Firm Journal

KiwiSaver continues to grow

Since KiwiSaver started ten years ago, KiwiSaver members have built up total assets of more than $40 billion dollars and 2.7 million New Zealanders have joined the scheme, according to the FMA’s annual KiwiSaver report 2017.

Based on returns as at 31 March 2017, total assets were up $7 billion from $33.8 billion in 2016. Investment returns of $2.7 billion were more than double those of 2016.

For the second year running, the number of transfers (between providers) is higher than new members joining the scheme.

The FMA’s findings raise alert for the number of default KiwiSaver providers who are not meeting their responsibilities in terms of addressing the financial literacy of members. The FMA has written to the chief executive of each default provider to address this.

From March 2018, KiwiSaver providers will need to show the dollar amount of fees paid on a member’s annual statement. The change comes to help members better understand their fees.

Posted on 13 October '17, under super.

New provisional tax option for small business

From 1 April 2018, small businesses with a turnover of less than $5 million a year can work out their provisional tax using the accounting income method (AIM).

AIM uses new functionality in approved accounting software to work out payments. It will suit businesses that have irregular or seasonal income and have accounting software or want to start using accounting software.

Businesses can continue to use another provisional tax option if they prefer.

Those businesses that do choose to use AIM will only pay provisional tax when their business makes a profit, helping with cash flow.

If payments are made in full and on time, there is no exposure to use-of-money interest. Businesses that make a loss can receive a refund immediately rather than waiting until the end of the year.

To choose AIM, complete the set up in your software. You are required to opt into AIM at the beginning of the tax year before your first payment would fall due.

For new businesses and those new to paying provisional tax, you can opt into AIM anytime before your first payment would be due.

On your first due date, you must send Inland Revenue your statement of activity through your software and send your payment if there is one to make.

AIM is not available for a transitional year or if you are a partnership, portfolio investment entity, super fund, trust or a Maori authority. If you have foreign investment funds (FIF) or controlled foreign companies (CFC) attributed income you are also excluded.

Posted on 27 September '17, under tax.

KiwiSaver provider backs compulsory super

New Zealand’s biggest KiwiSaver provider ANZ is backing compulsory super after new research finds that just 53 per cent of New Zealanders who earn less than $50,000 are members of KiwiSaver.

Although the research found that 80 per cent of those surveyed who earned more than $100,000 were KiwiSaver members, many were not regularly contributing to the scheme.

Since KiwiSaver was launched 10 years ago, 2.7 million people had joined, however, 375,000 working-age people have not enrolled in the scheme.

ANZ is proposing that KiwiSaver is made compulsory. If it is not made compulsory, ANZ is suggesting all adult non-members should be automatically enrolled with an option to opt out or a reintroduction of Government incentives to join up.

ANZ said the findings do raise questions about whether KiwiSaver is reaching the people who need it the most. Only 35 per cent of those surveyed said they have calculated how much they will have saved by age 65. A further 37 per cent said there was too much uncertainty and 22 per cent said it was too hard to work it out.

Posted on 14 September '17, under super.

Business tax bill is now law

The Taxation (Business Tax, Exchange of information, and Remedial Matters) Act 2017 received Royal assent on 21 February 2017.

The new legislation focuses on changes to business taxation to make tax simpler. From 1 April 2017, the threshold for self-correction of errors under section 113A of the Tax Administration Act 1994 has increased from $500 to $1000; the use-of-money interest will be reduced or removed for the vast majority of business taxpayers; and most RWT exemption certificates can now be issued for more than one year.

For the 2017-18 and later income years:

  • The 63-day rule for employee remuneration has been made voluntary.

  • The PAYE/ESCT threshold for annual and income year FBT return filing is increasing from $500,000 to $1 million.

  • A new simplified method of deductions for dual use vehicles and premises will be available.

From 1 April 2018, the introduction of the accounting income method will give smaller businesses a new pay-as-you-go option for provisional tax. The accounting income method will allow small taxpayers to use their accounting software to calculate and pay their provisional tax, taking the guesswork out of calculating provisional tax.

Posted on 12 April '17, under tax.

Preparing for an Inland Revenue audit

Inland Revenue conducts audits on businesses to ensure they are paying the correct amount of tax and are complying with tax laws.

Businesses can be selected for an audit for various reasons, i.e. random selection, to analyse business accounts or tax returns, selecting a particular industry or area, and so on. However, Inland Revenue won’t disclose the reason you have been chosen.

If your business is selected for an audit, there are some things you can do to prepare. Inland Revenue will send you a letter telling you what records it needs to see and you will be provided with an information sheet on how the process works.

Inland Revenue will generally follow up with a face-to-face interview to learn more about your business and answer your questions.

An audit will look at your business’ ledgers, journals, invoices, payroll records and bank statements. The length of an audit will vary between businesses. Inland Revenue will notify you at the start of the process with an estimate of how long the audit should take.

Some audits focus on a small part of a business – in these instances, Inland Revenue may instead choose to conduct the audit by email or through your tax agent.

Near the end of the process, Inland Revenue will meet you again to discuss its findings.

If you think you have made a mistake, you can tell Inland Revenue what’s wrong with your tax affairs before an audit starts. This is known as a voluntary disclosure. A voluntary disclosure may reduce any tax shortfall penalties.

Posted on 15 March '17, under tax.

Accessing KiwiSaver early

Although the main purpose of KiwiSaver is to prepare for retirement; New Zealanders can access their KiwiSaver early under certain circumstances.

KiwiSavers may be able to withdraw all or part of their savings early if they are buying their first home, emigrating, suffering financial hardship or serious illness.

Significant financial hardship and serious illness
Inland Revenue considers significant financial hardship for those:
– who are unable to meet minimum living expenses or mortgage repayments on the home they live in
– modifying their home to meet special needs for themselves or a family member with a disability
– paying for medical treatment for themselves or a dependent family member
– suffering from a serious illness
– incurring funeral costs if a dependent family member dies.

IRD may allow those who are facing serious illness to withdraw the total funds in their KiwiSaver, including the current value of their contributions; employer contributions; the $1,000 kick-start (if they were eligible) and any member tax credits.

Moving overseas permanently
New Zealanders who emigrate to a country other than Australia may be able to withdraw their KiwiSaver savings after being overseas for one year. If you are moving to Australia, you will be able to consolidate your super savings into an Australian complying super scheme or leave your savings in an NZ KiwiSaver scheme.

Purchasing your first home
KiwiSavers (who have been a member for three years) have the opportunity to withdraw some of their savings to put towards purchasing their first home. You may be able to withdraw the current value of your contributions; your employer’s contributions; returns on investment; and any member tax credits. KiwiSavers must leave a minimum of balance of $1,000 in their KiwiSaver account.

Posted on 1 March '17, under super.

Changes to online GST

Inland Revenue has introduced changes to help New Zealanders better manage their GST online.

The changes to GST are the first of many changes over the next few years to make tax simpler. Here are some of the following changes:

GST payments and returns
– Pay your GST when you file your return without having to log out of myIR.
– Make GST payments by direct debit, or by using your Visa or MasterCard credit or debit card.
– Set up email and text message reminders when your GST return and payment is due or late, to avoid penalties.
– Arrange GST payment instalment plans online and in most cases receive immediate confirmation and approval.
– Request an amendment to an already filed GST return.

GST refunds
– All GST refunds will now be paid directly into your bank account. You can update your business bank account details at any time in myIR.
– You can see the status of your GST refund online anytime.

GST statements
– The new look GST statement is clearer and easier to understand. The statement will include a summary of your filing periods (s) and a summary of transactions for each period.

Posted on 16 February '17, under tax.

Taking a contributions holiday

Employees who have been a KiwiSaver member for 12 months are allowed to take a ‘break’ from saving or contributing their money to their KiwiSaver account. This is called a contributions holiday.

A contributions holiday is for employees who want a break from making KiwiSaver contributions from their pay.

Employees can only take a contributions holiday if they have been a member for 12 months or more. However, some employees can take an ‘early’ contributions holiday if they’ve been a member for less than 12 months.

If you’ve been a member of KiwiSaver for 12 months or more, you can take a contributions holiday of between three months and five years. In some cases, Inland Revenue may agree to a holiday of less than three months. There is no limit to the number of times you can take a contributions holiday and you can renew it at any time.

You can restart your contributions while you’re on a contributions holiday by asking your employer to begin making deductions again. You can start or stop your contributions at any time during your contributions holiday but if the change is within three months of the last change, your employer needs to agree.

Your employer will be required to begin compulsory employer contributions again when you restart the contributions from your pay. You will also be entitled to the member tax credit.

Inland Revenue will only consider an early contributions holiday where a person is experiencing, or likely to experience, financial hardship. The person will need to provide evidence of financial hardship for reasons outside of their control to support their application.

If a person’s financial circumstances have changed for reasons within their control or discretion, Inland Revenue may not accept the application.

While taking a contributions holiday, a person’s employer is not required to make compulsory employer contributions. The employee can also still make voluntary contributions.

Posted on 1 February '17, under super.

Flexibility for those affected by recent earthquakes

Inland Revenue is providing added flexibility for those affected by the recent earthquakes that may not be able to meet a particular filing or payment date.

All customers in affected areas including Wellington, can ask Inland Revenue to grant relief from penalties and use-of-money interest.

Inland Revenue is encouraging those who have been affected by the recent earthquakes and are struggling to deal with their tax affairs to contact them as soon as possible.

Additional relief is provided for farmers and fishers as the recent earthquakes are likely to materially affect their income for the 2017 income tax year. Approval to use the IRD’s income equalisation scheme discretions has been granted.

Late deposits for the 2016 income tax year up to 30 April 2017 will be allowed for farmers and fishers whose current or future income will be significantly affected by the earthquakes. This is regardless of when the 2016 return is filed or what the due date is for filing the tax return.

Farmers and fishers who are materially affected by the earthquakes will be able to make early withdrawals. In this case, materially affected means that net income has been, or will be, significantly decreased as a result of the earthquakes, and the withdrawal is needed to cover the income gap that results in a following year.

Please contact our office if you have been affected by any recent earthquakes and require assistance.

Posted on 19 January '17, under tax.

Faster GST refunds

From February 2017, New Zealand businesses will have faster access to GST refunds after a change made to tax rules.

The Minister of Revenue Michael Woodhouse has announced GST refunds will be available to the taxpayer in just two days by direct credit. The Tax Administration (Direct Credit of GST Refunds) Order 2016 will make it compulsory for Inland Revenue to provide GST refunds by direct credit to a taxpayer’s identified account.

The current process uses a cheque from Inland Revenue which takes an average of 10 days to become available.

The change comes as a result of extensive public consultation in November 2015, which sought feedback on how digital technology might be used to provide more streamlined PAYE and GST processes for taxpayers.

Posted on 21 December '16, under tax.