Inland Revenue have rolled out changes to how New Zealanders file and manage their GST as part of ongoing business transformation. More than half of New Zealand's businesses now file their GST through Inland Revenue's secure online service myIR, or direct from their accounting software. If this includes your business, you may have noticed there is a new myGST tab on your myIR account. This will provide access to all your GST information.
Taxpayers are now able to use this to register for GST, register as a preparer of GST returns, amend GST returns and accounts, file and pay GST at the same time, set up payment plans, and track GST payments and refunds online.
This is on top of the recent changes for some taxpayers who are now able to prepare and send GST returns to Inland Revenue from their accounting software.
If you would like to discuss how your GST is currently being managed and how the
changes may work in practice for you, please contact us.
Faster GST refunds
It is now compulsory for Inland Revenue to provide GST refunds by direct credit to a taxpayer's bank account, resulting in faster GST refunds. Obviously it is important Inland Revenue has your correct banking details - if you would like us to confirm this with them, please let us know.
From here on, Inland Revenue will only make GST refunds by cheque if they do not hold a customer's bank details.
PAYE is the next big ticket item in the business transformation proposals – if they go ahead, employers will be able to file PAYE directly from their payroll system. Though not proposed to start until 1 April 2019, there are some lead-up steps that will start from 1 April 2018:
- payroll subsidy (subsidising employers to outsource their PAYE obligations to listed payroll intermediaries) would cease
- some minor changes to the PAYE rules for holiday pay paid in advance and aligning when rate-changes come into effect
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There has been a raft of legislative change introduced recently which will affect businesses once it comes into effect.
Without going too deeply into detail we will briefly outline these changes ...
The provisional tax changes mentioned last year will apply from 1 April 2018. These include the proposed accounting income method (AIM) of paying provisional tax.
While current methods for calculating and paying provisional tax will still be available, AIM proposes that you pay provisional tax from your accounting software, where you are a business with less than $5m annual gross income. AIM-capable software will calculate provisional tax owing throughout the year and enable you to pay provisional tax direct to Inland Revenue.
This could work well for some businesses but for others it may be better to continue using the current options available.
With AIM-capable software we could monitor tax paid direct from your business and contact you if we notice anomalies requiring further investigation or adjustment. If you are interested in looking into which method is best for your business, give us a call.
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Use of money interest
Another part of the package of changes applying from the 2018 income year (ie from 1 April 2017 for standard balance date taxpayers) is to remove use of money interest from the first two provisional tax instalments (for those who pay in three instalments) and who continue to use the standard method to calculate and pay provisional tax (often referred to as the 'uplift method').
Businesses (including companies) and individuals with residual income tax of less than $60,000 and paying provisional tax in three instalments using the standard method will not be subject to use of money interest.
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Miles to go – changes proposed for motor vehicles
Currently close companies providing a motor vehicle for the private use of shareholder-employees must pay FBT on the value of the benefit provided. This value is based on the availability of the vehicle rather than its actual private use and this means higher FBT compliance costs for close companies.
New option for close companies
The recently introduced legislation changes this for the 2018 tax year. Under the new rules close companies which provide one or two vehicles to shareholder-employees can elect to use the motor vehicle expenditure rules instead of paying FBT. Like sole traders and partnerships, close companies could measure the business use of a motor vehicle and calculate the tax deductions allowable for motor vehicle expenditure based on business use.
New method for calculating business use to claim deductions
Also introduced is a new simplified method of calculating business use for vehicles. The new option would allow you to choose to calculate your business usage and resulting deductible expense differently.
What you need to know
The actual requirement would be for you to keep a vehicle logbook for three months every three years to determine your business usage.
When it comes to calculating the tax deductible amount, the calculation is 'two tier' and based on Inland Revenue rates set each year:
- for the first 10,000 kilometres, the rate is calculated on the proportion of business use for the vehicle (say 60%) multiplied by Inland Revenue's first tier rate (for example 75 cents/km)
- for every kilometre after that, the rate is calculated on proportion of business use for the vehicle (eg 60%) multiplied by Inland Revenue's second tier rate (for example 25 cents/km)
What you need to do
To gear up for the change, at close of business on 31 March record your odometer reading. Diarise to do the same thing next year so your records show the total number of kilometres travelled in the tax year. Also keep a logbook for each vehicle for a three-month period, to record mileage when the vehicle is being used for business or private purposes.
If you're in any doubt as to whether this affects you, please contact us.
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There is also a new alternative option for calculating home office applying from 1 April 2017 (for standard balance date taxpayers).
Under the new option, home office deductions can be determined by using a 2-step calculation.
The first step involves taking the ratio of the area of the premises used for business purposes to the total area and multiplying this by a specified rate set by the Inland Revenue.
The second step then requires the mortgage interest, rates and rent paid for the year to be multiplied by another specified rate set by Inland Revenue and adding this to the amount calculated in the first step.
Depending on your circumstances, this new option may be beneficial to you and we will discuss this with you if it applies to you.
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