Business Tax Update - 2012
Business Tax Update Issue 30 June 2012
- Keeping records and claiming business expenses
- Employee’s circumstances may change child support payments
- Depreciation determinations give certainty
- IR3 income tax returns due 7 July
- Increase for childcare and boarding service providers
- Temporary passwords for online services
- 2013 PAYE tables
- Publications update
- Voice ID is now the standard for verification
- Voluntary student loan deductions from 1 April 2012
- Have we got your correct BIC code?
- Making deductions from lump-sum sleepover payments
- Delay in setting 2012 motor vehicle mileage rate
- International tax changes
- New versions of our guides now available
- ANZ Flying Start Business Plan competition 2012
- Business Tax Update reader survey
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
1 June: If you filed an IR3 last year you should have received the 2012 return by now. If you need to file an IR3 and you, or your tax agent, haven't received one you can:
- file your return online using our service IR3 individual income tax return 2012 or
- request a paper copy using our Request an IR3 taxpack service .
28 June: First instalment of 2013 provisional tax due for those who have a March balance date and use the ratio option.
30 June: Last day to make your FBT elections. Because 30 June falls on a Saturday, we can accept your FBT election on Monday 2 July.
The expenses listed here can only be claimed as tax deductible if they were earned through business activity. Individuals who earn taxable income from their business activity may claim relevant expenses.
You hear it time and time again - keeping good business records pays dividends.
This is the time of year when many of you start preparing your tax returns. If you've kept good records it'll be a breeze, whether you do the tax return yourself or get a tax agent to do it for you. If you haven't made a good job of record keeping, you might have a stressful time putting all the paperwork together. You might also miss out on claiming some expenses because your records weren't adequate.
It pays to get into a good record-keeping routine. Sending in your completed tax return at the end of the year should be the final part of a year-long process.
From the beginning of a new tax year, start filing your statements, invoices, GST returns and interest statements. It doesn't matter too much what system you use, but you must keep it in order and up to date. You can use boxes, folders, concertina files or computer-based programs, as long as you can retrieve information easily when you want to. You need to keep:
- receipts for all claims
- interest statements
- summaries of earnings from each employer
- dividend statements
- a record of rental income and expenses
- purchase and sale agreements (for disposal of investment assets).
What you can claim
You can claim most expenses, for example:
- a vehicle for work purposes, transport costs and business travel
- rent paid on business premises
- depreciation on items such as your computer and office furniture
- part of any household expenses, eg, mortgage interest, telephone and electricity, if you have a home office
- interest on borrowing money for the business
- some insurance premiums
- work-related journals and magazines
- membership of professional associations
- work-related mobile phone
- work uniforms
- tax agent's fees.
You'll save on fees if you complete your own return, but a tax agent will have a better knowledge of what you can and can't claim. Using their expertise may cover their fees and still get you ahead.
When's the best time to get a good record-keeping habit? Now is good.
For more information about record keeping and claiming expenses, see our:
- Smart business (IR320) guide
- Record keeping (IR323) factsheet
- Record keeping (IR1008) factsheet with checklist.
You can also attend our free, nationwide tax seminars. For example, in Wellington an "Introduction to business" seminar is held every Tuesday (except public holidays). This seminar covers business structures, income tax, expenses you can claim, GST and more.
If you're deducting child support for an employee, you may get a notice from us in late July/early August requiring you to change the amount you deduct for them. We'll do this if their child support liability has been reassessed as part of the Salary and Wages Income Finalisation (SWIF) process.
If you don't receive a change notice for an employee, just carry on deducting child support at the existing rate.
What is SWIF?
Each February, we calculate a liable parent's assessment for the coming year. We base it on their earnings for the 10 months from April to January, plus an estimate of their expected earnings for February and March. In July, we compare our estimate to the liable parent's actual full-year earnings.
New assessments and deduction notices
We only issue a new assessment if the liable parent's assessment income changes by over $500.
The new deduction notice you receive tells you when to make deductions for your employee and the amount to deduct.
Need more information? You and your staff can call us on these numbers:
- employers 0800 220 222
- employees 0800 221 221.
We've recently issued three depreciation determinations.
Fertiliser storage facilities relating to the depreciation of buildings and grandparented structures sets general economic rates for the following assets: barns, barns (drying), chemical works, fertiliser works, powder drying buildings and fertiliser storage facilities. This determination applies from the 2011-12 and subsequent income years.
Tax depreciation rates provisional determination number PROV22 sets the provisional depreciation rates applicable to dry store buildings used in the "Dairy plant" industry. This determination applies for the 2011 and subsequent income years.
Tax depreciation rates provisional determination number PROV23 sets the provisional depreciation rate for automated milking systems. This determination applies for the 2011 and subsequent income years.
These have also been published in Tax Information Bulletin Vol 24, No 3 (April 2012).
Your IR3 is due by 7 July unless you use a tax agent and have an extension of time, or you have an approved change in balance date. (Because 7 July falls on a Saturday in 2012, you can file your return on Monday 9 July.)
An easy way to file your IR3 tax return is by using our secure online services. You can also use online services to:
- change your contact details
- update your bank account details.
You may not need an IR3
We've gone through our records and identified 48,109 IR3 customers who don't need to receive or file an IR3 return. We used the answers from income-related keypoints on the 2011 IR3 returns to identify those who didn't receive any business or true IR3 income, including customers who used tax agents.
To refine this process we've added a couple of tick boxes to the 2012 IR3 return. We ask customers who have received interest or dividends from a partnership, look-through company, trust and/or estate to put a tick at Questions 13 and 14. We also have a tick box at Question 21 to identify shareholder-employees who may receive a shareholder-employee salary in the future.
Movement in the Consumers Price Index means an increase in the standard-cost components for childcare and boarding service providers for the period 1 April 2011 to 31 March 2012.
The variable standard-cost component increases from $3.29 to $3.34 an hour for each child.
The administration and record-keeping fixed standard-cost increases from $321 to $326 a year for a full 52 weeks of childcare services provided.
Boarding service providers
The weekly standard-cost for one to two boarders increases from $243 to $247 each.
The weekly standard-cost for third and subsequent boarders increases from $198 to $202 each.
Change in building depreciation affects fixed standard-cost
Changes to depreciation for buildings in Budget 2010 affected the fixed standard-cost component for the use of a dwelling. This has reduced from 5% to 4% effective from 1 April 2011.
The adjustment to fixed standard-cost also affects home-based childcare providers. The fixed cost percentage of the purchase price of a dwelling used for this activity has similarly reduced from 5% to 4%.
You can read about the changes in the upcoming Tax Information Bulletin Vol 24, No 5 (June 2012)
From 20 April 2012 any individual who registers for an online services account will have to activate it by calling us on 0800 227 770. Up till that date, we automatically posted you a temporary "first-time" password if you didn't activate your account within 48 hours of registering. We've stopped doing this but if you received a temporary password before the cut-off date you can still activate your account with it.
Note: If you didn't get a letter or can't put your hands on it, you'll have to re-register.
If you log in using a temporary password, you must change it before any services can be used. If you try to reset the password before entering the original password, you will get an error message.
The 2013 PAYE deduction tables for pay periods between 1 April 2012 and 31 March 2013 are now available online.
We review our publications to ensure they're not only up to date but still provide the right information in a format that's easy to use. Sometimes this means we discontinue a publication if information is available elsewhere, or we combine information.
IR40 gone but replaced with restyled IR590
There used to be two forms for applying for relief from debt - the IR40 and IR590 - which were both called "statements of financial position". These forms gave us relevant details so we could assess your situation.
The forms have been combined into one, and the IR590 is now called "Disclosure of financial position".
We've streamlined the IR590 to make supplying the information more straightforward. In almost all cases, we should be able to get the necessary information over the phone. But, where a customer's financial situation gets really complicated, we'll send them a Disclosure of financial position (IR590) to fill in.
We believe this new approach will improve our service and speed up resolution of debt issues.
KiwiSaver publications discontinued
We've reviewed the information in our KiwiSaver publications recently and made two guides obsolete:
- Introducing KiwiSaver (KS11)
- KiwiSaver: Making easy work of saving (KS40).
You can find the same information in Your introduction to KiwiSaver - employee information (KS3).
A third publication, KiwiSaver: A guide for children and young people (KS33) will only be available online.
Last month we told you about voice ID, our new validation for individuals. It's our most secure protection for your account and speeds up your call.
Voice ID is now the standard for verification and we're asking every individual to enrol. It makes your account more secure, gives you access to more after-hours services (such as password reset) and speeds up your calls - things every caller wants.
More than 200,000 people have enrolled already and we encourage you and your staff to do the same today.
Enrolling for voice ID is easy and only takes a couple of minutes. Just call 0800 257 843 (24 hours a day, 7 days a week), making sure you have your IRD number handy. It will work best if you call us from somewhere quiet.
If you haven't done so already, please enrol yourself and continue to promote this service to your employees by letting them know about it in your regular communications with them.
If your employee has a student loan, they must add "SL" to their tax code from 1 April 2012 regardless of how much they earn, unless they have a repayment deduction exemption. This will ensure they're making the right repayments towards their student loan every pay period.
If your employee wishes to change the amount of their student loan repayments, they need to provide you with either a special deduction rate or a repayment deduction exemption certificate.
Voluntary extra deductions (SLBOR repayment code)
Aside from the standard student loan deductions you make every pay period, your employee may ask you to make voluntary extra deductions for their student loan to help pay their loan off faster.
Voluntary extra deductions are in addition to the standard student loan deductions you must make from your employee's gross earnings, based on their tax code (eg, M SL, S SL). These extra deductions are made using the SLBOR repayment code. They don't have to earn over the pay-period repayment threshold to have the extra deductions made from their pay.
The voluntary extra deductions must be listed separately from your employee's other student loan deductions on your Employer monthly schedule (IR348/EMS). You'll need to add a new entry for your employee that includes:
- their name
- their IRD number
- the SLBOR repayment code
- the total amount of extra deductions you've made for the month in the student loan deduction box.
Note: Just to remind you, the start and finish dates on your EMS don't refer to the period covered by the tax or student loan deductions you've made on the EMS.
Only fill in the start date when a new employee starts work and only fill in the finish date when you stop paying wages permanently or temporarily, or if you've ceased business.
We need your correct business industry classification (BIC) code for ACC purposes. Please check we have the correct BIC code for your IRD number. You can confirm this the next time you contact us.
Two new factsheets provide information about deductions and entitlements to anyone who receives lump-sum sleepover payments.
One factsheet is for support workers receiving sleepover lump-sum payments and the other is for employers making deductions from sleepover lump sums:
- Sleepover payments - information for support workers (IR1016)
- Sleepover payments - information for employers (IR1017).
These back-payments are covered by the Sleepover Wages (Settlement) Act 2011. Because of the time taken to settle the agreement, you may have to pay lump sums to employees who no longer work for you, as well as current employees. You'll need to contact former employees to get their current PAYE rate.
Lump-sum payments are treated as an extra pay. Our factsheets give employees and employers information about deducting income tax, child support, student loan repayments and KiwiSaver contributions from the back-payment, and which rates to use. We tell support workers about changes they need to take into account if they receive Working for Families Tax Credits entitlements or pay child support.
We review the motor vehicle mileage rate at least once a year based on the costs of owning and operating a motor vehicle. Unfortunately there's been a delay in getting the information this year and our 2012 review has been delayed. We expect to be able to provide the updated mileage rate for the 2012 income year in early July.
If you need to file a tax return in the meantime you should use the current (2011) mileage rate of 74 cents per kilometre (which applies to both petrol and diesel fuel vehicles) to calculate your motor vehicle running costs for your 2012 income tax return.
Employers may continue to use the 2011 mileage rate as a reasonable estimate of motor vehicle expenditure when reimbursing employees.
The Taxation (International Investment and Remedial Matters) Act 2012 was passed on 7 May. It features changes to foreign investment funds, calculation methods, memorandum accounts and the approved issuer levy. The Act also includes some technical and remedial changes to other areas of the international tax rules, including thin capitalisation.
Full details of the changes will be included in upcoming issues of this newsletter and the Tax Information Bulletin.
In the meantime, here are the main points.
Foreign investment funds (FIFs)
A new attributing income exemption is introduced for non-portfolio FIFs. This extends the active income exemption for controlled foreign companies (CFCs) to non-portfolio FIFs. A non-portfolio FIF is where the person holds a 10% or greater interest in the FIF.
The fair dividend rate method and cost method will generally be available to all FIF interests, not just interests of less than 10%.
Accounting profit and branch equivalent calculation methods are repealed.
Portfolio investment entities (PIEs) won't be able to use the active income exemption/attributed income exemption for CFCs or FIFs.
Anyone under the $50,000 threshold can elect to calculate overseas income using FIF calculations (for a minimum of four years).
The above changes apply to income years beginning on or after 1 July 2011.
Branch equivalent tax account (BETA) and conduit memorandum accounts
Conduit tax relief accounts credits are repealed for income years beginning on or after 1 July 2011.
Branch equivalent tax accounts (BETAs) are repealed for companies with income years beginning on or after 1 July 2012.
Approved issuer levy
The approved issuer levy (AIL) will be zero-rated for certain bonds.
Interest payments on qualifying bonds will be zero-rated for AIL.
The zero rate won't apply if the AIL return isn't completed and filed by the due date.
Our guides are a key source of information for our customers and we regularly update them to take in legislative and procedural changes.
We've recently revised or newly published the following business publications.
|Shoulder number||Name||Version date|
|IR194||Gift duty||October 2011|
|IR255||Charitable and donee organisations||April 2012|
|IR277||Retiring allowances and redundancy payments||April 2012|
|IR320||Smart business guide||April 2012|
|IR322||Employer obligations||April 2012|
|IR333||First-time employer's guide||April 2012|
|IR335||Employer's guide||April 2012|
|IR337||Completing employer monthly schedules||April 2012|
|IR356||IR56 taxpayer's handbook||April 2012|
|IR582||Debt options||April 2012|
|IR592||Debt options information||April 2012|
|IR688||Helping you understand your employer forms||March 2012|
|IR741||Late payment and late filing penalties||April 2012|
|IR776||Disputing an assessment||April 2012|
|IR777||Disputing a notice of proposed adjustment (NOPA)||January 2012|
|IR778||If you disagree with an assessment||December 2011|
|IR849||What you need to do if you're an employer||April 2012|
If you hold any of these publications with an older version date, you may want to replace them with the current version. You can download them from "Forms and guides" or order copies by calling our self-service number 0800 257 773.
If you have a business or new business idea you're keen to see fly, this competition is for you!
Business.govt.nz's second annual ANZ Flying Start Business Plan competition opened for entries on 22 May 2012.
Submit a business plan showcasing a fresh and viable business that is set for growth and sustainable revenue.
You could be in to win a prize package of $56,000, as well as a $1,000 cash prize in your region.
Who can enter
Business owners with sales of less than $2 million to the year ending March 2012, or those with a business idea they want to get off the ground, are eligible to apply.
How to enter
Visit the business.govt.nz website and use the online template to submit your business plan. Entries close on 26 June 2012 at 5pm.
We'd like to find out if the Business Tax Update newsletter meets your needs as a source of relevant and timely tax information. We'd appreciate it if you could download the PDF below and complete the questionnaire at the end.
Your responses will be kept confidential and can't be tracked. When you've finished just press the submit button. Thank you for your time and input.
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.
PDF | 340kb | 7 pages
Other issues this year
Business Tax Update Issue 36 December 2012
Business Tax Update Issue 35 November 2012
Business Tax Update Issue 34 October 2012
Business Tax Update Issue 33 September 2012
Business Tax Update Issue 32 August 2012
Business Tax Update Issue 31 July 2012
Business Tax Update Issue 29 April/May 2012
Business Tax Update Issue 28 March 2012
Business Tax Update Issue 27 February 2012
Date published: 05 Jun 2012
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