November 2015 E-Newsletter

Welcome

Welcome to the November edition of Focus.  We hope you're all enjoying the beginning of summer and starting to round off the year before a well-earned break next month. This month we're looking at Using Your Home for the Business, IRD Alert Emails and GST Invoices.

Using your home for the Business

Do you work from home? Even if you don’t primarily conduct your business from home, if you have a dedicated work space or area in your home you may be able to make a claim for a portion of your household expenses.

If you plan to claim a home office deduction, record-keeping of the household expenses is just as important as keeping invoices and records for your business expenses.  You can claim a portion of your household expenses including insurance, rates, power, phone & even a portion of your mortgage interest if you own the house.  However you can’t claim a deduction for any private or domestic expenditure at the house (e.g. fixing the washing machine or mowing the lawns).

You can only claim the expenses that relate to the area of your home used for business.  Work out the percentage of the work area, compared to the total floor area of the house, and then apply this percentage to the total house expenses.  If you don’t have a separate area for the work-related business you conduct from home, the apportionment can be based on criteria such as the amount of time spent on income-earning activities and the area used at the home.

Alert Emails from Inland Revenue

From time to time we send email alerts to customers telling them they have documents to view in their myIR account. Some of you have told us that you're concerned about these email alerts. You've asked us how customers can tell if the email is legitimate, could there be a privacy breach and could it be sent to the wrong address?

How to tell if emails are legitimate

The following features confirm that an email is legitimately from Inland Revenue:

1. The sender is alert@IRonline.ird.govt.nz
2. There is a unique identifier at the bottom of the email below the footer that starts with AID. It contains a maximum of 16 characters, both alphabetical and numerical.
3. Our disclaimer is specific and doesn't have any links.

You asked us if sending IRD numbers in the alert email is a privacy breach. Privacy is maintained in these emails. A breach only occurs when a customer's information is received by someone it doesn't belong to.

The email address the alert email is sent to has been provided by the customer. This makes it unlikely we'd send a customer's information to another customer's email address. If the customer doesn't keep their contact details up to date with us the most likely outcome is that the email alert we send will bounce back to us.
There is a further safeguard. When customers contact us, they must provide three points of validation, not including their IRD number, so their information remains confidential.

Do you really need a GST invoice?

A GST registered person should ensure that they receive a tax invoice whenever goods and services purchased are charged with GST. This invoice should then be retained for a period of 7 years. Failure to be able to produce a correct GST invoice when audited by Inland Revenue may result in the GST claim being disallowed.

The amount of information supplied on a GST invoice may differ depending on the amount of the Supply. 

Supplies exceeding $1,000

Whenever a supply (including GST) exceeds $1000 you need a fully detailed tax invoice that states:

• The words “tax invoice” in a prominent place
• The name and registration of the supplier
• The name and address of the purchaser
• The date of Issue
• A description of the goods and services supplied
• The quantity or volume of the goods and services supplied; and
• The tax exclusive amount and the tax or the tax inclusive price with a statement to the effect that it is inclusive of GST.

Key point with a tax invoice of greater than $1000 is that the invoice needs to show the purchaser’s name. If it doesn’t you should ask the supplier to reissue you with an amended invoice to include this.

Supplies between $50 and $1,000

A simplified form of invoice may be used when the GST inclusive cost of the goods and services exceeds $50 but is not more than $1,000.

The invoice will need to include all of the above points with the exception that the invoice will not need to record the purchaser’s name and you won’t need to break down the quantity or volume of goods or services supplied.

Supplies of less than $50

If the supply is for less than $50 you do not need a tax invoice. However you must keep adequate records to substantiate the claim. As a minimum you must record the following:

• Date
• Description
• Cost
• Supplier

The date, cost and supplier are generally noted on bank statements if a credit card or eftpos facility has been used. However the description of goods purchased is not automatically recorded. If you do not have a receipt for goods costing less than $50 you should make sure that you narrate the description of the goods purchased against the bank statement or in your ledger to support the GST claim. The GST on an expense of less than $50 isn’t much by itself but if the IRD disallows all of these items in a year due to insufficient records they will certainly add up.

Electronic records

Note that if you are storing your invoices electronically you need to ensure that these can be viewed and printed in the identical format to the original hard copy invoice.  Make sure your data is being backed up regularly and you stay up to date with software changes to ensure that they are still accessible for at least 7 years.

If you have any questions or concerns about your record keeping procedures please contact us.