October 2014 E Newsletter

Wecome

Welcome to the October Edition of Focus.  This month we highlight the entertainment rules for providing food and drinks to staff and clients and the new workplace health and safety reforms.  With Summer on its way, we wish you a fun filled Labour weekend.

Are you about to hold a client function?

Be aware that it is likely the event will only be 50% deductible for income tax and GST purposes.

Here is an example of a recent question we were asked by a client.

“I have just had a formal evening function for 80 of my customers. This was held off my business premises and the evening involved pre-dinner drinks, dinner and music. The total cost of the event was around $6,000 including GST. Can I claim 100% of the GST on this expense?

The answer to the above situation is that the company can only claim 50% of the GST on this event. They also will be limited to a 50% deduction for income tax purposes. This is known as the entertainment limitation rule.

The entertainment limitation rule applies to deductions for expenditure on food and drink that a person provides off their business premises. The limitation rule extends to any incidental expenditure on matters such as hireage of crockery, glassware or utensils, waiting staff, and music or other entertainment provided in association with the specified kind of entertainment.

Please contact us if you have any questions around the deductibility of your entertainment expenditure.

Coffee anyone?

Companies often provide their employees with coffee and other light refreshments while they perform their normal employment duties on the company's business premises. Three common options used are:

Option A - purchasing a coffee machine for employees that will be situated and used on the company's business premises.

Option B - purchasing takeaway coffee and light refreshments from a neighbouring café which will be brought back to the company's premises for the employees.

Option C - paying for coffee and light refreshments which the employees will consume at the neighbouring café.

How much expenditure under each option will be deductible to the company for tax purposes?

Generally expenditure on food and drink provided on the person's business premises is fully deductible. However, where the food and drink provided on the business premises is more than a light refreshment and is provided either for a celebration or party, or in an area of the business premises reserved for senior employees, the expenditure will only be 50% deductible. 

Option A - expenditure incurred will be 100% deductible.

Option B - expenditure incurred will be 100% deductible.

Option C - expenditure the company incurs will only be 50% deductible. Because the expenditure is not provided on the company's business premises it is not fully deductible.

Workplace Health and Safety Reforms due to come into effect on 1 April 2015

So what do these Health and Safety reforms mean to our business?

• The new Health and Safety at Work Act comes into force on 1 April 2015, replacing the present Health and Safety in Employment Act 1992
• You will face much stronger compliance and enforcement measures, coupled with an increased regulations to monitor and enforce compliance
• You can no longer “contract out” your health and safety responsibilities
• You face more stringent legal requirements as business owners and people in executive/decision making roles (partners, CEOs)
• All businesses must “up their game”, because of the significant financial implications resulting from non-compliance

Your Health and Safety Policy and induction process for all workers, must be firmly in place.

What are the benefits for introducing a good Health and Safety Manual and practices to our business? 

• Numerous studies have shown positive links between Health & Safety and Productivity
• Reduction in lost time due to accidents and injuries
• Reduced ACC levies
• Become an employer of Choice
• Improved retention of employees

New GST Registration Rules

The new GST registration rules have been in force since April 2014 and were intended to help foreign businesses with ‘locked-in’ GST and to allow NZ businesses to recover overseas VAT/GST. Since the implementation of these new rules IRD have advised that it will interpret them narrowly in that a foreign business with any kind of commercial activity in NZ will be unable to register under these rules.  In addition, the foreign business will not be able to register under the standard GST registration rules if the goods are not in NZ, or the services are not performed in NZ at the time of supply. Therefore the foreign business is not entitled to register for GST under any rules and as a result is denied GST recovery.

Do you want to have a say on how tax can be simplified for you?

The panel also asks customers to submit their views on any aspect of tax compliance to find areas where Inland Revenue can make tax easier for Kiwis.

The Taxpayers' Simplification Panel is part of the IR4U programme of better engaging with the public. It will give New Zealanders a voice in simplifying, modernising and transforming the way we all pay tax. The panel consists of representatives with a wide range of knowledge and experience on board helping us to make tax easier for New Zealanders.

The first thing the panel will meet and consider will be the 1,500 responses to the Save Time campaign which was run in the Hawkes Bay area earlier this year. The campaign asked individuals and small business owners to rate six improvement ideas that could make it faster and easier for them to get their tax done.

Read more about the Taxpayers' Simplification Panel