IBBZ Accounting

Chartered Accountants & Tax Specialist

 

Useful tips for Small Business

General update by IBBZ Accounting on latest tax news, business growth and technology tips.

Recent blog posts

GST: zero-rating of services related to land

 GST:  zero-rating of services related to land

Legislation

As amended, section 11A(1)(k) land related services provided to non-residents outside New Zealand at the time the services are performed are eligible for zero-rating, if they are:
• not directly in connection with land in New Zealand or
• not in connection with land in New Zealand and intend to enable or assist a change in physical condition, ownership or other legal status of that land or
• directly in connection to land outside New Zealand

Tagged in: GST Land Zero-Rated
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How to build successful working relationships at workplace?

How to build successful working relationships at workplace?


Successful working relationships are required to have happy workplace. These relationships could be with business partners, clients, suppliers and employees.

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Comprehensive Capital Gains Tax is being introduced in New Zealand

On 01 Feb 2019 Tax working group headed by sir Michal Cullen has recommended the Government to introduce capital gain tax. The formal report is due to be released to the public on 21 Feb 2019. The government may consider the introduction from 01 April 2021


It is expected the scheme will be broad based with very little and no exemptions, excluding family home.


Sir Michael Cullen is the same person who was behind the introduction of GST in New Zealand. The GST scheme is a broad based with very little exemptions, almost everything in New Zealand attract GST. It makes New Zealand GST unique in the world. New Zealand is the only country in the world who has broad based consumption tax with no exemptions not even on essential items. GST collects significant revenue for the government.

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Why thinking is important in the success of a company growth?

Why thinking is important in success of a company growth?

 

Overthinking can be dangerous. However, thinking should be in a manner of critically analysing the subject. It should have the ability to reason and have logical judgements. A critical thinker can easily differentiate between rational thoughts based on careful consideration and emotional thoughts based on personal bias. Critical thinker is an active leaner rather than a passive recipient of information and analyse information objectively before jumping to the conclusion.

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Why understanding accounting is critical for HR?

Why understanding accounting is critical for HR?

Accounting and Human Resource are both crucial areas for a company. Being a Human Resource Manager requires to have number of skills like ability to connect with people at different levels, perform thorough assessment on employee’s skills, character and of course HR planning to meet company’s goals. So, it is important for HR professionals to possess business acumen because it helps to understand the drivers of revenue and cost of their company. Areas of accounting like financial reporting, budgeting and cost information help to make better planning and controlling decisions.

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What are the tax rules for rental income earned by CFC?

New Zealand Tax Rules for Controlled Foreign Corporation CFC Income

 

A New Zealand tax resident may have a controlled foreign corporation, which is involved in business of rental. Different tax rules apply for such corporations.

The CFC rules were reformed in around 2009 to make New Zealand businesses compete globally and provide certain exemptions to them. If CFC is in a business of rental this can add some complexities in calculating the exemptions.

General rule of thumb is rental income is attributable income. However, certain exemptions are provided in the legislation.

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Business Restructuring

Is business restructuring right for you?

Is your business struggling financially, operationally or you just do not have enough time to focus on the business.

Have you thought about restructuring your company? Have you heard the term “restructuring”, what is this, is this right for your business?

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Speculation Tax – New Zealand New Tax on Real Estate

Do you own or are looking to own residential real estate in New Zealand? Learn more about new tax on real estate


Speculation Tax – New Zealand New Tax on Real Estate

If you own or looking to own residential real estate, you should know about speculation tax. You should also be aware of the Government tax policy to address New Zealand housing affordability.

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Ring Fencing Rental losses: another nail in the coffin of residential rental investment.

Why ring fencing rental losses are being introduced

 

Auckland residential market has been hot topic for several years. It has been going in only one direction upwards. The Government has been trying to make changes in tax policies since 2010. Firstly, they abolished LAQC, and depreciation on building, then introduced bright line test. Currently the bright line test has been extended to 5 years from April 2018 onwards, and Ring fencing of rental losses are being introduced from April 2019.

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Modifying the 63-day rule on employee remuneration Section EA 4 of the Income Tax Act 2007

What is 63-day rule

A person is allowed a deduction for the amount spent on employing people. Payment related to employment could be in the form of wage and salary or payment of leaves. Section EA 4 says payment must be made within 63 days after the end of the income year. Any payment not made within 63 days after the of the income year, becomes income of the person for tax purposes. It means deduction is not allowed for the unpaid portion.

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Financial Hardship Provisions do not apply when Inland Revenue bankrupt taxpayer for the recovery of Tax Debt

Financial Hardship

In the recent tax case of Singh v The commissioner of Inland Revenue [2017] NZCA 506, the court of appeal held the Commissioner can ignore sections 176, 177, 177c of the Tax Administration Act 1994 when pursuing bankruptcy due to non-payment of tax.

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How much money do I need for retirement?

Each person has a different lifestyle. To maintain a good lifestyle lot of financial planners, go with $100k a year for a couple, means $50k for one person. However, this has been a very traditional approach this approach is suited for industrial age era not for modern time (information age)

Traditional approach is you work till 65, keep making small savings in your retirement funds. By the time you retire you should have about $500k in your investments. These investments will give you a yield of about 5%, so you will get about $25k a year. You will also be eligible for Super, may be one investment property so roughly you will get about $50k a year.

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Proposed Solutions to RWT for Small Businesses

RWT on dividends between companies

With amendments being made to sections RE 2(5), this now limits the definition of “resident passive income”. This section excludes fully imputed dividends paid to a corporate shareholder if the paying company chooses to exclude the dividend from the definition.

This will allow a company to opt out of withholding RWT on a fully imputed dividend paid to another company.

The above amendments were needed because of company tax rate being lowered from 33% to 28%. Dividends were effectively overtaxed by the amount of RWT withheld.

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Know the Difference Between a Contractor and Employee

You need to be careful when deciding between employee or contractor. The mistake of paying someone as a contractor if they really fall under the category of an employee can be very expensive. This can be a trap that can cause you serious problems later.

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RWT On Dividends: Tax and Accounting Treatment

 

What is RWT (resident withholding tax)

It is a tax deducted on dividend before making a payment to the shareholder. For example, if company made a profit of $100 before tax, $28 would be income tax. Net profit after tax $72 will be a liability payable to shareholders. A payment of $72 will be made to the shareholders, the name of this payment is dividend.  The IRD is interested in collecting tax from this payment, with current highest tax rate being 33%, further 5% of deduction is imposed on the company. Hence, $5 will be deducted and paid to the IRD, this is called RWT.

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Attempts made to simplify RWT deductions for small business

What are the new rules of RWT on Dividend payments for closely held small companies.

The changes on Dividend and RWT are outlined in Taxation (Annual Rates for 2016-17, Closely Held Companies, and Remedial Matters) Bill.


The bill received royal assent on 30-03-2017. This Act came in to force on the same date, and in practice from 01-04-2017 income year.


Exemption of RWT deduction on Dividend Payment between companies

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Tips to improve your small business

 

1.Utilise technologies:

Modern techs can save your time and give you edge over other competitors. Use of Facebook, LinkedIn, Google+ will be easy to reach large number of people. Dropbox or Google Drive can save your data in cloud so you don’t have to worry about losing your important data when PC crashes.

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Government’s efforts in making PAYE simpler

In November 2015, the Government released the fourth document in a series of discussion documents for public consultation planned for the next few years to support consultation on the Government’s proposals for modernising and simplifying tax and social policy administration in New Zealand.

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Why cash flow is important for your business?

You might think “I am in a small business, why I need a cash flow?” But small businesses are the most that require cash flow.

Many analysts stated that the main reason for small businesses not growing is because of poor cash management.

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Overseas tax credits and foreign income tax treatment

If you are a New Zealand resident for tax purposes, you will be taxed in New Zealand for all of your “worldwide income”. This includes income derived from New Zealand and from other countries.

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