December 2014 E Newsletter

Welcome

We wish you and your families all the best for the festive season.

Please note that our office closes on Friday 19 December and reopens on Monday 12 January 2015.  For urgent enquiries while the office is closed, please contact Kate Dudley on 021 943 027 or Kirit Lal on 021 245 4748.   

For most of you, the second instalment of 2014 provisional tax is due on 15 January 2015 and we are sending out reminder notices this week.  If you are yet to send us your 2014 information for the preparation of your financial statements, now is a good time to do so.  If your income for the 2015 year is different to prior years and you would like us to estimate your provisional tax, please let us know so we can process this for you before 15 January.

Christmas Holiday Period Obligations

Christmas is fast approaching so here is a timely reminder about some of your holiday period obligations:

Employing casual staff or students over Christmas.
All new employees whether casual for the holiday season or not, need to complete a Tax Code declaration form (IR330) that includes their IRD number and tax code. 

Full-time students may be able to get a student loan repayment exemption while they’re working and they will need to provide employers with a copy of their exemption certificate.  If employees are hired on a temporary contract for less than 28 days they do not have to be enrolled in KiwiSaver, however if they want to join KiwiSaver or they’re already a member and want you to make KiwiSaver deductions they must give you a completed KiwiSaver deduction form (KS 2).

Staff Holidays over Christmas
Some employees will work through the Christmas period this year and that does not mean they lose their annual holidays.  Even if an employment agreement says that annual holidays will be forfeited if not taken, it is unlawful for an employer to enforce such a clause.  The Holidays Act makes it clear that annual holidays can’t be forfeited, if an annual leave balance is becoming unsatisfactorily large, the employer’s remedy is to get the employee to take holidays. 

Many businesses tend to close down for a certain length of time over the Christmas break and there are some rules that employers must follow if they intend to enforce a closedown period on employees:

• Employers must give staff at least 14 days notice of the closedown period.
• Employers can require staff to use their annual holidays over this time.  Public Holidays are still recognised during the closedown period and treated as such.
• There may only be one closedown per year.

Due dates extended over the Christmas Break

• The normal payment deadlines for GST, provisional tax and PAYE are extended over the holiday period as follows:

                                     
GST Payment              28 December 2014 extended to 15 January 2015
Provisional Tax            28 December 2014 extended to 15 January 2015
PAYE payments   
(for large employers)   5 January 2015 extended to 15 January 2015

FATCA (Foreign Account Tax Compliance Act)

FATCA (Foreign Account Tax Compliance Act) is new US legislation introduced in an attempt to reduce US citizens ability to evade US tax. With FATCA, the U.S. Internal Revenue Service (IRS) will be able to identify and collect tax from US persons who invest in US assets through non-US entities.

The NZ Government has entered into an inter-governmental agreement (IGA) with the US and introduced domestic legislation to enforce FATCA in New Zealand, requiring financial institutions here to report to the Inland Revenue who will then pass the information on to the IRS.

Under this legislation if the financial institution has not met its FATCA obligations or provided the necessary documentation they could have 30% withholding tax imposed on US sourced passive income, which the IRD would not allow as a credit against any New Zealand tax liability.

Obviously if you are a US citizen or tax resident here in New Zealand FATCA is going to have a direct impact on you. But what about the rest of us?

Surprisingly, New Zealand family trusts with no US beneficiaries can also potentially be affected if it is considered a financial institution under the wording of the IGA. According to guidance from the IRD, trusts are considered financial institutions if;

• The trust has a business of dealing in investments.
• The trustee is a statutory trustee company (such as a lawyer's or accountant’s nominee company or other professional trustee company.  These trustee and nominee companies are considered financial institutions and therefore so are any trusts they act as trustee for).
• The trust has given a discretionary mandate to an investment manager to make and execute decisions on its behalf (without consultation).

If your family trust falls into the definition of a financial institution the trustees will have registration and reporting obligations under FATCA, they will also need to enrol with Inland Revenue so that the IRD can exchange future information with the IRS.

If your trust is a passive non-financial entity which earns income from US investments, it may be asked to provide further information to the bank or fund manager, who will report it to the IRS via Inland revenue.
Any active trusts such as trading trusts which carry on a non-financial business, will not need to do any reporting.

Seasonal Vouchers

As Christmas approaches, many businesses buy vouchers to give to staff and customers.

Most issuers of vouchers account for GST when they are redeemed rather than on issue.  Businesses purchasing vouchers in this way typically cannot claim a GST input tax deduction as any tax invoice is provided at the time of redemption to the staff member or customer.