Mhk chartered accountants limited
Contacting Us
Ian Malcolm
Aaron Neels
917-2893
917-2897
Main Line
Frances Fu
Lewis Chen
Shirley Cheng
(09) 379-8011
917-2895
917-2896
917-2894
2015
Tax Titbits
IRD Compliance Focus 2014 – 2015
The IRD have provided an updated document showing their
compliance focus 2014-15, a link to this is on our website.
No surprises— as well continuing to look at as ongoing cross-border
If you or your staff are responsible for payroll activities, remember to
transactions, they state their focus is now on the following:
start using the 2015-16 PAYE rates from 1 April. Both the PAYE
calculator on the IRD’s website and the PAYE tables (IR 340 and IR • Aggressive Tax Planning
341) for the 2015-16 tax year are available at www.ird.govt.nz • Charities and claiming donations
(search keywords: paye tables, paye calculator).
• High Wealth or High Income Taxpayers
• Property transactions
• Trusts with progressive tax planning
UOMI rates Updated
arrangements without commercial justification
Use-of-money interest rates on underpaid and overpaid tax will rise • Fraud and identity theft
on 8 May 2015. The interest rate charged by Inland Revenue on • Under-reporting of income and operating outside the system
underpaid tax will rise from 8.40% to 9.21%, and the rate for The IRD have also indicated one of their “Triggers” for audit, risk
overpaid tax will rise from 1.75% to 2.63%. These rates are reviewed review, or other following up, will be if their records show payments
regularly to ensure they are aligned to market interest rates and were are not made on time, or any types of returns are not filed on time.
last updated in May 2012. It’s worth paying tax on time!
New tax year—new PAYE tables
Recent Cases
Rules for accounts change from 1 April 2015
Restructuring – IRD Wins
The rules for preparing your accounts will change when we do your
2015 accounts and tax return.
A recent case in the High Court, Beacham v C of IR, held that the
restructuring of two businesses, one being a medical practice which
was profitable, and a car restoration business that was making a
loss, into one business, was tax avoidance.
The new rules are supplied by the tax department. The main
difference between what we did historically, and what we will be
required to do from now on, is to tell the IRD about “associated
person transactions”.
Quite rightly so. There were no reasons for restructuring other than Roughly translated, this means dealings the family, another family
tax avoidance in this case.
company or family trust have with the company. So, if you pay your
daughter for sticking stamps on envelopes you’ll need to tell the IRD
Yet another reminder, do not attempt to restructure to reduce tax,
how much you paid her. A brief list of disclosures of transactions with
restructuring which may end up reducing tax is only valid when there
associated persons iincludes:
are valid commercial reasons, other than tax savings.
• Interest paid by the company. Mostly shareholders lend their
money interest free to their company, so this won’t affect them.
Directors’ duties: Reckless Trading
•
The High Court recently considered whether a director had breached Loans made from the company. This mostly arises when the
her statutory duties, including s 135 of the Companies Act: the duty shareholders are living beyond their means and need to borrow
against reckless trading. Reckless trading is where the business of a from the company instead of the other way around.
company is carried on in a manner likely to create substantial risk of • Payments for services received by the company. This includes
wages, salaries, management fees etc for each recipient. The
serious loss to the company’s creditors.
In Cool Cars (Wholesale) Limited (In Liq) v Sharma [2014] NZHC name of each person and the amount is sufficient.
256 the director was found in breach of this duty where she had • Expenses for acquiring intangible property, which would apply, for
committed a company to an unconditional purchase of real estate example, if you charged your company for the use of a patent.
without having finance arranged
.
An expensive lesson!
Please make sure you are ready to provide this information with your
records this year.
Directors: Ian Malcolm • Aaron Neels
B U I L D I N G S U C C E S S T H R O U G H B U S I N E S S
UNIT 1, 36 SALE STREET • VICTORI A QUARTER PRECI NCT • AUCKL AND 1 010 •NEW ZEALAND • P O BOX 221 • SHORTLAND STREET • AUCKLAND 1 140
TELEPHONE 09 - 379 8011 • FACSI MILE 09 - 309 1910 • www. mhk.co.n z
Annual accounts planning pays off
Entertainment
You’ll need to identify entertainment expenses separately as they're
When you're preparing material for us to prepare your annual generally only 50% deductible. Gifts of food and wine made to
accounts, the best guide is our questionnaire.
customers or suppliers are not entertainment and, so long as they're
Please answer all questions. If you're unsure of the answers, please made in the normal course of your business, they are 100% tax
contact us so we can explain what's needed. Sometimes you'll have deductible and don’t need separately identifying.
to supply us with a list of expenses, such as details to calculate your
ACC
business use of home calculation.
Employers get two bills a year, one for staff and one for themselves.
If you put any of this information on another piece of paper instead
It pays to check the bills as mistakes occur. If you have a high
of in the questionnaire, please show cross-reference this.
income and some is PAYE income, you could find you're
Some clients supply more information than we need. This often unnecessarily paying premiums on total earnings above the
leads to extra work and extra costs. Our questionnaire should be maximum income threshold of $118,191.
your guide. Stick to it. If you think other information would be useful,
keep it apart from what we have asked for and discuss it with us. Bank accounts
We need evidence of all bank balances at balance date. Banks
We’ll tell you what to leave out next time.
sometimes wait until statements are full before sending them out.
Other things to remember
If you need to keep a log book to determine the private share of This is no good to us. Request your bank sends you a statement at
running costs, it has to be for a three-month representative period. the end of each financial year for ALL accounts. This includes
Check to see when you last did a log, Inland mortgages and loans. Alternatively, obtain internet printouts, please
Revenue requires you to complete a new one check these show the balance at 31st March.
every three years, or more often if the
percentage of private running changes by more IRD up in arms about ‘donations’
than 20%. When did you last do your log book? The IRD is looking at “donations” and querying as to if any part of
Write off bad debts from the books BEFORE balance date, showing these are really in the nature of fees for services.
the date as proof you wrote the amount off in time.
In Revenue Alert 14/01 it lists the criteria for a donation. When you
Check to see all staff have completed an IR 330, and contractors analyse the list it amounts to:
• the gift is made voluntarily;
are not required to have PAYE deducted.
• Nothing is received back in return for the gift either by the giver or
If you have a company car, the company needs to pay fringe benefit
anyone else;
tax (FBT) for your private use or we make an adjustment for this. • The charity doesn’t have to give anything away in return for
FBT is reduced for every complete day it cannot be available for
receiving the gift.
private use, such as while overseas or if the car is being repaired.
The department is investigating arrangements where private
FBT is usually calculated based on 20% of cost price. Once you've education and child care centres charge nominal fees and then get
had a car for more than five years, you can switch to 36% of “tax parents to make substantial donations, for which they issue a
book value”. It pays to make the switch for all cars costing more donations receipt. The IRD are saying these are payments which
than $15,000.
would not ordinarily be donations, and are fees for services. The
purported donations are used to meet running costs, which would
Stock take
otherwise have had to have been charged to parents.
If the total value of your stock is greater than
GST is also an issue. These “donations” are really being paid for
$10,000 you need to count your stock at balance
services. Therefore the education centre must charge GST.
date. This can be a big job for retailers and often
has to be done a few days either side of the date. Make sure you The department says penalties and interest may be applied if it
have systems to cope with stock arriving and stock sold between the catches anyone transgressing.
What can you do? If this announcement affects you and you have
time of counting and the actual balance date.
been used to claiming these donations, you may need to forgo these
Watch out for payments made in advance. If the stock hasn’t
claims, which is, of course, exactly what the IRD wants to achieve.
arrived, the amount paid in advance may not be an expense. You
may need to adjust for this. It will depend on the terms. If it is an
Logicians’ Lines
expense, include it in stock. Most computer systems cater for this.
Why did the accountant stare at his orange juice
Some businesses, such as builders, also have partly completed
for an hour?
work. Value this at the direct costs of materials, labour and any
Because the box said “Concentrate”...
other processing costs. Don’t include your profit though.
Money owing to you (work in progress)
Watch out for work you have done before balance date but invoiced
or been paid for after balance date. If you get paid once a month,
your April payment (March balance date) is probably for work done
in March. This money forms part of your income for 31 March 2015.
Individuals can claim for most charitable donations you've made. If
these donations are made through a limited company, they are tax
deductible, provided the company doesn't make a loss.
An accountant and a lawyer were lazing on a beach
in Hawaii sipping mai tai's. The lawyer told the accountant "I had this
downtown property in Memphis that caught fire, and the insurance
paid out so I came here."
The accountant said, "Wow, what a coincidence. I had a downtown
property, too, in Auckland. It got flooded so here I am with the insurance proceeds."
The lawyer took another sip and asked with a puzzled look:
“Ok, I give up. Just how do you start a flood?”