Business Tax Update - 2010

Business Tax Update Issue 15 December 2010

• Reminders
• New employer obligations for overseas workers
• File your GST transitional returns online
• Snapshot of Budget tax changes from April 2011
• New FBT rates from 1 October
• Our services over the holiday season
• Business.govt.nz is your Kiwi business website
• Updated online tax statistics
• Tax relief for weather-affected Southland/Otago farmers
• Redundancy tax credit available
• Pike River mine tragedy
• Season's greetings
• Footnote

Welcome to Business Tax Update

If you have any suggestions for topics you'd like covered in this newsletter, email BusinessTax.Update@ird.govt.nz

Reminders

Tax payments due on 7 February 2011: Final income tax, student loan and Working for Families Tax Credits payments (if you don't have a tax agent with a valid extension of time) are due Monday 7 February 2011.

GST returns and payments due 15 January: If your taxable period ends on 30 November your GST due date is Saturday 15 January 2011. However, you have until the next working day (Monday 17 January 2011) to send us your return and make your payment.

If you can't pay on time, call us on 0800 377 771 to discuss your situation. Find out more about payment options.

KiwiSaver enrolments over the holiday season: If you employ a casual employee for less than 28 days you don't need to enrol them in KiwiSaver. For more information on the enrolment process go to the KiwiSaver website.

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New employer obligations for overseas workers

In the October issue of Business Tax Update we mentioned new obligations were coming up for employers to check carefully that prospective employees are entitled to work in New Zealand.

These new obligations, included in the Immigration Act 2009, came into effect on 29 November 2010. While the Act continues the principle that you must not employ a non-New Zealand citizen who isn't entitled to work in New Zealand, the Tax code declaration (IR330) will no longer be a "reasonable excuse" for employing a non-New Zealand citizen. Employers will now need to show they have taken "reasonable precautions and exercised due diligence" to check job applicants are entitled to work for them.

To help you meet the new law, the Department of Labour is making it easier to check whether people from overseas are entitled to work in New Zealand. VisaView is a free online service employers can use to quickly and easily find out the work entitlement of non-New Zealand citizens, including any specific work conditions such as whether the individual can only work for a specific employer or just part-time.

VisaView also helps employers keep track of their enquiries so they can demonstrate they've taken "reasonable precautions and exercised due diligence" when hiring new employees, as required by the new legislation. It's also been extended so New Zealand passport holders can prove their entitlement to work. Almost three-quarters of New Zealanders aged between 16 and 65 hold or have held a passport. Extending VisaView to offer a passport validation has made a significant difference for employers concerned about asking New Zealanders to show they are citizens, and therefore entitled to work here.

Legislation is also currently before Parliament to enable a further extension that will cover other New Zealanders, including those who have never held a passport.

For more information on VisaView, go to the Immigration New Zealand website.

We've updated page 1 of the Tax code declaration (IR330) by explaining employer's new obligations under "Note to employers". You can view the updated IR330 (November 2010) under "Forms and guides".

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File your GST transitional returns online

You can now see an online demonstration on how to file your GST transitional return. Our simple, step-by-step, online demonstrations will help you navigate your way through the transitional GST form - whether you file online or by paper. Go to "Demonstrations" and watch it now.

There's also more information in our Budget 2010 section or you can read our GST rate change guide (GST106), which gives you tips on adjusting your accounting systems and completing the transitional forms. You'll find this under "Forms and guides".

Only businesses whose returns span the 1 October period need to file a GST transitional return. You or your tax advisor should have received a how-to flyer Completing your GST transitional return (GST107) with your transitional return.

You may also need to use the GST rate change adjustment calculation sheet (GST105) to adjust for the GST rate change to 15% for certain supplies. Please check the time of supply information to see what applies to your business.

You can view the GST transitional return (GST104A) under "Forms and guides" and the GST rate change adjustment calculation sheet (GST105) under "Work it out".

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Snapshot of Budget tax changes from April 2011

We're now starting to plan for the Budget changes that will come into effect from 1 April 2011. You can find out more about these in our Budget 2010 section - we encourage you to have a look.

The upcoming April 2011 tax changes include the following:

• company tax decreasing from 30% to 28% from the 2011-12 income year
• no depreciation deductions for buildings with a useful life of 50 years or more from the 2011-12 income year
• stricter tax rules for foreign multinationals to reduce their ability to minimise tax payments in New Zealand
• tax rules changing from 2011-12 to reduce interest deductions by foreign multinationals that allocate high levels of debt to their New Zealand subsidiaries.

There are also proposed changes to LAQC and QC rules and people receiving Working for Families Tax Credits won't be able to use investment losses from rental properties to reduce their income.

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New FBT rates from 1 October

When calculating FBT you can use either a single rate or the alternate rate. Both of these rates changed on 1 October 2010.

The single rate for quarterly filers changed from 61% to 49.25%. This new rate applies to the quarter ending 31 December 2010, due by 20 January 2011, and all later quarters.

The alternate rate changed from 49% to 43%.

If you used the 49% alternate rate in quarters 1 or 2, or the new 43% rate for quarter 3, when you file your fourth quarter return you must use either a "full" or "short-form" alternate rate calculation.

If using a "full" alternate rate calculation, the rates in the table below apply to fringe benefit-inclusive cash remuneration for the 2010-11 year.

Income range	FBT rate
$0 - $12,390	12.99%
$12,391 - $39,845	23.84%
$39,846 - $54,915	45.99%
$54,916 and over	55.04%

If using a "short-form" alternate rate calculation, the rates in the table below apply to fringe benefits for the 2010-11 year.

Fringe benefit type	FBT rate
Attributed	55.04%
Non-attributed - major shareholder-employees	55.04%
Non-attributed - other employees	45.99%

The alternate FBT rates change again for the 2011-12 year. We'll update you closer to the time.

If you file an annual or income year return the flat rate changed from 61% to 55.04% for the 2010-11 income year and this changes to 49.25% for the 2011-12 income year. You also have the option of using an alternate rate calculation.

We've updated all FBT forms, guides and calculators with the new rates and they're available now under "Get it done online", "Work it out" and "Forms and guides".

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Our services over the holiday season

Contact centre opening hours
Holiday dates	Availability
Friday 24 December 2010      - Large Enterprises      - All other enquiries	8am to 2pm 8am to 5pm
Saturday 25 December 2010 to Tuesday 4 January 2011	Closed
Wednesday 5 January 2011      - Child Support      - KiwiSaver      - Large Enterprises      - All other enquiries	8am to 6pm 8am to 6.30pm 8am to 4.30pm 8am to 8pm

Counter services

All our counter services (with the exception of Christchurch, which will be open until 5pm) will be available until 4.30pm on Friday 24 December 2010, with scheduled appointments till 2pm. They'll reopen at 8am Wednesday 5 January 2011.

Other services

Secure online services, ir-File and our 0800 self-service numbers will be unavailable from Saturday 25 December until Tuesday 28 December 2010 inclusive. These services will start again from 6am Wednesday 29 December 2010.

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Business.govt.nz is your Kiwi business website

Business.govt.nz provides the latest expert advice, business tips and information from government to help you start, manage and grow your business.

The site is designed to help you save time and money by having one place where you can find everything you need, and it's all free.

Visit the Business.govt.nz website to find:

• practical tools and resources to help build your own business plan
• information on the rules and regulations you need to comply with
• direct access to government transactions you need to perform.

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Updated online tax statistics

Last year we published a range of statistics about tax revenue and social entitlements. These included data on customers, revenue collection, donation tax credits, child support, Working for Families Tax Credits entitlements, and income distribution by income bands.

Now we've added 10 new sections - five relate to debt and five to compliance. We've also updated our data and added the 2009 statistics. If you want to compare current data with previously published statistics we also now have a data archive section.

You'll find the data organised into seven groups:

• customers
• revenue and refunds
• tax returns
• compliance
• debt
• tax agents
• social policy.

You can download and save or print your spreadsheet. There're also links to definitions to help understand the tables and graphs.

The tax statistics include only data collected by Inland Revenue and don't duplicate statistics available separately from other sources such as Statistics New Zealand or The Treasury.

Find out more information and see the latest statistics.

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Tax relief for weather-affected Southland/Otago farmers

We understand the recent snow storms and extreme weather conditions have caused significant issues for many farmers in South Otago and Southland. If you're a farmer we thought it might be helpful to remind you of options that may assist you.

Income equalisation scheme

You may wish to use the income equalisation scheme to take income from your 2010 tax year to the 2011 tax year. We can exercise discretion to allow for late deposits from the 2010 tax year and early withdrawals.

Find out more about assistance for farmers affected by the Southland snow storms in relation to the income equalisation scheme.

Late election of provisional tax estimates

You may be able to make a late estimate or re-estimate your provisional tax if your circumstances have changed due to the adverse weather. We can arrange early refunds if provisional tax has been overpaid.

Late filing and late payment

If you've been unable to file returns on time it's important you contact us to discuss options. We can't extend the filing dates for GST and PAYE returns, but any penalties for late filing may be waived. If you receive a letter saying returns are overdue it's important you don't ignore the letter.

We'll take a lenient and realistic approach when considering remission of penalties and use-of-money interest, and apply discretion on a case-by-case basis.

Outstanding tax

We'll consider instalments for outstanding tax in some circumstances. You may be able to apply for a write-off due to serious hardship if you know you won't be able to pay the full amount.

Working for Families Tax Credits

Working for Families Tax Credits entitlements are based on a person's yearly family income. Your entitlement may have changed so you'll need to check if your family income will reduce because of the adverse weather event.

You can claim the Working for Families Tax Credits either weekly, fortnightly or at the end of the year. You may need to consider your options before applying.

Child support

If you're having trouble making your child support payments by the due date, call 0800 221 221 to discuss your options.

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Redundancy tax credit available

The redundancy tax credit was repealed from 1 October 2010 but Revenue Minister Peter Dunne has announced an extension to 31 March 2011.

The extension will apply to all redundancies received before 1 April 2011. If you lodge a Redundancy tax credit (IR524) form with us now, claims for redundancy payments received on or after 1 October 2010 will be processed after the law has been amended. It will be paid at the rate of 6 cents in the dollar to a maximum of $3,600 for each redundancy payment.

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Pike River mine tragedy

We appreciate the devastating effect the Pike River mine disaster has had on the Greymouth community and the wider region. The economic consequences could be felt for some time.

We understand that some people and businesses may face difficulty paying or filing by the due date if the mine remains closed for a prolonged period. If your business is facing difficulties meeting tax obligations in the aftermath please talk to us as we have provisions available to assist.

You can find more information on our website or you can call us on 0800 473 566.

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Season's greetings

We wish you a safe and relaxing holiday.

Have a great break and we look forward to bringing you our next issue of Business Tax Update in February 2011.

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Footnote

Business Tax Update comments generally on topical tax issues relevant to businesses. Every attempt is made to ensure the law is correctly interpreted, but articles are intended as a brief overview only. The examples provided are not intended to cover every possible factual situation.

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Date published: 08 Dec 2010

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