Facts on Tax

ACC Premiums

The Accident Compensation Corporation (ACC) has responsibility for insuring and collecting ACC premiums for employers, the self-employed and private domestic workers.

ACC premiums are calculated at a rate based upon the risk of accident for an industry category. The levies are reviewed every two years

ACC has a long history in New Zealand. It began in 1974 and has continued to evolve ever since.

For more information on ACC please visit www.acc.co.nz.

Depreciation Allowances

Economic rates apply to the purchase of assets. An additional 20% loading applied to new assets (excluding buildings) up until 20 May 2010. There is an option to use either straight line or diminishing value for all assets. The following assets are examples only.

 

Economic Rate (DV)

Building (acquired before 19/05/05 to 31/03/2011) 4%
Building (after 19/05/05 to 31/03/2011) 3%
Building (acquired after 01/04/11) 0%
Computer (acquired before 01/04/05) 40%
Computer (acquired after 01/04/05) 50%
Office Furniture 12%
Vehicle 26%
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Low value assets ($500 or less excluding GST) can be written off. ($200 or less excluding GST before 19/05/05)

Donations

If you made financial donations to a approved donee organiastions ,during the last tax year, you can claim part of it back as a rebate.

As well if you made donations to most schools and parent-teacher associations.

Donation rebates for individuals (minimum $5) are made on form IR526. The limits on donations claimable for individuals, companies and Maori Authorities have been removed as of the 2008/2009 tax year. The total you can claim is the lessor of 33.33% of your donations or 33.33% of your taxable income.

For more information visit www.ird.govt.nz/income-tax/income-tax-for-individuals/individual-tax-credits/tax-credits-for-donations.

Entertainment
Entertainment expenditure is limited to a 50% deduction if it falls within the following:
  1. Corporate Boxes
  2. Holiday Accommodation
  3. Pleasure Craft
  4. Food & Beverages consumed at any of the above or in other specific circumstances eg. Business Lunches.
There are a number of exemptions from these rules, please talk to us if you are unsure.
Working for Families Tax Credits

What are Working for Families Tax Credits(WFfTC)

Working for Families Tax Credits are payments for families with dependent children aged 18 or under.

There are 4 different Working for Families Tax Credits:

In-work tax credit: A payment for families where the parents have paid work for a required number of hours.

Minimum family tax credit: A payment to make sure families are getting a basic income where the parents are working the required number of hours for salary and wages.

Family tax credit: A payment for each child in the family. Best Start: A special payment for up to 3 years for children due or born on or after 1 July 2018.

Who is eligible?

Working for Families Tax Credits are usually income tested. Your eligibility depends on the type and amount of income you earn. They are available for:

  • almost all families with children earning under $65,000 a year
  • many families with children earning up to $80,000 a year some larger families earning more.
  • All families with a child under 1 can get up to $60 a week Best Start payment. Best Start is income-tested in the child’s second and third years.
  • You will not be eligible for the in-work tax credit if you get an income-tested benefit or a student allowance.

    To calculate your entitlement check the IRD website

    Fringe Benefit Tax
    • FBT Rate 64% (or 49% for certain employees) of FBT value (income tax deductible)
    • Return Period Quarterly or Annually

    FBT Value of Motor Vehicles:
    When calculating the taxable value for motor vehicles, you will need to use either the actual cost price, or the tax book value.

    From 1 April 2006 the FBT value of the benefit when using cost price reduced from 24% to 20% (or from 6% to 5% if FBT is paid quarterly).

    Low or Interest Free Loans:

    • Benchmark Interest Rate (from 1 October 2019)
    • 5.26% p.a (reviewable quarterly)
    • For the most recent rates, check the IRD website
    Gift Duty

    Gift Duty has been abolished from 1 October 2011. You are still required by IRD to complete a deed of gift.

    Goods & Services Tax

    GST Rates

    1. On supplies in NZ 15.0%
    2. Zero rated supplies (eg exports) 0%

    Exemptions:

    1. Financial Services
    2. Domestic Rentals
    3. Wages/Salaries and most Directors Fees

    Registration threshold - $60,000 turnover pa

    Filing frequency threshold - Turnover exceeding $500,000 pa: 1 or 2 monthly

    Filing basis threshold - Turnover exceeding $24,000,000 pa. must use invoice basis

    PAYE on Salaries & Wages

    If PAYE deductions exceed $500,000 pa, deductions from 1st to 15th month- due 20th of the same month and balance of monthly deductions are due the 5th of the following month. For deductions of less than $500,000 pa, PAYE is due 20th of the month following deduction.

    Employee ACC Earner Premiums, Student Loan repayments and Child Support deductions payable follow the same rules.

    Provisional Tax

    There are three methods of paying provisional tax.

    • Accounting Income method. (AIM) We do not recommend this as too complex.
    • Ratio Option. Very good where net income can vary.
    • Standard Option. What we use the most.

    Provisional Tax is payable in 3 installments unless a taxpayer qualifies as a new provisional taxpayer. Provisional tax is calculated at 105% of the previous years residual income tax (RIT) if RIT is over $5,000 from 31 March 2020 (2021 tax year).

    For non-individuals, use of money interest is payable on shortfall of terminal tax from the 3rd installment date until the terminal tax is paid.

    For individuals, use of money interest is payable from the 3rd installment date where their RIT exceeds $50,000 or the taxpayer has estimated their provisional tax.

    Return Due Dates and Extensions of Time

    Standard balance date taxpayers 'linked' to a tax agent have until the 31 March the following year to furnish their income tax returns under the extension of time arrangements.

    Taxpayers with balance dates from 1 April to 30 September must file their return by the due date for the preceding 31 March year.

    Taxpayers with balance dates from 1 October to 31 March must file their returns by the due date for the following 31 March year.

    Taxpayers failing to file returns by the due date may lose their extension of time resulting in earlier return and terminal tax payment dates for subsequent income years.

    Taxpayer Penalties

    Reassessed tax may incur the following penalties:

    Lack of Reasonable Care 20%
    Unacceptable Tax Position 20%
    Gross Carelessness 40%
    Abusive Tax Position 100%
    Evasion 150%

    The above penalties may be reduced for disclosure before an audit by 75% or during an audit by 40%. Above penalties may be increased by 25% for obstruction.

    Late Payment
    If you don’t pay your taxes or duties on time, you will face standard penalties for late payment.

    • All initial late payment penalties imposed are staggered in three phases.
    • An initial 1% late payment penalty will be charged on the day after the due date.
    • A further 4% penalty will be charged if there is still an amount of unpaid tax (including penalties) at the end of the 7th day from the due date.
    • Every month the amount owing remains unpaid a further 1% incremental penalty will be added.

    Late payment penalties may be remitted in limited circumstances. These penalties apply to all taxes and duties, but not to student loan or child support payments.

    More information can be found on the IRD Web site