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GST on Special Supplies

Ben DuflouTuesday, September 17, 2019



Special supplies for GST purposes differ from normal business sales and purchases. A couple of examples you will frequently come across are secondhand goods and hire purchase agreements.   

 

Secondhand Goods

When you purchase secondhand goods from a supplier who is not registered for GST, you can claim a credit for GST, based on the amount you have paid for the goods, as it is assumed GST was never claimed on these goods on the initial purchase. You need to keep a receipt, like you do for a normal purchase; it just won’t have a GST number for the vendor. Please note that livestock and fine metals and jewels are excluded from these provisions.

 

Hire Purchase

When you enter into a hire purchase agreement to purchase goods, including financing on vehicles, GST is claimable on the purchase price of the goods at the time they are purchased. This is because the financing arrangement is separate to the supply of the goods, and financing is exempt from GST.

 

Your accountant will need the hire purchase/financing agreement, as it generally includes interest and set-up costs, which are deductible for income tax purposes. They will also need the tax invoice for vehicle purchases, as it can include additional on-road costs that can be claimed in the year of purchase, instead of being included in the vehicle cost that is added to the Asset Schedule and depreciated.

IRD are moving on from cheques

Ben DuflouWednesday, September 11, 2019

From 1 March 2020, Inland Revenue will no longer be accepting cheques.

There are many different ways to pay – electronically or in person.

Here’s a summary of payment options:

  • myIR: You can pay by direct debit and make debit card and credit card payments securely through myIR online services. Visit the IRD website (ird.govt.nz) and login or register for myIR.
  • Online banking: Make payments using online banking "Pay Tax" function.
  • Credit or debit card via IRD website: Use your credit or debit card to make online payments through the website. Visit ird.govt.nz/pay.
  • In person at Westpac: Pay by EFTPOS or cash at a Westpac branch or Smart ATM.
  • Money transfer: If you are overseas you can pay IRD using a money transfer service. Search for “make a payment” on the website for more information.

Charges may apply for some payment options.

If you have any questions, or would like some assistance with setting up online payments etc., don’t hesitate to contact us.

The General Ledger - August 2019

Ben DuflouThursday, August 29, 2019


  • Tax Debt - how financing with TMNZ can help
  • Small Business Guidebook
  • Employee Break Times - are you up-to-speed?
  • AAF Team Event & Wellbeing at Work
  • Client Profile: Orange Clinic of Natural Medicine
  • Upcoming Tax Dates
Click here to find out more.

Do you have tax debt?

Ben DuflouTuesday, August 13, 2019

Are you lying awake at night thinking about unpaid terminal or provisional tax, or worrying how you are going to pay your upcoming tax?  It’s important that taxes are paid on time to avoid late payment penalties and use of money interest, which can escalate quickly.

Putting money aside through the year is the best way to manage your tax obligations; however, if you are already behind, it can appear to be an impossible task.

We work with Tax Management New Zealand (TMNZ), a company that can assist with paying off older debt, or to finance upcoming tax commitments.  TMNZ interest rates (at around 5%) are significantly cheaper than the Inland Revenue’s (at 8.35% from 29 August 2019), and you won’t have any late payment penalties to pay.

TMNZ has flexible payment options, meaning you can pay off your debt over a number of months to assist with cashflow.

Give us a call at the office to discuss utilising TMNZ to get you back on the right path, before the Inland Revenue contacts you!


GST on Low Value Imports

Ben DuflouMonday, August 05, 2019

GST treatment of imported goods has been a hot topic over the past couple of years.  A big change is due to take place on 1 December 2019 - just in time for Christmas. This change will see GST built into the price of low value imported goods; that is goods under $1,000, rather than being paid at the border. This includes goods that currently fall below the $400 threshold for GST and import duties.

While this affects low value items that would historically not attract GST, this does not necessarily mean that all imported goods will end up being more expensive. Goods below $1,000 will no longer attract tariffs and border processing fees meaning that some goods will end up being considerably cheaper. For instance, a $450 article of clothing currently would attract a $45 tariff, GST of $74.25 and a $52.67 border processing fee, adding up to $621.92 in total. Under the new system, the same $450 article of clothing will only attract $64.50 of GST, totaling $517.50.

This change will be implemented by requiring offshore companies supplying goods into New Zealand, to register for GST if the total value of goods supplied to New Zealand exceeds, or is likely to exceed $60,000 in a 12-month period. Online market places, such as Amazon and Ebay, will collect the GST on behalf of the sellers using the platforms. Unlike regular consumers, GST registered New Zealand businesses purchasing goods from an offshore supplier, will not be charged GST on their purchases, but will have it calculated.

http://taxpolicy.ird.govt.nz/news/2019-06-17-gst-low-value-imported-goods-application-date

https://taxpolicy.ird.govt.nz/sites/default/files/2018-other-gst-low-value-imported-goods-fact-sheet.pdf

http://www.mondaq.com/NewZealand/x/821868/sales+taxes+VAT+GST/New+Zealand+Enacts
+New+GST+Rules+Applying+To+Online+Sales+Of+Low+Value+Goods

Property Update - Q3 2019

Ben DuflouWednesday, July 31, 2019



Residential Rental Losses - Now Ring-Fenced!

On 26 June 2019, the Government quietly passed the bill that now ring-fences residential rental property losses, which means losses generated from residential property investments can no longer be offset against other income earned by taxpayers.

 

The obscurely named “Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Bill rules retrospectively apply from 1 April 2019.  As a result, any residential property losses generated during the 2020 income tax year (1 April 2019 to 31 March 2020 for most investors) and beyond will be quarantined in the same way as Mixed Use Asset losses are treated.

 

Future losses can only be offset against other residential rental profits within the investor’s portfolio, or against taxable gains from the sale of property (capture by the intention test, bright-line test or property trade rules – subject to specific conditions).

 

Quarantined losses not utilised, will be carried forward to be used in future years, though the retention of the losses will be subject to rules around company shareholder and partnership continuity rules, where changes of shareholders/partners could result in the quarantined losses being forfeited.

 

These rules will apply to individuals, partnerships, trusts, look through companies (LTC) and closely-held companies alike.



Key Impacts

With this in mind, any investors who have relied on income tax refunds generated through residential rental losses need to consider the impact on their future cash flow; this was the key reason behind our recommendation that property investors avoid applying for 2020 special tax codes.


For those clients that pay provisional tax or are close to the $2,500 residual income tax threshold, the change to provisional tax could be significant for the 2021 income tax year, and also result in a terminal tax liability for the 2020 income tax year.

 

On face value, the rules would tend to suggest that restructuring property through LTC’s and Trusts, would no longer provide any benefit to investors. However, restructuring debt against income generating assets will always provide benefits to taxpayers, though the cash flow benefits may take a little longer to be realised under these ring- fencing rules.



Consideration

For clients that operate a business or own other investments, there are potential opportunities to reassess their operating structures to mitigate some of the impacts associated with ring-fencing rental losses. 

 

Given the rules are now in place, if you have any questions around how the rules impact you directly, or you wish to discuss whether restructuring would be beneficial, then please contact Ben and the team at All Accounted For to arrange a time to discuss your implications (ben@aafl.nz or 04-970-1182).


Motor Vehicle: Lease vs Buy

Ben DuflouThursday, July 18, 2019



Whether to lease or buy a motor vehicle is a common question for business owners. We highlight some of the pros and cons to consider when looking into purchasing a new vehicle.

Lease

Pros

Cons

Operating lease vehicles are fully tax deductible as an operating expense

Locked in ongoing business expense

Operating lease fixed monthly costs can be easier to budget

In the end, leasing usually costs you more than an equivalent loan

Monthly payments are lower as you’re not paying back any principal

Lease contracts specify a limited number of kms

Driving a late-model vehicle – higher priced, better equipped vehicle than you might otherwise be able to afford

Drive the car during its most trouble-free years

Buy

Pros

Cons

Ownership

Pay for the total cost of the vehicle as well as having to budget for maintenance, insurance, interest on financing

No end-of-lease charges

Higher monthly payments

Drive as many kms as you want

Post warranty repair costs

Freedom to customise the vehicle


Some important questions you should ask yourself are:

  • Is having a new vehicle every three or so years important?
  • Do you travel a considerable distance in your vehicle each year (high mileage)?
  • Is ownership of the vehicle more important than low upfront costs and no deposit?
  • What will be the financial position of your business at the end of the finance period?
  • What are the projected cash flows for your business?
  • Is the vehicle intended purely for business use or will it also be used personally?
As purchasing a vehicle can have a significant financial impact on your business, we recommend you contact us to talk through your options.
 

FBT & Employee Insurance Schemes

Ben DuflouMonday, July 15, 2019
If you offer an employee insurance scheme, it is important to ensure the correct taxation treatment, as recording the benefits through PAYE will impact employees' entitlements for kiwisaver, student loan, working for families and holiday pay.

If you want to know more, click on the link below to read this article by Velocity Financial, in conjunction with All Accounted For.


The General Ledger - June 2019

Ben DuflouWednesday, July 03, 2019


- Has your business made the necessary changes to replace your single-use plastic bags? 
- Are you being inundated with IRD mail relating to PAYE? 
- We introduce our new office administrator, Sarah J. and congratulate Adam for his outstanding tax exam results. 
- Short of space? Our client, Pencarrow Cabins might be able to help.

Click here to find out more.

New IRD Notifications

Ben DuflouWednesday, May 15, 2019

As many of you may know, IRD has been undergoing a system upgrade under the Business Transformation project. IRD services were down during the Easter break, while they migrated all of the information from the old system in to the new one.

New system is still accessed through the myIR portal from the IRD website but provides the tax payers, and their accountants, with more information and functionality then before.  Unfortunately, just like with many projects of this scale, there are some hiccups along the way.


Access to myIR notifications

As a result of your information being transferred to the new system, some discrepancies in the level of access we have to your information have also changed.  Due to this you may receive an update from IRD notifying you of new access being granted to your myIR account.  In some circumstance you will be notified of the user name of the staff member that linked your tax account to our tax agency.  Understandably this can raise concern as you are unlikely to be aware of the usernames used by All Accounted For staff for accessing myIR.  We have approached IRD to see if the issue can be resolved, but in the meantime if you have any concern regarding one of these emails please call or email us.


Tax return available notifications

IRD is also notifying many taxpayers via email when their tax return for 2019 tax year become available and when the due date is.  We are aware that many of you have not received emails like this in the past and have relied on All Accounted For to keep you informed.  We can assure you that we will still be monitoring and sending out reminders as we have in the past. As above, if you have concerns about any correspondence from IRD please contact us.

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