GST News - 2006
GST News March 2006
- GST adjustments and fringe benefits
- Your views on GST News
- WorkSite/PaeMahi
- GST filing frequency
- Income tax returns for the 2006 tax year
- Charitable organisations - are you aware of the Charities Act?
Welcome to GST News
We send you this newsletter twice a year, in March and September, to tell you about tax law changes and topical issues relating to GST.
If you have a GST topic you'd like to see covered in this newsletter, please write to the Editor, GST News, PO Box 2198, Wellington or email us at gst.news@ird.govt.nz and we'll aim to cover the topic in a future edition.
GST adjustments and fringe benefits
We've been asked to explain why the GST-inclusive value is used when calculating fringe benefit tax (FBT). But first, here's a brief explanation of why GST adjustments are made.
GST adjustments
Sometimes you may want to use business assets or goods for private use. If you do this, you'll need to make a GST adjustment for the private use, because GST must be paid on goods used for personal use.
- If you're a sole trader, partner, trust member, or an associated person, and you have used business assets or taken goods for private use, you account for the adjustment in Box 9 of your GST return.
- If employees (including shareholder-employees) use business assets or goods for their personal use, you account for the GST in Box 7 of the Fringe benefit tax quarterly return (IR420) or Box 6 of the Fringe benefit annual return (IR422) or Fringe benefit tax income year return (IR421).
In addition, as the employees have received fringe benefits, you will need to account for FBT.
Example - Goods
Sara runs a door-to-door beauty supply business and operates as a sole trader. She has one employee.
Sara purchases stock in January and June and claims back the GST content in the relevant returns.
In December, Sara gives her employee a gift of cosmetics. These have a GST-inclusive cost price of $1,000. Sara also takes cosmetics of the same value for her private use.
See below for the tax treatment for this example.
| Cosmetics used by | Private use of business goods? | GST adjustment required | Is this a fringe benefit | Where will the GST adjustment be accounted for? |
|---|---|---|---|---|
| Sara | yes | yes | no | GST return |
| Employee | yes | yes | yes | FBT return |
The GST adjustment is 1/9th of the $1,000 GST-inclusive cost price. $1,000 ÷ 9 = $111.11
Sara's use will be accounted for in her GST return (Box 9), and the employee's use will be accounted for in Sara's FBT return, as GST payable on the FBT taxable value.
The FBT taxable value of the employee's cosmetics is $1,000 (GST-inclusive value). This is equal to the amount that the employee would have paid, if she'd bought the cosmetics herself.
Example - Motor vehicle
Mark is an employee, and the company car is available for his private use on the weekends.
See below for the tax treatment for this example (quarter ending 31 March 2006).
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The benefit Mark has received is equal to $1,000. This is the taxable value to be included in the company's FBT return.
GST payable on the fringe benefit taxable value of the car is $111.11 and must also be included in the FBT return.
Your views on GST News
This month (March), some of you will have received a GST News survey, along with your Goods and services tax return (GST101).
We would appreciate if you could take 10 - 15 minutes to fill out the survey, and send it with your return in the freepost envelope provided.
Summarised results of the survey will be published in the September 2006 edition of GST News.
WorkSite/PaeMahi
www.worksite.govt.nz has been developed by combining the resources of a number of government agencies, including Inland Revenue, to provide an online shortcut to finding staff both in and outside New Zealand. WorkSite/PaeMahi also provides information for people looking for work or establishing a career path. It's there if you need help:
- with education and training
- looking for staff
- establishing and operating a business
- finding publications and information about working in New Zealand.
The site has an advanced search engine that includes "Ask an Expert"-a database with over 100,000 answers to commonly asked questions. Combined with the original search, this gives you access to more in-depth answers to your questions.
GST filing frequency
GST returns can be filed on a one, two, or six-monthly basis. The options available to you depend on your turnover.
Here's a reminder of the taxable periods available.
| Your turnover in any 12-month period |
Taxable periods you can choose |
|---|---|
| Up to $250,000 | One, two or six-monthly |
| $250,001 to $24 million | One or two-monthly |
| Over $24 million | One-monthly only |
Note: If the business operates in a group or in branches, the taxable supplies of all members or branches must be added together to get the total taxable supplies. Non-profit bodies don't have to do this.
If your turnover has increased and you are required to change filing frequencies, you must notify us in writing within 21 days. You can do this at www.ird.govt.nz if you are registered for Online Services.
Why change?
There are reasons why you might want to change your filing frequency, even if you aren't required to do so. For example, you now expect to receive regular GST refunds, or you find it easier to deal with GST if you complete returns at more regular intervals. If you meet the requirements, we'll approve your request and send written confirmation of the date your new taxable period will apply from.
Note: You must continue filing returns using your current taxable period until we advise you when to change.
Income tax returns for the 2006 tax year
The table below shows the dates the 2006 annual income tax returns will be issued.
| Return type | Dates issued by |
|---|---|
| Individual tax return (IR3) | 30 May 2006 |
| Companies income tax return (IR4) | 27 April 2006 |
| Estates or trusts income tax return (IR6) | 5 April 2006 |
| Partnerships income tax return (IR7) | 7 April 2006 |
| Maori authorities income tax return (IR8) | 29 March 2006 |
| Clubs or societies income tax return (IR9) | 5 April 2006 |
| Registered superannuation funds income tax return (IR44) | 11 April 2006 |
Who should receive an income tax return?
All non-individuals and any individual who receives income from self-employment, a rental property, a partnership or withholding payments should receive an income tax return.
If you haven't received a taxpack by the date shown above, go to our website or call us on 0800 377 774.
Who will receive a summary of earnings?
We'll send a summary of earnings, showing income information for the tax year, to taxpayers who file any of the income tax returns listed above and also receive income through salary, wages or withholding payments. We'll send these out in the last two weeks of May 2006.
When is it due?
Taxpayers who don't have a tax agent or an extension of time must fi le their returns by 7 July 2006. If you can't file your return by the due date, you'll need to call us on 0800 377 774.
Charitable organisations - are you aware of the Charities Act?
If you are a charitable organisation you need to know about the new Charities Act 2005 and what it means for you.
The Charities Act 2005 established a Charities Commission to provide:
- a registration and monitoring system for charitable organisations
- support and education to the charitable sector on good governance and management.
Since it began operating on 1 July 2005, the Commission has been designing and building a register of charitable entities in New Zealand. It will begin accepting registrations in mid-2006.
Registering with the Commission is voluntary and has no bearing on the legal status of charities. If your organisation chooses not to register with the Commission it will still be able to call itself a charity and solicit funds from the public, but it will no longer qualify for tax-exempt status.
To register, charities will be required to provide the Commission with documentation that proves the organisation is carrying out charitable purposes and activities. Once registered, your charity does not need to provide documents to both the Commission and us. Instead, the Commission will tell us that they have registered your charity.
Inland Revenue will continue to be responsible for ensuring that eligible charitable organisations receive their tax exemptions. In the next few months, we'll issue a statement advising charities on the requirements for tax exemption. Your organisation will have until 30 September 2007 to register before your tax status is affected.
For more information about the key features and associated tax implications refer to Tax Information Bulletin, Vol 17, No 7 (September 2005).
The Charities Commission has published a booklet A Guide to the Charities Act, which is on their website www.charities.govt.nz
For further information about what the Act means, call the Charities Commission on 0508 CHARITIES (0508 242 748).
Kathleen Clement
National Manager
Delivery, Planning and Initiation
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Date published: 10 Mar 2006
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