Are you a NZ Tax Resident?

If you are a New Zealand Tax Resident, you will need to pay tax in New Zealand.

*Please note that tax residency is not the same as residency when referred to with regards to immigration.

Determining tax residency involves two tests:

  • Days present in New Zealand test
  • Permanent place of abode test

Days Present in New Zealand Test

  • This is simple and straight forward; If you spend over 183 days in New Zealand during any twelve month period, you are deemed to be a tax resident.
  • The 183 days do not have to be consecutive, and they do not have to be in the same financial year.
  • If you can choose any two dates a year apart, and count more than 183 days between them when you were present in New Zealand, you will be deemed to become a tax resident from the first of those days.
  • A part day counts as a full day, so the day of arrival and the day of departure are included.

In addition to the Days Present rule, there is the Days Absent rule.

Being present for 183 days in a 12 month period means you are a tax resident however, if you then stay out of New Zealand for more than 325 days (days need not be consecutive) in a 12 month period, you can terminate your tax residency.

If this circumstance applies, you will be a non-resident from the first of those 325 days.

You will also be deemed a tax resident if you have a permanent place of abode in New Zealand, regardless of whether or not you breach the days present test.

Tax laws can get rather complicated and contain many grey areas. To ensure you stay on top of your obligations, we recommend you consult us if you are unsure. Phone us on 09 273 7377

ACC levies are dropping!

If you own a Small Business, ACC will automatically update your levy rate and you’ll receive an invoice later this year.

If you’re self-employed, ACC is changing the way you’re levied. In future, the income from your tax return will be used to calculate your levy for the same year.

You don’t need to do anything as your invoices will automatically be updated.

ACC view self-employed people and small businesses differently.

To ACC, self-employment means you’re the only person in your business, are a member of a partnership or operate as an independent contractor.

Small business owners are designated as such if they have other people working for them and are required to pay the levies of employees as well as cover them while they are at work.

In order to calculate how much you need to pay, ACC will consider the following:

  • the industry you work in
  • your classification unit
  • your annual income

ACC Levies are applicable to everyone who is in business in NZ.

There are three different types of levies –

  • Work Levy
  • Earners Levy
  • Working Safer Levy

The Work Levy is the fund that supports people when they sustain injuries at work, and this is different for every business.

If you would like to find out more information about ACC levies and how they are calculated, you can visit the ACC website here.

If you’ve received an email saying you have a Refund due from the IRD – Stop!

  • You need to be careful before supplying any personal information from an email like this.

Read these tips on how to figure out whether its genuine or a scam!..

  • The IRD will never include personal information in the body of an email, such as your full name or the amount you are due to receive. They will ALWAYS require you to login to your account in order to view the information.
  • The IRD would also never state that something was in New Zealand dollars – they ONLY process funds in NZD so have no need to differentiate.
  • Refunds take several weeks for the IRD to process. If your email says that you will receive your email in 3-5 days, this is not consistent with IRD processes.
  • Look out for unusual language and weird urls as these can also be an indication that something is amiss.
  • IRD correspondence is not usually signed off with an individuals name – It is more likely to be signed off by a team eg Tax Refunds Team.
  • Most importantly, if in doubt, contact the IRD and check BEFORE you click on any links!

 

 

Repairs to residential rental properties are tax deductible (conditions apply) and will reduce your overall income for tax (including salary, business income, etc) for your income received up to 31/3/2019.

A tax law change will soon take effect and this means that expenses incurred from 1/4/2019 onward will not be able to reduce your “OTHER” income (from salary or your business), but will need to be carried forward and can only be claimed against future RENTAL income. This advice is written for tax payers with a 31/3/2019 tax year end.

This new restriction is called “ring fencing”.

Therefore, we advise that if you are considering doing repairs, and if you are likely to have a rental loss, that it will probably be advantageous to carry out and claim these repairs before 31/3/2019 so that they can be claimed in this tax year.

We also recommend discussing any planned repairs with us directly because there can be exceptions, and we want to ensure the best outcome for all our clients.

Please not that the related tax claim only applies where individuals, partnerships and most “Look Through Companies” own a residential rental property.

The ring-fencing rules do not affect residential properties that are owned by Trusts, companies that are not Look Through Companies, and properties that are “Mixed Use Assets”.

By way of further explanation:
“Look Through Companies” allocate their losses for use in their shareholders tax returns versus non Look Through Companies retain their tax losses.

“Mixed Use Assets” (MUA) are assets (eg a beach house) that are used partly for private use and partly to earn rental income. Accordingly MUA expenses need to be apportioned between non tax deductible (private use) versus tax deductible.

GST is short for Goods and Services Tax, and is just that: a tax on goods provided and services rendered.

The current GST rate in NZ is 15%.

It is applied to goods and services within NZ, and is designed to be borne by the end user ie the person or business who consumes the good or service and does not on-sell it.

Once your annual turnover goes over $60,000, you must register for GST. If your turnover is less, you can still opt to register, but you don’t have to.

A business or person who is registered for GST may charge GST on their sales and also claim GST on their expenses.  The difference is then either paid to or refunded by, the Inland Revenue Department.

If you would like to calculate your own GST, visit the IRD website for a selection of How To guides https://www.ird.govt.nz/gst/

If you would like us to take care of it for you, give us a call on 09 273 7377

Short Term Rentals

If you rent out a room, caravan or sleep-out, even if its just for a few days, this is income and must be declared. There are some exceptions to this rule if you are renting out your holiday home that you also use yourself.

For example if your holiday home qualifies as a mixed use asset, and you earn less than $4,000 per year from renting it out, you don’t need to include this income in your tax return. However, if you are not including the income, you cannot include the expenses either.

Income earned that is not from a mixed use asset, will need to be incluede in an IR3 (Individual) tax return.

You should also note that you are able to claim expenses for the time of the rental – for example, rates, cleaning etc however these expenses will need to be apportioned accordingly.

You can read more about the general rules on the Ministry of Business, Innovation and Employment website here

If you’d like further help to assess your tax position, get in touch. We’d be happy to assist.

If you are a Sole Trader or Partnership, you can claim the running costs of using your own vehicle in your business.

Running costs include things like fuel, registration, warrant of fitness, repairs and maintenance.

You can claim 100% of costs if you only use the vehicle for business and not personal use.

If the vehicle is used for both business and personal travel, you will need to make adjustments to apportion these costs.

A logbook should be kept for 3 months (every 3 years) in order to determine the proportion of business versus personal travel.

*Note that travel between work and home is not classified as business use.

More detailed information can be found here on the Inland Revenue website…

Throughout the year, many important dates occur in respect of payments that need to be made to Inland Revenue. If you don’t meet your obligations on time, you may be charged penalties and use of money interest.

These dates will be different depending on your circumstances and the various tax types you are liable for.

For example, if you’re GST registered, you’ll need to know when the returns and payments will be due, and this will also depend on your filing frequency.

Luckily, the Inland Revenue Department make it easy by supplying calendars of due dates, for all different tax types.

For more information, check out the IRD website here…