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Tax Talk Newsletter Jun / Jul 17
Sharing information to combat global tax evasion
- The Government has signed up to the global automatic exchange of information (AEOI) initiative led by the OECD. We're one of 100 countries that will automatically share some financial account information about foreign tax residents. All countries will use the Common Reporting Standard (CRS) to identify and report on financial accounts held or controlled by foreign tax residents.
The countdown is now on for 1 July 2017 when the CRS requires reporting New Zealand financial institutions to:
- start due diligence to identify accounts held or controlled by foreign tax residents
- collect prescribed identity and financial account information about the identified accounts, and
- report this information to IRD annually by 30 June (from 2018).
There is a broad definition of a financial institution. Other than banks, financial institutions can also include:
- non-bank deposit takers
- collective investment entities
- mutual funds
- private equity funds
- hedge funds
- discretionary investment managers
- certain brokers, and
- trusts (including some managed family trusts).
IRD is helping you to prepare for the Common Reporting Standard. IRD will have a new CRS section on their website in May.
IRD will be running a targeted public awareness campaign during June and July to highlight the changes and impacts.
Information sessions will be held in early June - the key focus on these sessions will be a general implementation update. Let IRD know what CRS topics you would like to hear about by emailing them at global.aeoi@ird.govt.nz
The following information sessions will be held:
- Wellington - Wednesday 7 June, 10am to 12pm in the Grand Dining Room at the Wellesley Hotel
- Auckland - Thursday 8 June, 1pm to 3pm, 2 Takutai Square, Britomart, hosted by Ernst & Young
- Teleconference - week beginning 15 June, 10am to 12pm, dial in details to follow.
IRD welcomes your questions and feedback, and you can sign up to implementation updates via global.aeoi@ird.govt.nz
ACC is developing a new website
ACC is developing a new website ACC is working to improve their business customers' online experience and they'd love your feedback.
They're developing a new website with new content and tools and a new online service – MyACC for Business. Beta.acc.co.nz As part of the website upgrade, a test site - beta.acc.co.nz has been developed.
New website tools of particular interest to businesses are:
- an invoice heat map outlining key sections of an ACC invoice, and
- a levy estimator to help new customers estimate how much their first invoice might be.
Check out the new site and let ACC know what you think of the new content and layout. There are feedback tabs on each page of the site so let them know if you think anything is missing, unclear or wrong. Keep checking it, there'll be more soon.
MyACC for business
MyACC for Business is a new online self-service and it's available for sole trading self-employed customers. ACC customers can self-register, check and update details, as long as there is an 's' at the end of their ACC number.
More features will be developed during the year and ACC will extend access to other business customers, including intermediaries.
MyACC for Business can be accessed at: myacc.co.nz/forbusiness
This is just the beginning of improvements to ACC's digital channels. If you’d like to be involved in shaping what they develop for tax agents and intermediaries, please get in touch.
Email digitaloperations@acc.co.nz
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Mileage rate for motor vehicles increased
For the 2017 tax year (1 April 2016 to 31 March 2017), the mileage rate for both petrol and diesel fuel vehicles has increased to 73 cents per km.
This year we are also able to set mileage rates for hybrid and electric cars. The mileage rates for these vehicles are:
- hybrid - 73 cents per km
- electric - 81 cents per km.
For both Hybrid and Electric vehicles, our data shows that although these types of vehicle have lower running costs, these are offset by higher fixed costs.
If you're an employer you can use the above rates when reimbursing employees for the use of their private vehicle for work-travel for the current tax year (1 April 2017 to 31 March 2018).
The mileage rate is reviewed after a tax year ends so the rate reflects the average motor vehicle operating costs for that year. If you've filed your 2017 income tax return using the 2016 rate of 72 cents per km, you can request an amendment.
If the mileage rate doesn't reflect your actual costs, or your work-travel is more than 5,000km per year, you must keep a record of your actual vehicle expenses.
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Threshold change for correcting an error in your next tax return
On 1 April 2017, the threshold for correcting a minor error in your next tax return increased to $1,000. This applies to tax returns for:
- income tax (including RWT and NRWT)
- fringe benefit tax, and
- GST.
You can fix a minor error in your next tax return when:
- the error was caused by a clear mistake, simple oversight, or mistaken understanding on your part, and
- the total discrepancy in the assessment that is caused by the error is $1,000 or less.
Changes to ESS benefits
You can now choose to tax employee share scheme (ESS) benefits as an extra pay. This means you can deduct tax, student loan & child support on an employee's behalf.You can choose not to deduct any tax. In most cases you will still include the value of the ESS benefit for each employee on your Employer monthly schedule (IR348). If you choose not to deduct tax, the employee will have to pay it themselves.
If you file your IR348 online and include an ESS benefit with no tax, you may get the error message "No PAYE deductions are showing where an employee has positive gross earnings…". You can still file your return, this message will not stop you. But, IRD may contact you to clarify the income with no tax. To avoid this step, you can send IRD a list of employees in your ESS. You only need to send IRD this list once, or when new employees join your ESS.
Send your list to EmployeeShareScheme@ird.govt.nz including the following columns:
- Employer IRD number
- Employee name (surname, first name)
- Employee IRD number
- Date the employee joined the scheme if after 1 April 2017 (leave blank if employee joined before 1 April 2017).
You'll find more information on:
- how to tax the ESS benefit
- what to include on, and how to complete, your IR348
- when tax is due to be paid
- end of year square ups for employees.
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Low rates not so good
Don’t be taken in by very low interest rates for hire purchase, or even those offering zero percent.
Many retailers occasionally offer “special deals” of 0% percent interest on hire purchases. Does it mean you pay only the ticket price over the term of the loan?
The answer is no, and in fact the total price can be very expensive.
If you add up establishment fees, annual fees and any other cost the vendors may add, you will get some idea of the cost of the borrowing.
For example, an appliance costing $700 could be financed by one of the leading dealers at 0% finance. The deal included an establishment fee of $55 and what appeared to be an annual account fee of $52. The salesperson was a bit vague.
That would make a total of $211 ($55 + 3 times $52) for a 30-month agreement.
If you take the average between the debt at the start of the contract and the debt at the end of the contract, you get an average debt of $350. You can now see why the $211 is such an enormous figure to be paying.
Divide it by 30 months and multiply by 12 months and you have the cost per year of about $84. That's an interest rate of 24% ($84 divided by the amount borrowed being $350).
Even if these figures are not entirely accurate, do your homework and determine the true cost of borrowing. You might be a lot better off with a bank overdraft.
Never make judgments about potential customers
Carl and Carole were buying a new kitchen. They needed new appliances so they went to one of the large retail stores. While they were talking to the salesman, he was called over by his manager. The couple only found out why later.
In due course the salesman pulled off a pretty useful sale, but then confided in them what had happened. He said the manager had told him not to waste time on them because the manager considered them tyre-kickers. This was in spite of the store being relatively empty.
Another couple, Barry and Betty, had a similar experience when buying a car. They sent a list of questions to a dealer in new cars and instead of getting the answers they needed, they were supplied with three or four paragraphs of standard car information.
The couple like driving cars but didn’t want to know how they’re made and other technical details.
They found it very hard to interpret what they received and decided to send a letter of thanks to the company but stating they were no longer going to buy a car. About a month later, they still had not found the car they wanted so they made further enquiries at the dealership.
While out walking, they received a cell phone call from the manager. He wanted to know whether they were really serious.
In due course they bought the most expensive new car in the dealer’s fleet.
These are both true stories although the names have been changed.
Our message is, never prejudge your potential customers by their looks or their actions, and never assume they’re not going to buy from you.
Many people who look like hobos are quite rich. They don't have to dress up to be a big spender.
Important: This is not advice. Clients should not act solely on the basis of the material contained in the Tax Talk Newsletter. Items herein are general comments only and do not constitute nor convey advice per se. Changes in legislation may occur quickly. We therefore recommend that our formal advice be sought before acting in any of the areas. The Tax Talk Newsletter is issued as a helpful guide to our clients and for their private information. Therefore it should be regarded as confidential and should not be made available to any person without our prior approval.