account or you may have imputed retained earnings that have been reinvested in the business to date. Money could be borrowed in the business and used to pay out a dividend from retained earnings to shareholders who in turn use these funds to reduce debts in the property portfolio. The resulting interest costs in the business are deductible without being ring fenced and the property portfolio’s position is improved.
Thirdly, If you do have a loss making residential property portfolio, consider booking an appointment to examine the opportunity cost of retaining low yielding properties. If a property can be sold where more interest is saved through debt reduction than the lost rental income from the property the overall portfolio becomes more profitable, and now, more tax effective.
If you would like to know more about how these changes might affect you personally, please contact us for further information.
ARE YOU OWED A REFUND FROM ACC?
If you were in your first year of self-employment between 2002 and 2017, or paid provisional ACC levies after ceasing trading, ACC may owe you a refund. Customers receiving refunds will also receive an interest payment.
ACC will refund:
- all first-year levies collected between 2002-2017 from self-employed customers who worked full-time (averaged over 30 hours per week over the financial year), did not have a mix of employee and self-employed earnings and did not cease being self-employed in the same year.
- all businesses who paid provisional invoices and weren’t required to do so because they later ceased trading or changed their business structure.
ACC expects the refund process to be completed by 31 March 2019.
What you need to do
To find out if you may be eligible for a refund go to acc.co.nz or use MyACC for Business. If you may be eligible, you’ll be prompted to provide up-to-date contact details.
For more information and updates about ACC levy refunds go to acc.co.nz, call 0800 222 776, or email business@acc.co.nz
LACK OF EMPLOYMENT RECORDS CAN LEAD TO FINES UP TO $100,000
Employment New Zealand has raised concerns that many employers are failing to keep complete and accurate records including wages, time, leave, employment contracts and more.
As an employer, by law you must:
- be able to show that you’ve correctly paid your employees all minimum employment entitlements eg at least the minimum wage rate and four weeks annual holidays
- keep each employee’s records for seven years even if they have left
- ensure all employees have complete and current employment contracts.
Penalties for non-compliance can be up to $50,000 for an individual or the greater of $100,000 or three times the financial gain for a company.
Employment New Zealand has information about your legal obligations, the penalties and free resources available.
WATCH OUT FOR SPAM!
EMPLOYMENT LAW CHANGES PASSED
The Employment Relations Amendment Act 2018 was passed into law on 5 December 2018. It introduced a number of employment law changes that aimed to improve fairness in the workplace and deliver decent work conditions and fair wages. These changes reflected the Government’s 100-day commitments in workplace relations.
The Act restored protections for workers, especially vulnerable workers, and strengthened the role of collective bargaining in the workplace. Many of the changes were familiar to businesses, as they rolled the law back to how it was as recently as 2015.
The key changes included:
- reinstating set meal and rest breaks
- strengthening collective bargaining and union rights
- restoring protections for vulnerable workers, such as those in the cleaning and catering industries, regardless of the size of their employer
- limiting 90-day trials to business with fewer than 20 employees
Most changes take effect on Monday 6 May 2019. For detailed information on how the changes could affect you, visit the Employment New Zealand website.
FOLLOW US ON SOCIAL MEDIA
Johnston Associates has decided to provide more regular information via social media channels – namely Facebook and LinkedIn. We will continue to publish our quarterly newsletter, but you will find more regular and timely information through these channels.
So choose your preferred outlet by clicking on one of the buttons below, and don’t forget to follow us!
IMPORTANT PAYMENT DATES TO REMEMBER
JANUARY 15th 2019
- PAYE – Large employers returns and payment
- Provisional tax – Instalment due (for taxpayers with March balance dates)
- GST – Return and payment due for November
JANUARY 21st 2019
- Small employers return and payment
- Large employers return and payment
- FBT – Third Quarter return and payment due
- RWT – RWT return and payment due for December
- NRWT / Approved Issuer Levy – Payment and return for December
JANUARY 28th 2019
- GST – Return and payment due for December
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.