Business Tax Update Issue 11 August 2010 (Business Tax Update)

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Business Tax Update - 2010

Business Tax Update Issue 11 August 2010

Reminders
Update on GST Budget changes
Our compliance plans for the coming year
Use our latest publications
Problem-gambling levy rate change
Paying by credit or debit card
Filing returns if you're self-employed and have a student loan

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

2011 provisional tax instalments due 28 August: The first instalment for the 2011 provisional tax and student loan interim payments is due on 28 August 2010. This applies if you pay provisional tax using the standard or estimation option to calculate your provisional tax payments and have a standard March balance date. Your instalment due dates will be different if you file your GST returns six-monthly.

If you use the ratio option to calculate your provisional tax payments and you have a March balance date, your second 2011 provisional tax instalment is due on 28 August 2010.

Find out more about provisional tax.

GST Advisory Panel: This panel has been set up so you can ask questions or send your feedback relating to the GST rate increase.

To find out more go to the GST Advisory Panel website or phone 0800 387 783.

Update on GST Budget changes

Last month we outlined some of the key tax changes from the May 2010 Budget. This month we're focusing on the GST transition as the GST rate changes from 12.5% to 15% from 1 October 2010.

Before GST increases to 15% on 1 October you'll need to check you're ready to account for the new rate on all sales and income, as well as purchases and expenses.

If you use software to account for GST, check you can change the rate and calculation, or get an update from your software provider to do this.
You'll also need to make sure you're ready to issue tax invoices with the new GST rate of 15% from 1 October.

When issuing credit or debit notes you'll need to make sure the GST rate is the same as the original tax invoice.

Time of supply rules

The general time of supply rules will apply for most transactions when there's a rate change. Generally, a supply is considered to take place at the earlier of:

the time an invoice is issued, or
the time a payment is received by the supplier.

The time of supply is important because it determines the rate of GST that applies to any sale or purchase. If an invoice is issued or a payment made for a supply prior to 1 October 2010, even if the goods are delivered or services provided on or after that date, then the rate of 12.5% will apply.

Although the general time of supply rule applies for most transactions there are special rules for some specific transactions. These include hire purchases, lay-bys, progress payments and rental or hire agreements.

Find out more about time of supply information for other special supplies.

Accounting basis and the GST rate change adjustment

How you account for GST depends on the accounting basis you use rather than the time of supply. Here's a quick refresher of the three types of GST accounting basis:

Invoice basis - you can claim GST when you receive an invoice and you account for GST at the earlier of issuing an invoice or receiving a payment.
Payments (or cash) basis - you account for GST or claim GST when you receive or make a payment.
Hybrid basis - you account for GST on your sales (income) using the invoice basis and claim GST on your expenses (purchases) using the payments basis.

If you use the payments or hybrid basis it's likely you'll have made or received supplies where GST was charged at 12.5% that you'll not account for until 1 October. When accounted for on your GST return these supplies would have GST calculated at 15%, so to make sure the correct amount of GST is accounted for a GST rate change adjustment is required.

Filing your GST returns

If you file monthly, two-monthly or six-monthly GST returns for the period ending 30 September 2010, you'll use the 12.5% rate. Then from 1 October you'll need to use the new 15% rate.

You'll receive a one-off GST transitional return if your return period spans the rate change, so you'll be able to account for GST at both rates.

There are two parts to the GST transitional return form:

Part 1 is for GST on supplies at the old rate of 12.5%
Part 2 is for GST on supplies at the new rate of 15%.

The two parts are then combined to calculate either your GST to pay or refund for that return period.

You'll need to separate any goods and services you've purchased and sold before and after the rate change and record these supplies in the correct part of the return.

If you pay provisional tax with your GST you'll receive a one-off GST transitional and provisional tax return, which includes your provisional tax calculation.

You'll need to make your GST transitional return at the usual date whether you have a refund, tax to pay or a nil return.

You'll also receive a flyer Completing your GST transitional return (GST107), which will help you complete the return.

Find out more about the Budget 2010 changes.

Our compliance plans for the coming year

Every year we address areas that may be a risk to the government's revenue base. Our compliance focus publication Helping you get it right: Inland Revenue's compliance focus 2010 - 11 gives a detailed description of our compliance plans for the coming year. We've identified patterns of non-compliant behaviour in various customer groups, eg individuals, families, non-profit groups, small and medium enterprises and tax agents.

We believe that raising awareness of the compliance issues we've identified will give you an opportunity to review your own situation and check that everything's in order.

The compliance issues in this year's programme fall under five key themes:

making sure everyone pays their fair share
targeting industries in the hidden economy
getting it right at source
proactively managing debt
making it easy to do online.

Some issues identified for two key groups in the programme may be relevant to you.

Small and medium enterprises (SMEs)

We'll continue to contact businesses early when payments become overdue and work with you to help you keep on top of your tax payments and repay any debt early.

Issues that we'll be targeting include:

businesses taking part in the hidden economy
property developers, speculators and dealers earning income from property transactions
common errors made by businesses reporting losses.

Employers

We saw a significant increase last year in the number of employers filing their employer monthly schedules online. We'll continue to encourage all employers to file electronically using our online service ir-File. Before you can use ir-File you'll need to register for an online services account.

Issues we'll be targeting include ensuring:

employer monthly schedules are filed accurately and on time
employers meet their KiwiSaver obligations.

Why not go to our website and read the full story?

Find out about our compliance focus 2010 - 11.

Use our latest publications

We regularly update all our publications affected by rate or legislation changes. We also periodically review the information needs of our customers, which may lead to significant changes in some publications.

It's important to only use the latest forms and guides.

If you keep copies on hand check our "Forms and guides" section to make sure you have the latest versions.

Redesigned KiwiSaver guide

We've recently redesigned Your introduction to KiwiSaver - employee information (KS3). It still contains all the important information you need but instead of a 24-page booklet, it's now a 2-page factsheet.

You can continue to give your employees any supplies of the KS3 you have on hand - no critical information has changed. When you request the new KS3 you'll still receive the New employee opt-out request (KS10) and KiwiSaver deduction (KS2) forms for your employees to complete.

View or print the revised KS3.

PAYE and GST forms updated

Our PAYE and GST registration forms are currently being updated. From now on if you provide an email address (optional) you'll automatically be subscribed to this Business Tax Update newsletter.

If you want to unsubscribe you can do so here.

Problem-gambling levy rate change

We're responsible for collecting a problem-gambling levy from gaming machine operators and gambling operators. This levy assists in providing public health services in the community as part of an integrated problem-gambling strategy.

The levy rates are reviewed every three years. The table below shows the new rates from 1 July 2010 (note the rates in the table below are GST-exclusive).

Gambling operator	Liable income	1 July 2007 to 30 June 2010	1 July 2010 to 30 June 2013
Casino operators	casino wins	0.72%	0.72%
Non-casino gaming machine operators	gaming machine profits	1.70%	1.48%
NZ Racing Board	betting profits	0.55%	0.51%
NZ Lotteries Commission	turnover less prizes	0.20%	0.34%

Find out more about the the problem-gambling levy.

Paying by credit or debit card

We've extended our services and you can now use your credit or debit card to make all online payments to Inland Revenue.

A 1.42% convenience fee will apply to all credit and debit card payments except for overseas payments of student loans and liable parents' child support.

Find out more about how you can make online credit and debit card payments.

Find out about other payment options.

Filing returns if you're self-employed and have a student loan

If you're self-employed and a student loan borrower it's important to file your income tax return on time so your student loan repayment obligation can be calculated. If you don't file on time you may receive an assessment that doesn't reflect your current income.

An easy way to file your income tax return is through our secure online services .

Voluntary repayment bonus

You can choose to make voluntary repayments throughout the year to reduce your loan. If your loan balance is $550 or more at the beginning of the tax year and you're up to date with your repayments and filing your income tax returns you may be eligible for a voluntary bonus. If you've overpaid your repayment obligation by $500 or more, then your loan will be credited with an additional 10% of the overpayment. This bonus can make a big difference to the life of your loan.

As when making any financial decisions, you're advised to seek appropriate financial advice before taking advantage of the voluntary repayment bonus.

Find out more about repayments to your student loan .

Receive up-to-date student loan information by subscribing to our student loan email service Notify Me .

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.