Companies going into voluntary or forced liquidation may have limited liability (the extent of the money invested) but such limitations do not cover the taxes due to the Inland Revenue Department (IRD). 

For instance, if a Company with $1000 as capital collapses, the liability of its Directors would be limited to $1000.

However, such limitations would not apply to IRD.

As a leader in a small business operation, your employees rely heavily on you for guidance and they also have a large stake in the success of your business. Nearly every employee-related performance depends on effective leadership.  Ineffective leadership can disrupt the employer-employee relationship, making it harder to achieve business goals. Therefore, it is vital to have good leadership skills.

Minimum family tax credits are mainly available to low income earners. Minimum family tax credit is a payment made to families with dependent children aged 18 or younger, so they have a minimum income of $438 a week after tax ($22,776 p.a. from 1-4-2014).

When an accountant tells you ‘I will do your accounts.’ what does that actually mean? To answer this question, I need to start from explaining what an accountant is doing. Basically, in terms of a small business, what an accountant does is book keeping, bank reconciliation and reporting.

In this article we will introduce a time management tool called priority matrix. You can have try and see whether it is the right one for you.

Some people set up a family trust to receive residential care subsidy when they get old. By setting up a trust they dispose their interest in an asset to be eligible to receive subsidy. With changing rules of social security it is getting harder to get residential care subsidy.

With the abolition of gift duty you can gift as much as you want and there will not be any tax duty. However, for residential care subsidy there still is a maximum level of gift per couple is $26,000.

What is residential care subsidy?

Residential care subsidy is paid to rest homes or hospitals directly for entitled people by the Ministry of Health.

When a business wants to upgrade its computer, it is easy to become confused by the technical data. In this article I will provide you some basic information that will help you to choose a right computer for your business.

Choosing a PC is actually choosing its hardware. For office use, it is mainly about choosing RAM, CPU and hard drive.

Healthy body means healthy thoughts for business

Mobile application – Moves is awesome to record  your daily activity.

This life style changing APP records real time information and its name is Moves. It tracks your everyday life and exercise. What you should do is just carry your phone in your pocket or bag.

This app automatically records your daily walking, cycling and running. It is able to recognise places in your daily life. It will generate a visualised report showing how you spend your day.

 With the app, you can see you every day exercise and review your lifestyle. You can start with small changes that can lead to a fitter lifestyle and healthier habits.

Link: https://www.moves-app.com/

Look through company (LTC) is a fairly new concept to our tax system which was introduced in Budget 2010. Basically the main purpose of introducing LTC is to strengthen our tax system by putting a cap on loss attribution rules.

Look through company rules were applicable from 01/04/2011 onwards and only apply to New Zealand resident companies.

What is it?

Subpart OB of ITA 2007 defines the rules related to Imputation credit accounts (ICA). Every company in New Zealand need to maintain an ICA account, basically if you are paying income tax then it is advisable to maintain this correctly as when you start distributing dividend you can also distribute imputation credits to the shareholders.

Imputation credit account is a memorandum account (section OA2), and section OA3 defines an ICA account must record all credits and all debits that arise in the account as at their credit date or debit date. 
Credit balances
The credit balance recorded in a memorandum account during a tax year or income year, as applicable, is the excess of credits over debits.
Debit balances
The debit balance recorded in a memorandum account during a tax year or income year, as applicable, is the excess of debits over credits.

Motor vehicle is an integral part of any business, and the motor vehicle expense for a small business can be between $5000 to $8,000 per annum thus record keeping and tax rules adherence becomes important.

Things to know about your motor vehicle-

There are four important proposed changes to tax laws announced by the honourable minister Peter Dunne today while making Budget 2013 announcement:-

What is imputation credits?

Imputation credits regime was introduced in NZ in 1988. It is a system which avoids double taxation on already taxed income. So, when NZ Company issue you a dividend this is reported in your tax return as income, and imputation credits attached with that dividend are used as tax credits to avoid double taxation.
Section LA5 (4) ITA 2007: permits imputation credits to be used as credits to settle one's income tax liability.

What is franking credits?

Franking credits is similar to what we have in NZ as imputation credits. In Australia imputation credits are referred as franking credits.
NZ and Australia both have similar imputation credit tax regime which ensures the taxes paid in local jurisdiction are not paid twice.

Financial Reporting Act 1993 (FRA) defines companies into two categories: Exempt companies and Reporting Entity.

Exempt Company audit requirements

Exempt companies need not to comply with the auditing requirements.
Section 6A of FRA defines exempt company:
Exempt company must not be an issuer or overseas company or the subsidiary of another body corporate and did not have any subsidiaries. Further more it must meet two of the following criteria:

• the value of the total assets of the company (including intangible assets) reported in the statement of financial position did not exceed $1,000,000
• the turnover of the company did not exceed $2,000,000
• the company has 5 or fewer full-time equivalent employees

From 01 April 2011, depreciation on building and items attached to the building are depreciated at zero %, thus there is no deduction for you.

However, there are lots of assets in your rental property for which you can claim deduction and reduce your taxes.

Commissioner’s view (TIB vol 22 No 4 May 2010) on a depreciable asset is to follow a 3 step process to ascertain whether the assets are a part of the building or are individual assets.

IBBZ Accounting is very different from your traditional accountant. We are creative and really go out of the way to ensure our customer receive the best advice and great satisfaction. We are different in many ways below is just one example from a property investor point of view.

Increasing mobility of capital, cross-border investments and international trade have all necessitated the need for ‘Double Taxation Avoidance Agreements’ between countries, aimed at eliminating ‘double jeopardy’ and facilitating global partnerships.

New Zealand has such agreements with many countries including Australia, UK, European Union and India (to mention a few) but the increasing Trans-Tasman trade and investment has necessitated a better understanding of the financial impact and more importantly, filing appropriate tax returns. While the importance of tax compliance cannot be undermined, individuals and companies must ensure that they are not burdened beyond their taxable limits.

New Zealand Double Tax Agreement with Australia does not allow tax credits received on Australian dividends as tax credits in your tax returns filed in New Zealand. 

There has always been a different opinion between taxpayer and the Commission of Inland Revenue in defining repair or capital expense. A taxpayer will always try to encompass its view in such a way that it can label the expenditure as repairs to avail tax advantage in the year of expense. If the expense is labelled as repairs & maintenance you can avail deduction immediately otherwise it is capitalised and depreciated over the useful life of an asset.

Capital can be defined as a tree, and repair is like watering to that tree. In the other words capital expense is something which gives you a brand new asset, and repairs is usual maintenance of that asset. Sounds simple, but it’s not that easy.

Significant changes are being made to the financial reporting standards from 01^st April 2014. What does this mean to you as a small business owner? Basically the changes are being made in the way your end of year accounts are prepared. The whole idea is to make it simpler to prepare end of year accounts so you will have less compliance cost and can focus more on growing your business.

The initial draft suggested that financial statements were not required for all businesses with less than $30 million turnover, but the IRD objected to that and suggested financial statements are required with a minimum standard level. The requirement for the IRD is to have a basic set of accounts on which they can rely upon in the event of auditing a business.  To reflect those changes The Tax Administration (Financial Statements) Order 2014 has been passed which is effective from 01 April 2014, which means your first set of accounts prepared on this basis would be for the year ending 31^st March 2015.

New Zealand GST is pretty unique in the world as it has very little exemptions. Almost all countries have similar kind of tax in their jurisdiction called VAT or GST. New Zealand’s goods and services tax (GST) system is based on the “destination principle”. This principle ensures that tax is charged by the provider of goods and services to the consumer based on their destination.

In cross border business to business transaction sometimes it is hard to determine the destination of a recipient. In determining the location of the recipient, New Zealand has, since relied on Wilson & Horton decision [Wilson & Horton v Commissioner of Inland Revenue [1996] 1 NZLR 26], which provides direction in determining the location of the recipient.