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Health and safety FBT exemption

Non-cash fringe benefits provided by employers are subject to FBT, however, if the benefit contributes to the health and safety of the employee, this may exempt it from FBT.

The benefit needs to qualify the following requirements:

  • Must be related to the employees health or safety
  • Must be aimed at managing risks to health and safety in the workplace as provided under the Health and Safety at Work Act 2015 (HSWA)
  • If it was provided on the employer’s premises, it would be excluded under section CX 23.

A benefit that addresses a specific harm or hazard to the health and safety of an employee would meet this criteria. This is because every employer has an obligation under the HSWA to minimise, and where possible, eliminate, risks to employees.

The healthy and safety exemption for benefits is based on the employer’s subjective assessment of potential or actual risks in the workplace. An example of a specific health and safety benefit could be physio appointments that target pain in the area likely to occur due to the employees roles and obligations in the workplace.

Employers should consult a tax professional if there is confusion regarding section CX 24 of the ITA which will exclude benefits from the exemption if benefits are used or consumed on employer premises.

Posted on 15 October '20 by , under tax. No Comments.

How will the NZ government tackle its COVID debt?

The New Zealand government is attempting to make changes to reduce the debt that it has incurred in its efforts to stabilize the economy during COVID. The Labour party announced a new top tax rate (39%) which would apply to those earning over $180,000 – this would bring in 550 million dollars each year.

However, critics are unhappy with the government choosing to utilise 2% of the workforce that falls into that bracket. Calculations have shown that this strategy would mean it takes 26 years to pay off the debt that has resulted from wage subsidies provided during COVID.

An alternative provided by critics of this change has been to progressively increase the age at which individuals become eligible to claim superannuation and index super payments to both average wage, and consumer price index growth.

Contrasting the perspective offered by critics, the PM has shown disagreement with raising the retirement age. Unfaltering against the opposing opinions, the government will continue to support the New Zealand Superannuation Fund, with plans to borrow an additional 10.4 billion dollars for it over the next 5 years.

Posted on 24 September '20 by , under super. No Comments.

Understanding the bright-line property rule

New Zealand tax residents selling residential property (including overseas property) that they have owned for less than 5 years may be subject to income tax. To determine whether you will have to pay income tax, you will need to use the bright-line rule.

The bright-line rule only applies to property bought on or after 1 October 2015.

The rule considers whether the property was either:

  • purchased between 1 October 2015 to 28 March 2018 and sold within 2 years, or
  • purchased on or after 29 March 2018 and sold within 5 years.

This means that if the residential property was bought between 1 October 2015 and 28 March 2018 and then sold within 2 years of purchase, income tax was applied to the capital gains made on the resale. Residential property purchased on or after 29 March 2018 will be subject to the five year bright-line rule. In this case, properties that are resold within 5 years of their purchase will be subject to income tax.

Residential property that is sold outside the bright-line period is not subject to the bright-line rule. This means it will not apply if you purchased a property any time on or after 29 March 2018 and sell it after 5 years has already passed.

There are situations where the bright-line rule does not apply even if you sell the property within the bright-line period:

Main home exclusion
The main home exclusion can be used under the bright-line property rule if the following apply:

  • The property was used as your main home for over 50% of the time you have owned it.
  • More than 50% of the property’s area was used by you. This could include your backyard, garden, and garage.

Individuals can only have one main residence. The main home exclusion can only be used twice over any two-year period.

A main home held in a trust
Residential properties that are held in a trust can also use the main home exclusion if the property sold was the main home of a beneficiary of the trust or the principal settlor of the trust, unless the principal settlor did not have a main home.

Inherited property
Property that is inherited is not subject to the bright-line test when it is sold by the person who inherited the property. If the property, or any part of the property is acquired by someone other than the inheritor, it may be subject to the bright-line rule.

Posted on 27 August '20 by , under tax. No Comments.

What to consider when developing a sales strategy plan

A successful sales strategy plan will provide your business with clear priorities, goals, and outcomes that can help you increase sales.

Outline your mission and goals

What’s your business’ mission statement? What are the goals and objectives that will help you achieve this? Your mission statement should define what your business stands for and what it aims to achieve, while your goals and objectives should be aimed at executing your mission. Consider using the S.M.A.R.T. framework when developing your goals to ensure that they are specific, measurable, achievable, relevant, and time based.

Identify your ideal customer

Knowing your ideal customer persona is crucial as it will be the basis of your marketing strategy. Assess your ideal audience by researching their demographics, needs and wants while thinking about how your products or services have to offer them. Don’t limit your demographic research to age, location, and gender, but also consider their attitudes, aspirations, and lifestyle.

Conduct a SWOT analysis

Assessing your business by using a SWOT analysis can help you identify areas to consider when developing a sales strategy plan, by addressing:

Strengths:

  • What are your strongest assets?
  • How skilled is your sales and marketing team?
  • What advantages does your business have over competitors?
  • What resources are available to you?

Weaknesses:

  • What are your areas of improvement?
  • What types of complaints do your customers have?
  • Where do you fall behind from your competitors?
  • Are you working with limitations on resources or skills?

Opportunities:

  • Are there changes in the business environment you can benefit from?
  • Have there been changes in the market that could present an opportunity?
  • Do your competitors have weaknesses or gaps you can fill?

Threats:

  • Are your competitors expanding or getting stronger?
  • How satisfied are your customers?
  • Are there changes in the economy, consumer behaviours, or government regulations that could affect your sales?

Posted on 13 August '20 by , under General News. No Comments.

Kiwisaver for the self-employed

Employees are paid their KiwiSaver contributions through their employers, however self-employed individuals have to do things a little differently. If you are self-employed, you agree to your contribution level with your provider instead of contributing a percentage of your pay.

Self-employed individuals who do not receive PAYE income will not be required to make any contributions to their KiwiSaver account, but will be able to make voluntary contributions whenever they wish. Some providers may require a minimum contribution amount.

Those who are self-employed but have their income subject to PAYE deductions will still be considered as employees for the purposes of KiwiSaver. In this case, the KiwiSaver contributions minimum of 3% will continue to be deducted from their wages. They will also need to make the minimum employer’s contribution of 3%.

In the event that a self-employed individual starts working as an employee, they will need to inform their employer that they are part of KiwiSaver in order for contributions to be deducted from their wages. They will be able to choose whether to contribute 3%, 4%, 6%, 8% or 10% from their earnings. As well as this, they may be able to receive employer contributions if they meet the eligibility criteria.

Self-employed individuals can join KiwiSaver by choosing a scheme provider and applying directly to them. The scheme provider will then notify the IRD that you have joined KiwiSaver. To be eligible to join KiwiSaver, you must be a New Zealand citizen and normally live in New Zealand or be entitled to stay in New Zealand indefinitely.

Posted on 7 August '20 by , under super. No Comments.

Deductions on home businesses

Self-employed individuals (contractors, sole traders, partnerships, or company owners) running a business from their home can claim the parts of their home used for business as an expense.

Any space in your home that is primarily used for the purpose of running your business can be claimed. This may include certain rooms such as a home office, a workshop, or a garage used to store stock. Parts of your home left for personal use cannot be claimed. The amount you can claim depends on the measurement of the space allocated for business use. This is calculated as a percentage of the total space in your home. For example, if you use 15% of the space in your house for business purposes, you can claim 15% of household expenses, such as:

  • insurance,
  • rates,
  • rent,
  • power.

A percentage of the interest you pay on your mortgage can also be claimed if you own your house. However, repayments of the principal amount you owe cannot be claimed.

When running your business from home, business-related phone calls can also be claimed under the following circumstances:

  • Businesses that use a home landline for business-related calls can claim 50% of the line rental.
  • If a separate phone line is used for business calls, 100% of that line rental can be claimed. In this case, nothing from your home landline can be claimed.
  • If a mobile phone is used for business calls, the cost of any business calls made can be claimed. In this case, individuals should record details such as the date and number they called, the reason for the call, and how much it cost.

Individuals running their business from home should keep a record of all their expenses as evidence and to calculate the percentage of business-related costs, apportioned from personal home expenses. Records can include receipts, logs and documentation related to the business.

Posted on 30 July '20 by , under tax. No Comments.

What are your NZ Super obligations?

New Zealanders who are currently receiving NZ Super payments, or are looking to apply need to be aware of the obligations that come with the scheme. It is important to be prepared for and prevent any penalties that may come your way in the case that you do not uphold these obligations.

What are your obligations?

Changes in your personal details, living conditions and financial circumstances need to be reported to Work and Income as soon as you can confirm them. For example, contact details such as your address, bank account number and name need to be reported. Other reportable changes in your living situation include your relationship status (marriage, separation, de facto relationships), involvement in a civil union, and starting or stopping living alone.

The following changes will also need to be reported to Work and Income:

  • intention to live overseas,
  • intention to travel overseas for longer than 26 weeks,
  • admittance or discharge from hospital,
  • being granted overseas benefits and/or pensions, and
  • being imprisoned or held in custody on demand.

Up until November 2020, your partner can also be included in your NZ Super. In the case that you have a partner included in your NZ Super, changes in work situations regarding your partner or yourself (such as becoming self-employed or switching to part-time, casual or full-time work) will also need to be reported.

Keep in mind that individuals who are receiving other payments from the New Zealand Government will also need to simultaneously meet obligations for other respective payments, that are not necessarily required by NZ Super.

What happens if you do not meet your obligations?

Individuals who do not meet the required obligations may be faced with a series of penalties including:

  • their New Zealand Superannuation being reviewed and stopped,
  • paying back any overpayments they have received,
  • being imposed a penalty of up to three times the value of any overpayment, and
  • being prosecuted, fined, and/or imprisoned.

Posted on 9 July '20 by , under super. No Comments.

Broader refundability of R&D tax credits

Businesses that have been impacted by COVID-19 may be finding it difficult to continue their research and development (R&D) plans on track. As part of the Government’s COVID-19 economic response, more businesses carrying out eligible R&D activities may be able to access a refund of their R&D tax credit with increased leniency.

The R&D tax credit regime for the 2019/20 income year was originally restricted to specific corporate entity criteria, including a maximum pay-out of $255,000 and a 20% R&D wage intensity cap. Under the COVID-19 Response (Taxation and Social Assistance Urgent Measures) Act 2020, businesses conducting R&D may be provided with broader refundability in the 2019/20 income year. This includes the removal of the $255,000 maximum pay-out cap, as well as the removal of the wage intensity criteria.

The changes also include a payroll cap, or a labour-related tax cap that applies to R&D expenditure on non-approved research providers. In this case, R&D tax credit refunds are limited by the amount of Employer Superannuation Contribution Tax (ESCT), FBT, and PAYE the business has paid within the year.

Broader refundability measures will apply by default to all 2019/20 claims. However, for 2019/20 only, businesses will still have the option to use the limited refundability rules within the $255,000 refundability capped scheme if they prefer. This may be a better option for businesses who cannot satisfy the payroll cap.

Posted on 2 July '20 by , under tax. No Comments.

Upcoming changes to NZ Super for couples

Since 2001, New Zealand Superannuation (NZ Super) has become a popular pension option for retired Kiwi couples. However, couples looking to apply for NZ Super in the near future or are already receiving payments need to be aware of the upcoming changes scheduled to be introduced on 9 November 2020. It is important to be prepared for the changes that will be passed into legislation at the end of the year and be wary of how they may affect you.

What is NZ Super?

NZ Super is the government pension paid to Kiwis over the age of 65 years is paid to individuals based on the Government’s payment level set every year on 1 April. The rates are reviewed and adjusted annually to take into account any increases in the cost of living, average wages and overall economic circumstances.

The current after-tax NZ Super rate is split into three different categories for couples:

  • Couples with two qualified individuals: paid at $652.04 each, after tax per fortnight.
  • Couples with one qualified individual and a non-qualified individual included: paid at $619.76 each, after tax per fortnight.
  • Couples with one qualified individual and a non-qualified individual who are not included: paid at $652.04 after tax per fortnight.

The proposed changes will be targeting couples with one qualified individual and a non-qualified individual included in the payment scheme.

What are the proposed changes?

The changes aim to simplify NZ Super by:

  • closing the option to include non-qualifying partners in payments (partners will be directed to apply for another assistance scheme),
  • changing how Work and Income makes overseas pension deductions,
  • changing the residency criteria to include time spent working for recognised New Zealand charities overseas, and
  • people living in mobile homes located outside of caravan parks will be eligible for the living alone rate.

Note that in relation to closing the option to include non-qualifying partners in payments, partners registered before 9 November will still be included in your payments unless circumstances (such as income increasing to above the cut-off point) change. You can also still apply to include a non-qualifying partner in your NZ Super before 9 November 2020 to receive NZ Super payments. Current eligibility requirements have not changed.

Posted on 11 June '20 by , under super. No Comments.

COVID-19 and tax for the self-employed

As part of their COVID-19 response, the IRD has introduced a number of measures aimed at alleviating the financial pressure on those who are self-employed.

Tailored tax rates and exemptions
Self-employed workers who have had their income significantly affected by COVID-19 and no longer fit in their current withholding rate can apply for a tailored tax code. This can be done through myIR Secure Online Services.

Additionally, self-employed citizens may be able to apply for a certificate of exemption for schedular payments (not salary or wages) if they have a good record of filing tax returns and paying tax.

Provisional tax
The threshold for provisional tax has been increased from $2,500 to $5,000. If you are a current provisional taxpayer with payments under $5,000, you must pay your tax bill by 7 February following the year you file. The increased threshold is aimed at lowering compliance costs for smaller taxpayers, and it means that some taxpayers will no longer have to pay provisional tax for the 2020-2021 income year and onwards.

Loss carry-back scheme
Self-employed workers who expect to make a loss in the 2019-2020 or 2020-2021 financial years may be eligible for the loss carry-back scheme. The scheme will enable businesses to carry their losses back one year to the preceding income year, offsetting profits that were made the previous year. Your loss carry-back can be claimed by:

  • Including the carried back loss in your tax return. The IRD will then provide you with a refund of overpaid tax.
  • Asking for a refund of any provisional tax you paid for 2020 if you plan to carry back a loss from 2021.

Posted on 2 June '20 by , under tax. No Comments.