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MAY/JUNE 2015 TAX AND BUSINESS NEWSLETTER
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MAY/JUNE 2015 TAX AND BUSINESS NEWSLETTER

COMPANIES & PARTNERSHIPS

As the new residency and recording requirements have come in for companies and special partnerships, if we don’t already know the residency status of partners and company directors, we’ll be contacting you about this.

We’ll also be asking you for details of date and place of birth for partners and company directors if we don’t already have this information.

RISK & REWARD


Call before you click - If you have a company, we’ll let you into a secret. We know, each year when we speak with you about what you want to do about dividends, that the minute we start to  talk about imputation credits and the imputation credit account, we watch your eyes glaze over and we know the ‘la la la la la la’ soundtrack is playing in your head. It’s okay. Almost everyone finds them hard to understand. And really, that’s okay with us because… that’s what we’re here for, right?

It’s not the Companies Office’s job to look out for your tax position. It’s ours. So when you go to update shareholder details for prior shareholding changes, there’s nothing to remind you that if your company’s shareholding has changed by more than 33% each year, you lose what they call ‘continuity of shareholding’. Put another way, if your company doesn’t have 66% commonality of shares in any given year, it loses its imputation credits. You may end up paying more in tax, and you’ll lose the credits you built up in previous years and there’s nothing you can do about it.
 
The rules around shareholder continuity are about making sure that this year’s shareholders who enjoy the benefits today of the tax losses that were carried forward and the imputation credits that accrued last year are largely the same people who were shareholders when those benefits were building up.

Size and timing of the proposed change? If you want to make more than a 50% change to shareholding, can we talk about it to make sure you understand all the implications?

Tax losses?
Did the company have tax losses last year which were carried forward? If the proposed change in shareholding affects more than 49% of the shares, then the company won’t be able to carry the tax losses forward.

Look Through Company? If the company is a Look Through Company, a transfer in shareholding may cause the company to fall out of the Look Through Company regime. Will you be happy with that?

Directors’ interests? Does the proposed change affect directors’ interests in any way? Talk to us!
Visit our website for our full list of services and more!
www.grl.co.nz

ALL MEASUREMENTS ARE LEVEL


This year’s Budget is more housekeeping than rock and roll. There’s a distinct aroma of homebaking and ‘there’ll be no pudding until you eat your greens’.

Room temperature has been adjusted and some social development investments covered and put to rise in a warm place. The piping hot property market has been set to cool off somewhat (if it can).

Promises of a surplus in 2016 and tax cuts in 2017 are firmly predicated on realising the projected growth averaging 2.8% per year.
 
There’s a strong focus on acknowledging realities for householders, particularly those with lower and middle incomes. Apart from the social benefits, this may also encourage more vigorous activity in the retail and services sectors of the economy.

Lest anyone be fooled that that wooden spoon is just for licking the bowl, Inland Revenue’s budget has been beefed up with an additional $74m over the next five years for compliance and enforcement targeting aggressive tax planning (is it just me or does that mean ‘evasion’) and the hidden economy of New Zealand’s ‘cashie culture’.
“Success doesn’t necessarily come from breakthrough innovation but from flawless execution. A great strategy alone won’t win a game or a battle; the win comes from basic blocking and tackling.” - Naveen Jain

(A)MENDING THE SAFETY NET


The government is giving explicit support for children in hardship. They’ve tried hard to balance this so as not to undermine incentives to work.

Benefit rates will increase for families with children by $25 per week after tax. Beneficiaries who work part-time will be expected to find 20 hours’ work each week rather than the 15 hours currently required. And while most sole parents and partners of beneficiaries are now expected to be available for part-time work after their youngest child turns five years old, they will now be expected to make themselves available after their youngest turns three.

Childcare assistance for low-income families will increase from $4 an hour to $5 an hour for up to a maximum of 50 hours of childcare a week for each child.
 

Working and studying for families


Student Allowances for families with children will increase by $25 a week.

Both the Working for Families (WFF) in-work tax credit and the WFF tax credit abatement rate will increase from 1 April 2016:
  • Low-income working families earning $36,350 or less a year, before tax, will see an extra $12.50 per week and some very low-income families will receive $24.50 extra
  • Working families earning more than $36,350 will receive more from WFF, but the amount is dependent on each family’s income and it won’t be more than $12.50 a week
  • Families earning more than $88,000 a year will see slightly lower WFF payments, with the average reduction being around $3 a week

TIMELY REMINDERS

22 June - Dividend Withholding Payment

(due to 20th falling on a weekend)

If a company has elected to maintain a dividend withholding payment account and the account had a debit balance at 31 March, a further dividend withholding payment and dividend payment penalty is now due

22 June - Imputation penalty tax

(due to 20th falling on a weekend)

Where a company had a debit balance on their imputation credit account at 31 March, further income tax and imputation penalty is now due

29 June - Provisional Tax

(due to 20th falling on a weekend)

GST ratio method taxpayers on January, March, May, July, September and November balance dates

Standard provisional taxpayers on January, May and September balance dates

6 monthly GST taxpayers on May and November balance dates

30 June - FBT

(due to 20th falling on a weekend)

Where a company had a debit balance on their imputation credit account at 31 March, further income tax and imputation penalty is now due

Note: these dates apply to those clients for whom we prepare tax returns. Different dates will apply for those clients for whom we don’t prepare returns. Please ask us if you’d like more information.

USE OF MONEY INTEREST RATE RISES


On 8 May this year, use of money interest - the interest Inland Revenue charges on underpaid tax - rose from 8.40% to 9.21%.

The rate Inland Revenue pay on overpaid tax rose from 1.75% to 2.63%. Remember! If you have unpaid tax owing, this rise will drive up your costs further.

Talk to us if you think this may affect you.

SWINGS AND ROUNDABOUTS

 

More flexibility on child support debt


From 1 April 2016, new measures on child support debt mean Inland Revenue can use their discretion more on a case-by-case basis to write off penalties for non-payment of child support. The aim remains to encourage parents to pay what they owe for their children and the new measures strengthen Inland Revenue’s ability to work with parents on controlling and managing their child support debts.
 

Social housing providers


Payments made to social housing providers will be GST-exempt if the government goes ahead with its proposed changes to the GST legislation.
 

ACC levies


ACC levies will continue to fall, with cuts of $375m forecast for 2016 and a further $120m in 2017. If cut as forecast the average motor vehicle levy, including the annual licence fee and petrol levy, could fall to around $120 in 2016.

Border Clearance Levy


A new Border Clearance Levy is expected to be introduced from 1 January 2016 to fund biosecurity and Customs activities. Subject to consultation, the levy will be around $16 for arriving passengers and around $6 for departing passengers.
 

KiwiSaver


The $1,000 kick-start incentive payment is no longer available to people enrolling in KiwiSaver. However, this does not affect existing KiwiSaver members in any way.

SAFE AS HOUSES
The suspense about whether and when a capital gains tax would be introduced to New Zealand seems to have been drawn out for well over a decade. OK, the suspense is over now. Are you relieved?

The focus in this budget is on damping down property speculation rather taking a slice off the family home.

There will be a two-year window for sales of residential property. If residential property is bought and sold within two years, it will be subject to tax. This does not apply for:
  • taxpayers selling their family home
  • inherited property, and
  • property that is being transferred as part of a relationship property settlement

The new rules will apply to properties bought on or after 1 October 2015. More detail is expected to come out in July.

 
It’s important to note that if you intend to sell a property outside of the 2 year timeframe, the sale may still be subject to tax, as it may still fall within other rules relating to the taxation of property. Please contact us if you are selling a property to see what rules apply.

IRD numbers - In addition, anyone buying or selling land - both New Zealand residents and non-residents - will have to provide an IRD number as part of the land registration process. All sales of land - other than sales of the main family home - will be subject to this requirement.

In addition to providing a New Zealand IRD number, non-residents will also have to:
  • provide their country’s equivalent of an IRD number, and
  • open a New Zealand bank account

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