Payroll News - 2003
Issue 56 September 2003
- reducing business tax compliance costs
- planning to change entity?
- paying on time
- taxation in the screen production industry
- notifying Inland Revenue Child Support when an employee ceases work
Shortly, the Government will release a discussion document containing proposed changes to tax rules. These are intended to reduce business tax compliance costs. The Government's proposals include:
- a subsidy for small businesses that use a tax agent for payroll management and associated tax obligations
- aligning the payment dates of provisional tax and GST
- a new way to calculate provisional tax.
If you want details of the proposals call our automated phone service INFOexpress on 0800 257 477 to request a summary. Remember to have your IRD number handy. We will send you a summary when the discussion document is released.
Alternatively,you will be able to view the summary and the full discussion document on our website www.ird.govt.nz
The proposals in the discussion document are only ideas at this stage and may or may not suit many small businesses. For this reason the Government will want to know what people who run small businesses think of the possible changes. We encourage you to have your say.
If you are changing entity from a sole trader to company, or partnership to company you need to:
- tell us when you cease your current entity, and
- re-register under the new entity.
Please call us on 0800 377 772 to go through all the steps you'll need to do to change entities.
It's important that you send your payment to us by the due date. If you don't have your Employer deductions (IR345) or (IR346) form you can get one from ourwebsite, and attach this to your cheque.
If the payment isn't received by the due date, we may charge late payment penalties and interest.
New withholding payment class
A new class of payments has been added to the withholding payments regulations to clarify the tax treatment for contractors working in the screen production industry (including television, video and film). The new class comes into effect on 8 September 2003.
This means that all resident contractors working in the screen production industry, who are covered by the new class (generally those contractors who work behind the camera), will be subject to a withholding tax deduction of 20 cents in the dollar. The no-declaration rate is 35 cents in the dollar.
Any contractors who would like a higher or lower rate of deduction can still apply to Inland Revenue for a special tax rate or a certificate of exemption.
Taxing per diem (per day) allowances
Per diem allowances paid to resident and non-resident contractors and entertainers working in the screen production industry in New Zealand form part of their gross income and are subject to withholding tax.
However, from I September 2003, if you pay a contractor or entertainer a per diem allowance in relation to services provided to a screen production, where the contractor or entertainer is working away from their town of normal residence, the sum of $60 per day will be considered as expenditure, and you do not need to deduct withholding tax from this amount.
You pay a contractor a $45 per diem allowance as they are required to work away fro their town of normal residence. You do not have to deduct withholding tax because the total payment is less than $60.
However, if the contractor or entertainer is also provided with the goods or services for which the allowance is paid, either by the payer or another party acting on the payer's behalf, the amount regarded as expenditure is reduced on a pro-rata basis. This is because the recipient of the allowance has not actually incurred the expenditure.
You pay a contractor $60 per diem allowance. The contractor is also provided with all meals while working, either on the set or at another location. The recipient has not incurred the expense therefore you must deduct withholding tax from the allowance.
If the daily allowance exceeds $60, withholding tax must be deducted from the portion that exceeds $60.
Completing the employer monthly schedule
Even though you may not have deducted any withholding tax from the per diem allowance, you must still include the total value of it in the gross earnings and/or withholding payments box on your employer monthly schedule, along with any other withholding payments made.
You have paid a contractor $1,000 for one day's work plus a per diem allowance of $55. Withholding tax of $200 has been deducted from the $1,000. However, because the allowance is less than $60, no withholding tax has been deducted from this amount. On your employer monthly schedule, show the gross withholding payment as $1,055 and the withholding tax as $200.
When the recipient of the per diem allowance files their income tax return at the end of the year, they can claim an expense of $55 to offset the untaxed income of $55.
If you have any further enquiries about the taxation of payments to those in the screen production industry, please phone us on 0800 SCREEN.
If you deduct (or have been asked to deduct) child support on behalf of an employee, it is important to notify us if they cease working for you. You do this by entering "C" (ceased employment) as the child support code in Box 4 of your Employer monthly schedule (IR348).
This notifies us to remove the employee from your records. You do not need to contact us directly if you have notified us on the schedule, even if you later receive a final deduction notice for the employee.
For more information about child support codes please:
- refer to page 28 of your Employer's guide (IR335), or
- visit our website.
PDF | 361kb | 2 pages
Date published: 23 Nov 2004
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