Inland Revenue's Business Transformation - Stage 2

Inland Revenue has been working hard at being easier to do business with. Its new tax system is kicking in, giving you new and simpler ways to manage your GST obligations through myIR.

Enhancements include the traceability of GST transfers, and notifications and alerts sent when there is something for you to do in your myIR account.

From April, IRD will address more areas, including:

Withholding Tax

Fringe Benefits Tax

Gaming Machine Duty

Payroll subsidy

Employment information (PAYE) collected in START

But the biggest change will be to tax law.

AIM (Accounting Income Method), a new option for calculating provisional tax, allows payments to be based on your actual profit in that period – so if you don't make a profit, you won't pay provisional tax.

And if you've ever wondered if you might have a tax refund tucked away at IRD, here's some good news - a proposal for refunds to be issued automatically.

It's all part of IRD's ongoing drive to work well with business. One thing you can expect to see is better communication with tax professionals before policy proposals are developed or executed, which should ensure future legislation can be practically implemented.

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Residential property sales tax period extended

Revenue Minister Stuart Nash has confirmed the bright-line test on residential property sales will be extended from two years to five years. At present, income tax must be paid on any gains from residential property sold within two years of acquisition, with some exceptions (such as the family home). The extension means that profits from residential investment properties bought and sold within five years will generally be taxable.

To make this happen, changes to law are currently making their way through Parliament. It is expected these will receive Royal Assent in late March. And it is expected that this will affect properties acquired on or after the date of Royal Assent.

We will have more for you on this when the legislation passes. Meanwhile, if you are in the process of entering into sale and purchase agreements to acquire property, please give priority to discussing the tax implications with us.

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New law will make dirty money easier to spot

Money laundering is big business in New Zealand. Every year $1.35 billion of fraud and drug-related money is laundered through seemingly legitimate businesses. In response, the Government introduced specific Anti-Money Laundering and Countering Financing of Terrorism legislation to address this risk.

Previously, only a few types of organisation had to comply with the legislation. Following amendments to this legislation passed last year, it is now confirmed that this legislation extends to these groups taking effect from these dates (or earlier if the Government legislates by an Order in Council):

1 July 2018:

Lawyers, conveyancers and businesses that provide trust and company services

1 October 2018:

Accountants who provide particular kinds of business services

1 January 2019:

Real estate agents

1 August 2019:

Businesses trading in high-value goods, sports and racing betting

If you are in any of these categories, of course you must make sure that your business complies. We can point you in the right direction. But please also note that as your accountant we are in one of the categories that must comply with the changes. And to do this, be aware that we will sometimes need to ask you for more information than we have in the past. This is because we need to be able to document that we have verified your ID and both you and your business entities are all above board.

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What are the new Government's tax priorities?

One of the first questions business owners ask when a new government enters power is what changes, if any, are coming in the area of tax.

Revenue Minister Stuart Nash provided a good steer on that when he addressed Chartered Accountants Australia and New Zealand last November.

The biggest question, he said, is whether our current system is fit for purpose. A week later, the government demonstrated its commitment to finding an answer by announcing the tax working group, to be headed by Sir Michael Cullen. Its brief is wide and includes specific emphasis on GST (but is unlikely to include GST rates) and the overheated housing market (almost certainly by focusing on speculative property buying).

Other issues the Minister highlighted:

The future of work, and tax consequences

Ensuring company tax is fair and efficient and all companies pay their fair share

Our ageing population and increased superannuation and healthcare costs

The rapid growth of the sharing economy and its implications for the tax system

Disruptive technologies and decentralised methods of operating

A copy of "Future of Tax: Submissions Background Paper" is available here.

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