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Proactive ways to manage your tax

Benjamin Franklin said there were only two things certain in life: death and taxes. What if there was a better way to manage paying tax on your terms that suit you?Tax Pooling is a system, that allows taxpayers to pay provisional tax when it suits, while ensuring that Inland Revenue (IRD) receives the tax it’s owed on time.Taxpayers can customise payment arrangements so they can pay tax when they have cash, or delay payments if they have temporary cash-flow shortfalls.Tax pooling pre...

Differences Between Cash and Profit

Cash is king! Do you make a profit, have tax to pay but wonder where your cash is going?There has been increasing discussions about the economy potentially slowing down. Experience shows that those in a strong cash position have opportunities available in a downturn; normally due to others bad fortunes or over-extending themselves. Those struggling to meet payroll, pay supplier invoices or stuck with old stock they cannot move have more risk.This article uses several real-life examples to explai...

Helping Your Child Into Their First Home

We have recently had several conversations about helping children into their first homes. Some parents have an inter-generational view of wealth and like to pay it forward by providing an early inheritance.There is no one size fits all approach for this process, or any family succession strategy. Individual specific advice is recommended.This article explores options available to help your children into their first home and outlines some risks to considers.If the child has a partner and they int...

Cryptocurrency Tax Update - March 2019

Overview Cryptocurrency tax is currently being reviewed by IRD and different tax interpretations, such as financial arrangements are being applied and discussed. Financial arrangement tax treatment may apply to some cryptocurrency tokens and will depend on the specific characteristic of each individual token. We have summarised cryptocurrency tokens into four distinctive categories and discussed how financial arrangement tax treatment would apply to each category of token. Each tax payer’...

Combined Business & Personal Travel

Business travel often provides a great opportunity to add a few extra days to explore a new location or rest and relax and enjoy some time away from home. This article outlines the tax-deductibility for business travel that includes a personal element. ...

Comprehensive Guide to PayDay Filing

Payday FilingFrom 1 April 2019 payday filing is mandatory. This means that each payday employers will be required to file employees earning details to IRD.Summary of PayDay filingEmployers must file employment information every payday instead of monthly PAYE returns.  Payments to IRD remain the same, due by 20th of the following month.PayDay filing provides IRD with new and departing employee contact details such as address, including date of birth....

Cryptocurrency Tax Payments - FAQ

Some taxpayers have 2018 terminal tax payments due on 7 April 2019. This is the final tax payment due for the year ending 31 March 2018. We have also previously signaled 2019 provisional tax payments (due 7 May 2019) which are dependent on 2019 profits.The article below outlines frequently asked cryptocurrency tax questions regarding these upcoming tax payments for both 2018 terminal tax and 2019 provisional tax. We have also previously published "What is terminal tax?" and "What is&nb...

Ring Fencing of Rental Losses

IRD recently released draft legislation for ring-fencing of rental property losses. Currently, if a rental property makes a loss, that loss is offset against other employment income and normally results in a tax refund. From 1 April 2019, IRD have drafted legislation that this will no longer occur. Instead the loss will be ‘ring-fenced’ and only able to be off-set against future rental profits.Currently, this legislation is only in draft and can be viewed here.The key points are:Start d...

Holiday Pay Guide

If you’re unsure what days and amounts (i.e., time and half and a day in lieu etc) you need to pay your employees over the holiday period, our holiday pay guide may helpThis year Christmas day and New Year’s Day fall on a Tuesday, and Boxing Day and the 2nd of January fall on a Wednesday. There are no special rules for these public holidays this year. For holiday pay purposes, the public holidays are observed on the days they fall on.What to pay your employee if they don’t work the public ...

Non-Taxable Cryptocurrency Gains

Please read an updated version of this article on our specific cryptocurrency tax website here. The tax treatment outlined in this article need to be considered with your original intention at acquisition.  Inland Revenue’s position is that gains on cryptocurrency are taxable if they were acquired for the purpose of disposal (selling or exchanging). Furthermore, their default position is that cryptocurrency is acquired for the purpose of disposal.“Bitcoin and similar cryptocur...

Using a company for cryptocurrency trading?

We’ve been asked “is there any benefit to using a company for cryptocurrency trading?” We’ve explored this option further and provided the advantages and risks to be aware of.  The decision to trade using a company structure should be based upon your own personal circumstances. Restructures always require a commercial reasoning for doing so otherwise is may be seen as tax avoidance by Inland Revenue. We recommend contacting us before doing anything. Note: there are tax differen...

AirBnb & GST

A short-term holiday rental, Airbnb, Book-a-Bach (etc) activity, is considered a taxable activity for GST purposes. Therefore, the ordinary GST rules apply. GST registration is compulsory if your annual turnover (total rental income) exceeds $60,000. You can also voluntarily register for GST. The GST rules for short-term holiday rentals is different from a residential rental property which is GST exempt.In the examples below, we refer to GST being repaid on sale. This does depend on the GST stat...

Are repairs & maintenance tax deductible after the tenancy agreement has ceased?

It is common for a rental tenancy agreement to end, and then the owner may decide to sell the property or move into the property themselves. If the property has been rented for some duration, some repairs and maintenance may be required. There is normally no doubt that the specific wear and tear occurred during the period the property was rented. Logistically, after the tenant moves out, this presents a great opportunity for the owner to arrange for the repairs and maintenance without the hassle...

End of Year Financial Checklist

31 March - End of Year Financial Checklist With year-end a few days away have a read of our checklist below to ensure you are prepared. Contact us with any questions you may have.Income:Did you make more money than last year? Let us know so we can review your provisional tax payments and update any forecasts. If you’re a GST client or farmer client we monitor these throughout the year.Expenses and Deductions:    1. Bad DebtsWrite off bad debts in your accounts receivable ledger befor...

Tax on Mining Cryptocurrency

This article applies to mining cryptocurrencies. My previous article ‘Are bitcoin and cryptocurrency gains taxable income’ provides a general overview for those purchasing crypto.  The process of mining crypto currencies normally involves using capital assets (specialised computer hardware), to solve algorithms, and cryptocurrency is received as a reward (income). The miner is providing a service (solving an algorithm) and in return being paid in cryptocurrency. The miner will pay tax o...

Are bitcoin and cryptocurrency gains taxable income?

With increased investment activity in bitcoin (btc) and cryptocurrency, it’s important to consider any tax consequences that may arise.  Outlined below are the tax consequences for probably the most common situation we see; btc purchased for long term growth.   If you acquire btc for the purpose of disposal, IRD default position is that any gain or loss will be taxable income. This is their default starting position because btc is normally acquire for the dominant purpose of dis...

How to pay 0% interest on debt

This is a strategy available to save money on interest, or provide cash (interest free) for investment opportunities.The below strategy outlines exactly how to save up to $4k pa in interest OR earn a $2,600 return by using a balance transfer method.This material has been prepared for informational purposes only, and should not be relied on for tax, legal, investment or accounting advice. You should consult your own tax, legal, investment and accounting advisors before engaging in any transaction...

Tax exemption available for gifts to employees

This applies to:Employees of companies only, includes shareholder employees, but not LTC shareholders unless they are paid a PAYE salary (if you’re unsure, ask us) Background information:Normally, if a company provides a benefit to an employee (such as a gift), it is subject to Fringe Benefit Tax (FBT). This means that the value of the benefit provided to the employee is taxed (at the FBT rate of 42 - 49%). A FBT return must be filed and the FBT tax must be paid to the IRD. However:There ...

Government Policy Changes for Small Businesses

Following our recent article about the tax changes of the new government, we’ve outlined some further policy changes that will effect small businesses and property owners:Minimum wage increases to $16.50 from 1 April 2018This is an increase of $0.75 per hour from the current $15.75 per hour, and Labour plans to increase this further to $20 an hour by 2021.Small businesses will likely be hurt as the minimum wage gradually increases. There is also the potential for consumer prices to increase (a...

New Government - New Taxes

Below we outline some of the tax changes that the new government is likely to phase in. These have not been passed into law yet and will keep you updated when they do.No new tax cuts from 1 April 2018 (that National previously announced).We mentioned in our June 2017 Newsletter about Nationals tax cuts that were being introduced on 1 April 2018. These were going to result in the average New Zealander earning $52k pa to be $20 per week better off.These tax cuts are not likely to happen ...

A New Way to Pay Tax

New Provisional Tax Method - Accounting Income Method (AIM) From April 2018, there is a new provisional tax calculation method called the Accounting Income Method(AIM). AIM allows for businesses with sales of less than $5m to meet their provisional tax obligations as the year progresses and minimise any use of money interest costs. Currently provisional tax is calculated on prior year tax liability and Inland Revenue's (IR) thinking is to make it easier to pay your&...

KiwiSaver HomeStart Grant

It’s not normal that we can expect free handouts from the government; but this is worth looking into. The HomeStart Grant may allow first home buyers a grant of $5,000 -$10,000 to put towards buying an existing home or $10,000 - $20,000 for a new home.There are two HomeStart grants:1) For purchasing an existing house, the grant is worth $3,000 - $5,000 (based on $1,000 for each year you have been in KiwiSaver (KS))2) For purchasing or building a new house, (or purchase land to build ...

Bright Line Test – What do you need to know?

The bright-line test results in residential property acquired and disposed within two years to be subject to income tax unless an exemption applies. It is additional to the intention test, (if you buy a property with the intention to sell it for a profit, the gain/loss is subject to income tax, regardless of the time frame).  Exemptions that may apply to the bright line test are: The main home exclusion test. This exemption is specific; for example, you can only have one main home (a beach ...

Non-Taxable Allowances

An employer may pay a non-taxable allowance (NTA) to an employee to reimburse them for expenses such as the costs of tools (when required as part of their employment agreement) or protective clothing and equipment (for example, steel cap boots, a uniform, or wet-weather gear).Generally, NTA are non-taxable to the employee, but a tax-deductible expense for the employer.Advantages of a NTA are:The employee doesn’t get taxed on the allowance; they receive more cash in the hand each pay and pay le...

Are you preparing your GST returns 6 monthly and have turnover greater than $500k?

If your turnover* has been greater than $500k in the past 12 months, and you are using the 6 monthly GST filing frequency, Inland Revenue (IR) may have exercised it power, and automatically changed your GST filing frequency to 2 monthly from 1 October 2017. If this applies to you, you may have received a letter from IR this past week.IRD have the power to change your filing frequency because it is compulsory to use the 2 monthly GST filing frequency if your turnover is greater than $500k in...