May 2014 E Newsletter
Welcome
Welcome to the May edition of Focus, where we review “Budget 2014” announced last week, and look at why we need you to complete the Annual Questionnaire. Please note the changes that the IRD are making in regards to payments & tax returns, in particular regarding what you will be able drop off at Westpac branches (from 1 October 2014). Tax residency is an issue that we are often faced with, and the IRD have recently made changes to their interpretation statement on this. If you are considering leaving the country, please contact us well in advance so we can ensure that we can give you the appropriate tax advice.
2014 Budget
The Budget highlights were:
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Cheque Duty
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Duty will be abolished from 1 July 2014.
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Tax changes to research and development (R&D)
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Loss-making start up companies will be able to "cash out" up to $500,000 of their tax losses from R&D expenditure (i.e. instead of carrying forward the losses, they will receive a cash payment). This cap of $500,000 will eventually rise to a maximum of $2m.
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Business will be allowed tax deductibility for R&D "black hole" expenditure that is currently neither deductible nor depreciable.
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These measures tax effect from the 2015/16 income year.
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Changes to parental tax credit and parental leave
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From 1 April 2015 the parental tax credit will increase from $150 a week to $220 a week and payment period will be extended from 8 weeks to 10 weeks.
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Paid parental leave will be extended from 14 weeks to 16 weeks on 1 April 2015 and to 18 weeks on 1 April 2016.
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Doctors visits
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Free visits for children under 13 years of age.
Click on link for further information on the 2014 Budget.
Accountant's Annual Questionnaire - why we need them please
By now you would have received an email requesting you to log on and complete your annual questionnaire. Clients often ask why they have to complete it. The questionnaire serves the following purposes:
• It is interactive and designed to cover all tax aspects. In completing this questionnaire we know all relevant tax matters have been covered allowing us to better consider tax planning, including ensuring all relevant deductible expenses are claimed.
• The questions raise matters that you might have not considered important but may help us, for example in determing your tax status, possible tax savings and other issues.
• Once completed the questionnaire provides you with a full list of information which we will require to attend to your tax and compliance matters. It means we can start your work knowing all the relevant information is at hand, creating efficiencies which in turn eases accounting costs and allows a quicker turnaround of your work.
Please contact your accountant if you have any questions.
Changes to Payment Services at IRD
From 1 October 2014, customers will no longer be able to make cheque payments or drop off returns or forms at Westpac branches (cash and Eftpos payments will continue at Westpac branches). Forms should be posted to the IRD. Payments can be made using online banking, credit and debit cards and international money transfers.
Inland Revenue encourages customers to make payments online. Digital payment channels are secure and faster than traditional payment methods, and are available 24 hours, seven days a week.
From 1 October 2014, payments posted to Inland Revenue need to be received by Inland Revenue on or before the due date to avoid payment penalties and interest. This means cheque payments can no longer be posted on the due date.
Tax residence
IRD have recently released an update to their tax residence statement. Tax residence is a fundamental issue for individuals and can have a significant impact on their tax position.
An individual is classified as a New Zealand tax resident if they have either been in NZ for more than 183 days, or if they have a permanent place of abode(PPOA) in New Zealand.
With the release of this statement, it is clear that if a person has a dwelling in New Zealand, alongside other ties to New Zealand (eg, regular trips back to New Zealand, or other personal interests), this will satisfy the PPOA test. The dwelling does not necessarily have to be directly owned by the individual. A property owned by a company or a trust may also constitute a dwelling, if the individual has sufficient connections to the property. As a result, individuals will need to rely on the tax treaties New Zealand has with other countries to limit New Zealand’s taxing rights.
This is a complex tax area and taxpayers are encouraged to seek appropriate professional advice to assist them.
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