From 1 April 2002 the ACC workplace cover and residual claims levies are collected from employers
by ACC on one invoice. Previously, the IRD collected the residual claims levy and ACC collected
the workplace cover levy.
This change means employers will no longer need to account to two organisations for these levies and employers will no longer need to file with Inland Revenue an IR 68A Residual Claims Levy Statement or make a levy payment on 31 May. Employer invoicing by ACC takes place in July and is based on employee earnings for the year ended 31 March. The IRD provide ACC with relevant earnings data from employer monthly schedules.
- Total gross earnings
- Total earnings not liable to earner levy
- Withholding payments
- Total of earnings exceeding the maximum threshold on which ACC levy is applied
For additional information read more...
Tax Facts - Depreciation Allowances
Depreciation allows for the wear and tear on a fixed asset and must be deducted from your income.
You must claim depreciation on fixed assets used in your business that have a useful lifespan of more than 12 months. Not all fixed assets can be depreciated. Land is a common example of a fixed asset that cannot be depreciated.
You will have to keep a fixed asset register to show assets you will be depreciating. This should show the depreciation claimed and adjusted tax value of each asset. The adjusted tax value is the asset's cost price, less all depreciation calculated since purchase.
In most circumstances you can choose between the diminishing value and straight line methods of calculating depreciation. You do not have to use the same depreciation method for all your assets, but you must use whatever method you choose for an asset for the full year. The method used for an asset can be changed from year to year.
Diminishing Value Depreciation
The amount of depreciation is worked out on the adjusted tax value of the asset. This value is the original cost less any depreciation already claimed in previous years. If you are registered for GST the original cost price should not include GST you have already claimed in your GST return. read more...
Straight Line Depreciation
Depreciation is calculated on the original cost price of the asset, and the same amount is claimed each year. If you are registered for GST, the cost excludes any GST you have already claimed in your GST return. read more...
You may use a pool system to depreciate low-value assets collectively rather than individually and depreciate them as though they were a single asset. You must use diminishing value depreciation rates for pooled assets.
- individually cost $2,000 or less, or have been depreciated so the adjusted tax value is $2,000 or less, and
- are used 100% for business, or are liable for fringe benefit tax if the business use is less than 100%.
Assets costing $500 or less (including loose tools)
Low-value assets ( assets that cost $500 or less), are deductible in the year they are acquired or created provided:
- they are not purchased from the same supplier at the same time as other assets to which the same depreciation rate applies (unless the entire purchase costs $500 or less)
- the assets will not become part of an asset that is depreciable, for example, the cost of materials to build a wall in a factory
- they were purchased on or after 19 May 2005 (the threshold before 19 May 2005 was $200.00)
To calculate depreciation on a business asset please refer to
the IRD Depreciation Rate Finder.
To learn more about depreciation rates and the methods for calculating depreciation, please refer to the IRD Depreciation Guide.
Individuals can make a claim for rebates on an IR 526 form for:
- Donations of $5 or more to an approved charity, or
- Payment for childcare or a housekeeper (under certain conditions)
- For donations made from 31 March 2009 and future years you can claim the lesser of
33.3333% of the total donation you have made, or 33.3333% of your taxable income .
- For donations of $1,890 or more your rebate will be $630 from 2003 onwards.
- For donations of $1,500 or more your rebate will be $500 for 2002 and previous years
- If you've paid $940 or more for childcare or a housekeeper, your rebate will be $310
- Earned taxable income during the period being claimed for, and
- Were resident in New Zealand at any time during the tax year
The total qualifying donations, childcare and housekeeper payments you can claim can't exceed your taxable income.
If you have a spouse or partner, they may claim your excess receipts
(for more information read the section of the IRD website).
If a company makes a donation to a donee organisation it can claim a deduction. The maximum deduction it can claim is limited to the amount of its net income, calculated before taking into account the deduction. read more...
Entertainment expenditure is limited to a 50% deduction if it falls within the following:
- Corporate Boxes
- Holiday Accommodation
- Pleasure Craft
- Food & Beverages consumed at any of the above or in other specific circumstances eg. Business Lunches
All other entertainment expenditure is fully deductible, provided the entertainment aspect is merely incidental
There are a number of exemptions from these rules, please talk to us if you are unsure.
Fringe Benefit Tax
Fringe benefit tax (FBT) is a tax on benefits that employees receive as a result of their employment, including those benefits provided through someone other than an employer.The four main groups of fringe benefits are:
- Motor vehicles (refer to the IRD website form more information on how to calculate)
- Low-interest loans other than low-interest loans provided by life insurance companies
- Free, subsidised or discounted goods and services, including subsidised transport for employers
in the public transport business
- Employer contributions to sick, accident or death benefit funds, superannuation schemes and specified insurance policies
Gifts, prizes and other goods are fringe benefits. If you pay for your employees' entertainment
or private telecommunications use, these benefits may also be liable for fringe benefit tax.
Refer to the IRD website (or contact us) for more information on how fringe benefit tax is applied and calculated on:
- Motor vehicles
- Low interest loans
Alternatively, the IRD website provides a fringe benefit tax multi-rate calculator to calculate FBT for a single employee.
Gift duty is imposed by section 61 of the Estate and Gift Duties Act 1968.
For gift duty purposes, a gift is something given:
- When nothing is received in return, or
- When something is received in return, but its value is less than the value of the property given
If something of lesser value is given in return for a gift, the value of the gift, for gift duty purposes,
is the difference between the two values.
These items can all be gifts:
- Transfers of any items (for example, company shares or land)
- Any form of payment
- Creation of a trust
- Employer contributions to sick, accident or death benefit funds, superannuation schemes and specified insurance policies
- A forgiveness or reduction of debt
If you made a gift before 1 October 2011 of more than $27,000 in any 12-month period, you will have to pay gift duty.
You must complete a Gift Statement and forward it to the IRD. In some cases, gifts must be recorded with IRD even if they are not liable for duty. For example, you must fill in a Gift statement (IR196) if you made gifts before 1 October 2011 with a combined total value of over $12,000 in any 12-month period.
Changes have been made to sections 2(2) and 61 of the Estate and Gift Duties Act so that gifts made on or after 1 October 2011 are no longer liable for gift duty and you no longer need to file any documents with IRD. The donor or agent remains responsible for keeping and maintaining records of the amount of debt that has been forgiven.
Gifts made to create a charitable trust, or for establishing any society or institution exclusively for charitable purposes, or any gift in aid of such trust, society, or institution are exempt from gift duty.
Allowing a debt to remain outstanding so that it can't be collected by normal legal action.
To find out more about paying gift duty see the IRD website.
Goods & Services Tax
GST is a tax on the supply of goods and services in New Zealand by a registered person
on any taxable activity they carry out. The rate for GST is 15% although it can be zero-rated for exports.
Certain supplies of goods and services are ’exempt supplies’. These include:
- Certain financial services
- Sale or lease of residential properties
- Wages/Salaries and most Directors Fees
GST registration is required if the annual turnover of the business for a 12-month period exceeds or is expected to exceed $60,000.
If your turnover exceeds $250,000 pa you must file your GST return monthly or bi-monthly.
There are three methods of accounting for GST:
- Invoice Basis
- Payments Basis
- Hybrid Basis
If your turnover exceeds $1,300,000 pa you must use the invoice basis.
If you are selling or are thinking of selling your products through your website please also refer to our section on GST and E-Commerce.
For more information on GST see the GST section of the IRD website.
GST & E-CommerceSale of Physical Goods via the Internet
If a GST-registered person sells goods via the internet and the goods are physically supplied to a customer
in New Zealand, GST is chargeable at 15%.
If goods are sold via the internet and physically supplied to customers overseas the sales can be zero-rated
for GST purposes. It is important to prove the goods have been exported (entered for export by the supplier)
and sufficient evidence should be held to prove the export.
Sale of Digital Goods via the Internet
If a GST-registered person sells digital products via the internet which are downloaded such as music, software or digital books, to a New Zealand customer they must charge 15% GST. (These products are treated as services for GST purposes). If digital products are sold via the internet and downloaded by an overseas customer they can be zero-rated but it is important to prove that the products are ’exported’ otherwise GST must be charged.
Note: Evidence required to prove products are exported
For more information on GST & E-Commerce see section of GST & E-Commercethe the IRD website
For tax purposes, a person is considered a non-resident if they have come to New Zealand and stayed
less than 183 days in a 12-month period, or do not have an ”enduring relationship” with New Zealand.
A non-resident is liable for tax on income for personal services carried out in New Zealand, and on other payments from New Zealand sources.
Non-resident employees are taxed PAYE on their wages just as resident employees are. However, a non-resident may claim exemptions under either a 'double taxation agreement', or 'the 92-day ' rule.
If you hire and pay a non-resident individual or company as a contractor, withholding tax needs to be deducted from payments for the specified contract activities or services. Employers are also required to deduct withholding tax from payments to non-resident entertainers, unless the performance:
- is part of a sponsored cultural programme for the government of New Zealand or a foreign country or
- forms part of a programme of an overseas non-profit organisation or
- relates to a game or sport in which the participants are official representatives of the organisation administering the game or sport in an overseas country
A non-resident who is carrying on or intends to carry on a taxable activity may elect to register for GST.
Depending on the value of supplies made in New Zealand, there are also circumstances in which a non-resident may also be required to register for GST. Supplies are deemed to be made in New Zealand if the goods are in New Zealand at the time of supply, or if the services are physically performed in New Zealand. For more details see the section of IRD website .
PAYE on Salaries & Wages
Pay As You Earn (PAYE) is the basic tax taken out of your employees' salary or wages. The amount of PAYE you deduct depends on your employee's tax code.
PAYE employees must complete a Tax code declaration (IR 330) as soon as they start working for you. If an employee fails to complete the tax code declaration, you must deduct PAYE at the no-declaration rate.
Every month you must file an employer monthly schedule detailing each worker's gross earnings and deductions.
If you are a small employer with gross annual PAYE deductions of less than $100,000, the schedule and payment are made on the 20th of the month following the deductions.
If you are a large employer with gross annual PAYE deductions of $100,000 or more, the deductions made from payments made to workers between the:
- 1st and the 15th of the month are paid by the 20th of the same month
- 16th and the end of the month are paid by the 5th of the following month (
except for December, payment is to be made by 15 January).
The employer monthly schedule is filed along with this payment.
Provisional tax is not a separate tax but a way of paying your income tax as the income is received through the year.
Instalments of income tax are paid during the year, based on what you expect your tax bill to be.
The amount of provisional tax you pay is then deducted from your tax bill at the end of the year.
If your residual income tax is $2,500 or more you will have to pay provisional tax for the following year. Residual income tax is the tax payable after subtracting any rebates you are eligible for and any tax credits (excluding provisional tax). Residual income tax is clearly labeled in the tax calculation in your tax return. To understand provisional tax, read more... .
The number of times you need to pay provisional tax each year depends on the option you use to calculate your provisional tax, and how many times you pay GST (if registered).
If you're registered for GST you pay your provisional tax and GST at the same time on a combined GST and provisional tax return. If you have another balance date (ie your tax year ends before or after 31 March) you can work out your due dates with tax due date calculator.
For additional information see the IRD website..
In some circumstances you may be charged interest if the provisional tax you paid is less than your residual income tax. If the provisional tax you pay is more than your residual income tax, the IRD may pay you interest on the difference. For more details see the IRD website .
Tax Payer Penalties
Taxpayers who do not meet their tax obligations may face penalty or interest charges.
To avoid such charges, you should pay the full amount of tax you owe by the due date.
The main kinds of charges for failing to meet tax obligations are:
a shortfall penalty where the correct amount of tax is higher than the amount you paid
(eg, because of an understatement of tax, or where the amount of a refund or loss is reduced)
- a late payment penalty if you post or deliver a payment to us after the date it was due
- a late filing penalty if you do not file a return by the due date
- interest on the amount of tax you owe if you have underpaid your tax.
The interest rates charged are based on market rates