Firm Journal

Here’s A Super Simple Way To Boost Your KiwiSaver Balance

The impact of COVID-19 may mean that there may be many New Zealanders who may have had to adjust the way in which their money is being spent. Most employed people have Kiwisaver payments deducted automatically from their pay, but did you know that you can add to your KiwiSaver savings at any time? 

 

It can be done through either one-off amounts or as regular additional payments, which can help to boost the balance. These contributions can be set up with additional advice and guidance from your KiwiSaver provider. 

 

So why might putting the extra money that you’ve accrued or accumulated as a result of changed situations into KiwiSaver be a smart move?

 

Many people may be reluctant to put more than the bare minimum of contributions into their KiwiSaver. If you put less than the bare minimum, which is $1,042 per year, you will receive a supplemental Government contribution, which can be a maximum of $521.

 

It might make more sense to invest your money elsewhere – but investing additional contributions into KiwiSaver can  provide you with long term interest. A key one for many is that of compounding returns. 

 

When a return is being compounded, it means that the money originally invested has interest added to it initially, and then the interest rate for the investment is applied agains the new amount. When this happens every year, compounding can start to work to your advantage.

 

Putting extra money into KiwiSaver also avoids having to make what can be complicated decisions and tradeoffs about where you want the investment money to go otherwise.

 

If you suffer from investment procrastination or over-thinking, nudging up your KiwiSaver contributions could be the simplest solution.

 

Speaking with your KiwiSaver provider may be the right step for you to take.

Posted on 4 October '21, under tax.

Using Your KiwiSaver To Buy Your First Home

Owning your own house may not have to remain a dream if you have been a KiwiSaver member for at least three years. 

 

Being able to purchase your first home may sound like a fantasy, but if you have been steadily saving over the years and remained a member with KiwiSaver for three years, you may be able to put all of it together.

 

Eligible members of KiwiSaver can withdraw their savings (including tax credits), but at least $1,000 must remain within the account. This can be put towards their first home, provided that the primary intent behind the purchase is to live in the property (and not to use it as an investment property). 

 

If you are a first home buyer, you may also be able to apply for the First Home Buyer’s Grant, which could give you up to $15,000 to put towards your first home.

 

If this is not your first home purchase, but you wish to use your KiwiSaver funds to help finance the purchase, you will need to speak with the provider to find out if you can do so. 

 

Kāinga Ora will also need to determine whether or not you are a qualifying person initially. If deemed to be in the same financial position as a first time home buyer, they will provide you with a letter to be forwarded to your KiwiSaver scheme provider to assist with your application to withdraw your KiwiSaver funds.

 

Withdrawing from your fund to purchase your first home is not limited solely to KiwiSaver members – if your fund is a complying fund provider, you may be able to withdraw your savings to help you buy your first home. However, you will need to ensure that your provider allows you to withdraw for this purpose, so you will need to discuss this with your provider. 

Posted on 8 September '21, under tax.

How NZSuperFund Uses Value-Adding Strategies To Increase The Money In The Fund

NZSuperFund was set up to reduce the tax burden on future taxpayers, regarding the cost of New Zealand superannuation. It invests Government contributions into investment opportunities to further grow the amount of money in the fund. In doing so, it takes into account three potential value-adding strategies. 

Strategic Tilting

As a value-adding strategy, strategic tilting is where NZSuperFund periodically changes (or “tilts”) their market exposures away from the Reference Portfolio. This is done with the expectation that the Fund’s performance will improve. 

They are made by increasing or decreasing the fund’s exposure to asset classes or currencies as based on the Fund’s assessment of fundamental market value. 

Capture Active Returns

Capture active returns refers to the broad class of activities that are undertaken in the belief that (over the long term) they will produce better returns than what is possible from the Reference Portfolio. This may involve investing in asset classes that are not in the Reference Portfolio or investing in asset classes that are in the Reference Portfolio but doing so actively, rather than passively.

Portfolio Completion

‘Completing’ the portfolio refers to the Fund’s activities in getting cost-effective access to investments and managing them efficiently when they have been made. 

 

Posted on 9 August '21, under super.

New Purchase Price Allocation Rules, And What They Mean For Disposing Business Assets

The new Purchase Price Allocation rules surrounding how business assets are valued when sold as a bundle have come into effect as of 1 July 2021. Applicable to the sale of assets such as commercial property, forestry land or business, the new rules will bring consistency to agreements for the disposal and acquisition of property.

Business asset sales are a mix of taxable assets, depreciable assets like plant or machinery, and non-taxable assets like business goodwill.

If the allocation includes a higher proportion of taxable and depreciable assets then the buyer will benefit because they can claim expenses and depreciation. But if there’s a higher proportion of non-taxable assets in the mix the seller will benefit as this reduces their taxable income.

Under the new rules, both the buyer and the seller must make the same allocation. If an agreement cannot be reached, they also set out the process that must be adhered to by both the buyer and seller.

The rules also apply to sales of residential land for $7.5M or more, but only if neither buyer nor seller is an owner-occupier in relation to the land.   The rules don’t apply to sales of businesses by way of shares. 

Want to be certain of your obligations when it comes to the disposal of business assets? Speak with us to ensure that you are in compliance with these updated requirements, or for assistance in readying the disposal. We’re here to help.

 

Posted on 2 August '21, under tax.

“Influencers” Are Warned By IRD That Eyes Are On Them And Their “Gifts” This Tax Time

Inland Revenue has its eye on social media content creators, with a draft statement published that will see gifted items incur tax. In an industry field that thrives on freebies, this is a gamechanger.

 

This move means that items that businesses (small or large) gift to social media content creators will need to be assessed for their resale value, and that those content creators could be liable to pay tax on any free products that they have received from brands.

 

The primary issue for many influencers that may arise out of this new tax obligation, is having to pay out-of-pocket cash when they haven’t received any fiscal payment.

 

Companies will now have to pay influencers to post their products to social media so that the income can then be taxed, instead of the current loophole where gifted items often get the spotlight at no cost. For some influencers, these gifts can exceed tens of thousands of dollars in value and have been a previously unaddressed tax blind spot.

 

If you promote products that you receive as gifts on social media, come speak with your accountant. They can better advise you specifically on your taxable assets and income.

Posted on 30 June '21, under tax.

How To Maximise Buyer Appeal For Your Home

If you’re in the process of preparing your home for sale, you may be trying to work out exactly what would attract potential buyers to your home, and raise the selling price higher. It can also be hard to see the appeal of the home you’ve lived in for so long, especially to a potential buyer.

 

If you are in the process of preparing your home for sale, you may be trying to work out how you can maximise your sales potential and attract potential buyers to your home. It might seem like more of a difficult task if you’re feeling a little blind to the appeal of the home that you’ve lived in for so long, especially to a potential buyer. Sometimes, the easiest way to raise the appeal of your home is to take a step back and look at what you can do to help (and then do it). 

Fixing minor defects, such as cracked tiles, peeling paint, faulty door handles and dripping taps are inexpensive fixes that you as a homeowner can potentially undertake to add value. Simple steps like mowing your lawn, repainting fences or weeding the garden can boost the kerbside appeal of your home to buyers, and raise the initial valuations of your property in the buyer’s eyes. 

Decluttering and depersonalising the home allows your prospective buyers to envision themselves in their potential home. You want the buyer to be picturing themselves there in the space on a blank canvas, not one your family pictures are doodled onto. You can try reducing the number of personal items visible to buyers within the home, or remove them completely with the skip bin treatment.

Areas of focus for potential buyers within a property can be a make or break situation. When preparing your house for sale, focus on key, functional living spaces where the new owners may spend most of their time. This could include the kitchen, living room, or the deck and backyard, and the effectiveness of a space on a buyer may depending on the time of the year (a pool won’t look as appealing in the winter months as it would in the summer, for example).

Finally, open homes are a critical impression point for potential buyers and can be used to really hone in on the buyers. Putting the final small touch to an open home, such as the smell of baking, fresh flowers, or a new welcome mat can cement with buyers the feeling of the home being theirs, rather than a simple house for sale.

Posted on 21 June '21, under Uncategorized.

What Does Paying Tax On Rental Income Involve?

Did you know that if you rent out your home to others, you will be required to file a tax return on that income received from the rental property, like you would do for other income received?
Needing to file a tax return, and pay tax on their rental income can apply to those who have an overseas residential property, are joint owners of a rental property, or are not New Zealand residents but who earn rental income from their New Zealand properties.

To work out what tax there is to pay, you must deduct your allowable rental expenses from your gross rental income.

Rental income needs to be brought to your accountant at market value, usually done by determining the amount being charged to an arms-length or third party tenant. If you are renting to a family member and letting them have it at a rent that is below the market value, doing so will impact the deductibility of interest and other costs.

The way in which income and expenses are worked out is not the same for all residential properties, and you must ensure that you are doing so according to what your property is classed under.

For assistance with filing a tax return on your rental property income, you can come to see us. We’ll ensure that you’re complying with your tax obligations when it comes to your rental property.

Posted on 8 June '21, under tax.

What Does Paying Tax On Rental Income Involve?

Did you know that if you rent out your home to others, you will be required to file a tax return on that income received from the rental property, like you would do for other income received?

Needing to file a tax return, and pay tax on their rental income can apply to those who have an overseas residential property, are joint owners of a rental property, or are not New Zealand residents but who earn rental income from their New Zealand properties.

To work out what tax there is to pay, you must deduct your allowable rental expenses from your gross rental income.

Rental income needs to be brought to your accountant at market value, usually done by determining the amount being charged to an arms-length or third party tenant. If you are renting to a family member and letting them have it at a rent that is below the market value, doing so will impact the deductibility of interest and other costs.

The way in which income and expenses are worked out is not the same for all residential properties, and you must ensure that you are doing so according to what your property is classed under.

For assistance with filing a tax return on your rental property income, you can come to see us. We’ll ensure that you’re complying with your tax obligations when it comes to your rental property.

Posted on 8 June '21, under tax.

Depreciation of Assets, And You

Depreciation is calculated annually over the useful life of the asset as part of your end-of-year accounts. To calculate the depreciation, you need to know the asset’s value, your depreciation method and the approved Inland Revenue depreciation rate.

Depreciation is a method of spreading the cost over time of significant assets you buy for your business or your work as a sole trader or contractor. This can be effective if you’re looking to mitigate the tax implication of the purchase over a more extended period.

Instead of claiming the total cost of the item initially, you claim the amount that the asset depreciates each year. The Inland Revenue approved depreciation rates can be claimed annually in your income tax return.

For tax purposes, you must depreciate assets that:

  • Are owned by you or your business and are available for business use
  • Cost more than $500
  • Have an expected life of more than 12 months

You cannot claim tax for depreciation of

  • Assets you’ve elected to treat as not depreciable with inland revenue
  • Trading stock
  • Land or buildings (barring fixture or land improvements)
  • Most intangible assets e.g. goodwill
  • Low-value assets (less than $500) which are entirely written off when you buy them
  • Assets where the costs are already deducted under another tax provision
  • Assets that don’t decline in economic value because of compensation for loss or damage
  • Assets where the cost was or is allowed as a deduction under special provisions relating to primary sector land improvements.

We can assist you in determining the depreciation of any assets you may be wishing to claim for your business or work as a sole contractor. Discuss your depreciated assets with us for more information.

 

 

Posted on 31 May '21, under tax.

Depreciation of Assets, And You

Depreciation is calculated annually over the useful life of the asset as part of your end-of-year accounts. To calculate the depreciation, you need to know the asset’s value, your depreciation method and the approved Inland Revenue depreciation rate.

Depreciation is a method of spreading the cost over time of significant assets you buy for your business or your work as a sole trader or contractor. This can be effective if you’re looking to mitigate the tax implication of the purchase over a more extended period.

Instead of claiming the total cost of the item initially, you claim the amount that the asset depreciates each year. The Inland Revenue approved depreciation rates can be claimed annually in your income tax return.

For tax purposes, you must depreciate assets that:

  • Are owned by you or your business and are available for business use
  • Cost more than $500
  • Have an expected life of more than 12 months

You cannot claim tax for depreciation of

  • Assets you’ve elected to treat as not depreciable with inland revenue
  • Trading stock
  • Land or buildings (barring fixture or land improvements)
  • Most intangible assets e.g. goodwill
  • Low-value assets (less than $500) which are entirely written off when you buy them
  • Assets where the costs are already deducted under another tax provision
  • Assets that don’t decline in economic value because of compensation for loss or damage
  • Assets where the cost was or is allowed as a deduction under special provisions relating to primary sector land improvements.

We can assist you in determining the depreciation of any assets you may be wishing to claim for your business or work as a sole contractor. Discuss your depreciated assets with us for more information.

Posted on 31 May '21, under tax.