Wages Subsidy renewed for the 5th time
The government has announced the following changes with the intention to curb the price rise in the housing market.
Here is a practical guide to help you get the right tax on bonuses (& other lump sum payments to staff)
Types of payments covered
Lump sum payments include:
Overtime or any regular payments are not considered lump sum payments.
Calculating PAYE on lump sums
Follow these steps to work out the PAYE rate to use for a lump sum payment:
Changes to Trust legislation have been made, with the provisions of the new Trusts Act 2019 coming into effect on 30 January 2021. Now is the time to take action to ensure that you are prepared for these changes.
The Trusts Act 2019 is the first major rewrite of trustee legislation since the Trustee Act 1956. The new Act is intended to update existing Trust law, making it more accessible for all New Zealanders and ensuring that beneficiaries have enough information so that the terms of the Trust are being carried out properly.
Data Records & maintenance
We have been asked about tax deductibility of suits and shoes worn for business by real estate agents.
This article identifies the relevant pieces of legislation, summarises it and then applies to a particular case (a realtor in this case) at the end.
New Zealand, does not have the most liberal tax laws when it comes to making claims for work clothes. Australia is more generous with this side of the legislation.
NZ Tax Law and the IRD have a very narrow definition of " work clothing" that would be deductible for tax purposes.
The main thing that limits your claims for work clothes as a business expense are sections DA1 and DA2. In particular, these two sections of the Income Tax Act 2007 (ITA 2007) work together to highlight and limit all claims that can be made for business expenditure, including work clothes.
With effect from 1 July 2019, all tenanted homes are required to be insulated. Landlords must insulate by then. If not then tenants have grounds to take legal action against the landlords.
We have been getting lots of questions about whether the cost of insulating a rental property is tax deductible or whether it is non-deductible capital expenditure and if non-deductible whether its depreciable! So we thought it would be helpful to clarify.
Capital vs non-capital (revenue)
Generally speaking, capital expenditure refers to expenses over $500 that results in "improvements" to a property. "Improvements" generally adds "functionality" (e.g a new room added or new door installed where there was none or building a deck where there was none) On the other hand, revenue expenditure is the type of work that restores a property to its original condition like a new paint, repairing an existing deck.
Bearing this in mind, how the cost of insulating a rental property is treated will depend on whether it is considered to be a repair or an improvement. The Commissioner of Inland Revenue discusses the treatment of expenditure on insulating residential rental properties in Interpretation Statement 12/03 (Income Tax Act 2007, ss DA 1, DA 2(1); Inland Revenue Interpretation Statement IS 12/03 Income Tax - Deductibility of Repairs and Maintenance Expenditure - General Principles, 29 June 2012). In the statement, the Commissioner concludes that:
If you are not sure about whether or not to claim the cost of insulation as an expense, please contact your Advisor at Core Business Services, Chartered Accountants at 0211 00 66 11 or email@example.com
The above publication discusses income tax & other issues generally and is not intended to be specific tax or other advice. Whilst every effort has been made to provide valuable, useful information, Core Business Services Ltd, any related suppliers, associated companies & practices accept no responsibility or any form of liability from reliance upon or the use of its contents. Any suggestions should be considered carefully within your own particular circumstances, as they are intended as general information only. Please do consult with your tax advisor or call this firm for information / advise specific to your circumstances before finalising any particular course of action.
Cryptocurrencies are intangible property in which encryption techniques are used to both generate the digital currency and to verify the transfer of currency between people. There are some 900 cryptocurrencies of which Bitcoin is the most popular. Cryptocurrencies such as Bitcoin are obtained from a cryptocurrency exchange or (some overseas)ATMs, or customers who pay in cryptocurrency.
CCH Learning & Staples Rodway recently presented “Taxing Cryptocurrencies (Tax, GST and Internet Cash). The Q & A session with 100 attendees ran for 45 minutes, here are some of key questions on tax and Cryptocurrencies
Question: If bitcoin is sold for a profit does income tax apply?
Answer: Income tax applies to the proceeds from selling any property acquired with a purpose or intention of disposal. Bitcoin is property and therefore any proceeds from the sale of bitcoin are taxable if it was acquired with a purpose of on-sale or disposal.
Question: What do Inland Revenue think?
Answer: Inland Revenue do not have published views as yet but are in the process of completing a public statement on the income tax and GST effects of cryptocurrency. (In comparison the Australian Tax Office published a series of rulings on cryptocurrencies in 2014).
Question: Is it possible for gains on bitcoin to be on capital account – i.e. non-taxable?
Answer: In tax terms bitcoin and gold share similar characteristics. Neither asset class produces revenue as compared to say shares or deposits which generate dividends and interest. With reference to this characteristic, Inland Revenue have recently released Questions We’ve Been Asked – Are Proceeds from the Sale of Gold Bullion Income? In short, Inland Revenue’s default position is that “proceeds from selling gold are taxable”.
Cryptocurrencies such as bitcoin will often be purchased with a view to disposal (and the proceeds will therefore be taxable). It is also true that assets such as gold and bitcoin can be purchased by investors for long-term holding, i.e. without a view to disposal. Not all purchasers of gold or bitcoin need to (or intend to) cash-out and realise their gains.
That said, Inland Revenue’s position is clear, they expect tax to apply to the proceeds of selling cryptocurrencies.
Question: When my retail business sells goods and services and is paid in cryptocurrency, what is the GST effect?
Answer: Cryptocurrency is classified as a good or service for GST purposes. Therefore, the retailer is treated as selling goods and services in exchange for other goods and services. This is known as a “barter transaction”. Special rules apply depending on whether the transaction is a B2B or a B2C transaction.
Question: Is it true that consumers suffer a “GST double hit” when they buy bitcoin from a GST registered person and then use that bitcoin to buy goods and services from a business?
Answer: Yes, a purchaser is charged GST when they buy cryptocurrency from a GST registered person, and they are charged GST again when they buy the goods and services. This GST double hit occurs because cryptocurrency is classified as a good or service for GST purposes. (This assumes the consumer is not buying goods and services as part of a GST taxable activity). Australia has changed its GST Act such that cryptocurrency is treated as “money” for GST purposes. As a result, GST does not apply when a person buys cryptocurrency. We hear that cryptocurrency related GST reform is expected in New Zealand . . .…but until then, this remains a very grey area! We will keep you posted as more information comes to hand.
If you want to know more about the income tax and GST effects of cryptocurrencies contact your Core Business Services tax advisor.
Last week a client showed up looking for advice on how to work through a residential property purchase. He challenged us to come up with 2 approaches - aggressive and conservative that highlighted the basic for his partner! This particular client has seen the ups and downs of life, love and humanity and we knew that he likes information to be presented simply in an tabular form!
So we got to work…and in that process we uncovered some insights that we thought we'd share with our clients!
Please note that we are NOT recommending one approach over the other and acknowledge that the right answer for you will lie somewhere in the continuum. In working through the scenarios, given the purpose of this article, we consciously removed all impact of tax structures, available tax losses, different types of mortgage products available in the market today and your ability to negotiate any variance to those.
We've woven our insights into a story about John and Jane - see if you can pick them before you read the key insights part of the article!
With Labour, NZ First & Greens coalition government, New Zealand's employment law is about to receive a shakeup!
Its never easy to balance to rights and obligations of employers and employees (& contractors) but eventually, it all ends up on the cost of the product or service the end-user buys. Gone indeed are the days when the end-user is forced to pay the said price. With opening of trade, too high a cost of production and distribution, makes the product or service uncompetitive relative to imports and too low a price, makes it uneconomical to produce relative to other investment opportunities.
It is likely we will see a mixture of the below proposals implemented in the coming years. Employers will need to be alert to these proposed policies and be ready for change and we will be there to assist as needed.
To give you a flavour of what may transpire, we list below the campaign promises made by the above three parties. The information has been collated from individual party websites and articles written by employment law specialists.