If you are making a loss on property rentals or self employed income, and you are also paid wages or salary, it might be helpful to apply for a special tax code. A special tax code allows you to get tax money back on the self employed losses as you go along, rather than having to wait until after the end of the tax year. Not only will you be better off financially but you can earn interest that would not otherwise have been available to you. A special tax code may also be helpful in situations where you are taxed at a higher rate on salary and wages than you would be on self employed income. We can help you with this application at no or low cost. 

The Herald reports that restaurants charge up to 20% extra on public holidays. According to the Herald’s poll, over 70% refuse to eat at restaurants charging an extra public holiday surcharge. We agree with the 70%. It can spoil an otherwise pleasant experience to be faced with an unexpected extra charge when it comes time to pay.

Any business that charges a public holiday surcharge is not as good as it could be. Such a business has either failed to budget properly, given that a proper business budget will attempt to take into account all costs over the forthcoming year (including extra staffing costs on public holidays), and then apply these costs evenly across expected sales. Alternatively, the business has failed to take advantage of the opportunity to separate itself from the pack by promoting itself as a business that does NOT add any surcharge on public holidays. It wouldn’t take much in the way of additional sales to cover the extra staffing costs on a public holiday.

By budgeting and planning in advance, restaurants will not only avoid leaving a sour taste in the mouths of their customers, they will reap the benefit of greater cost control and increased sales.

This weekend’s Sunday Star Times highlighted further issues with the Novopay teacher pay system. Not only are there many instances of people not being paid the correct amount (months after the system’s introduction), but when teachers receive back pay, Novopay is deducting the wrong amount of tax. The IRD provides a special method of calculating tax for lump sum payments (including back pay) so that too much tax is not deducted at the time of payment. Instead of doing it right, Novopay deducts tax as if the back paid amount is the standard pay for that teacher. So for example, if a teacher’s ordinary fortnightly pay is $2,000 and they are paid back pay of $10,000 as a one off payment, Novopay takes tax off the $10,000 as if that is their regular fortnightly pay amount. The result is that far too much tax is deducted and the teacher may lose entitlements to tax credits and other benefits. 

Another issue is that deductions for Kiwisaver and other amounts are being taken at the wrong amount and/or not being paid to the correct recipient. If your employer doesn’t pay your Kiwisaver contribution to the IRD you may lose that contribution. If the right amount of tax isn’t paid you may find yourself with a large tax bill at the end of the year.

The length of time these issues have been allowed to carry on without being effectively addressed is completely unacceptable. You shouldn’t have to do so, but please check your pay carefully, and, if necessary, check with the third parties to whom deductions should have been paid.

  

With the end of the tax year nearly upon us, it’s time to think about tax compliance.

Are you declaring all income? How safe are your aggressive tax avoidance schemes?

Times are tough and the New Zealand government has empowered the IRD to aggressively pursue unpaid taxes. This includes not just debt due to the Inland  Revenue Department, it includes undeclared income earned in the black market, and schemes devised to shift income between related parties (such schemes are common tax planning tools for doctors, architects and other professionals). The IRD has the monetary resources to pursue taxes it believes are its due. It also has increasing information sharing tools, both within New Zealand, and overseas; so, if for example, you have been quietly earning interest on a bank deposit in another country thinking it has nothing to do with the New Zealand IRD think again. It needs to be declared and, in most cases, NZ tax will apply. If you have a cute little tax avoidance scheme, ask yourself: is it going to stand up if the IRD challenges it and do the set up costs and the costs of dealing with an IRD challenge outweigh the tax savings?

It’s time to ensure that your tax affairs are squeaky clean. Please contact us if we can help.

The government is considering reducing the cloak of secrecy that currently applies to tax.  If a reduction in the current secrecy requirements fosters greater discussion, and legal changes, in regard to the ways that multinationals use transfer pricing and other techniques to pay very little tax in this country, then that is a good thing, however, there need to be strong safeguards to prevent the tax affairs of businesses being bandied about for political gain and to prevent the leaking of commercially sensitive information.

http://www.stuff.co.nz/business/money/8176838/Muzzle-on-IRD-over-firms-tax-affairs-may-go

We agree that people should pay their student loan debts, and, that it is unfair that some who have moved overseas are avoiding payment while people who have remained in New Zealand don’t have that option. But…sometimes factors beyond a person’s control mean that a student loan debt remains unpaid. With interest and penalties the amount of the debt can double quite quickly and spiral out of control. Even if the debtor tries to make payments, they often find that the new interest and penalties cause the debt to increase faster than their ability to repay. It is possible to negotiate a repayment arrangement and we can help with this. The benefits of a repayment arrangement is that it brings the debt under control and stops you being hounded by the IRD. On the other hand, for some debtors, the increasing size of their student loan debt means that bankruptcy will become an attractive option. If the debtor plans to remain living outside New Zealand for a few years, a New Zealand bankruptcy may have little downside in terms of credit rating and long term financial position. The IRD does need to chase debts, but chasing too aggressively may leave the IRD worse off.

http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10858246

This case is of interest because it shows that many people who should have known better (lawyers and company directors) were sucked into a tax evasion scheme. There is also the prison terms handed to the accountants involved – 8 and 8 ½ years. This is more jail time than non IRD fraudsters get, and more than for many serious crimes like rape. It demonstrates the risks of falling foul of the IRD. 

http://www.stuff.co.nz/dominion-post/business/8151657/Accountants-jailed-in-tax-case-appeal

Under section 16 of the Inland Revenue Act, IRD investigators have the right to arrive unannounced at a business or home and to enter it, search for and take away documents. The powers are wide reaching and draconian. Fail to comply and the consequences can be unpleasant. We welcome the IRD’s move to make the extent of its powers more well known.

http://www.radionz.co.nz/news/business/125026/ird-to-explain-to-public-its-search-powers 

The IRD has extremely wide information gathering powers. If you have any question about their powers, the only safe option is to seek immediate expert advice.

http://www.stuff.co.nz/auckland/local-news/8094072/Couple-fined-for-obstructing-IRD

Just before Christmas 2012 we gave away Christmas trees to deserving people. Thanks to all those responded. Because of you we were able to bring some Christmas joy to people who would otherwise have missed out, or who deserved some special recognition.  Thanks to Ana Samways and Sideswipe for helping us to reach out.

http://www.nzherald.co.nz/opinion/news/article.cfm?c_id=466&objectid=10854462