Kiwitax - Your Accounting Team

Courier Deliveries from Kiwitax

Brena Smith — Mon, 30 Jan 2012 23:54:19 GMT

When sending out completed work we often use couriers to deliver the packages. For client privacy and security we always instruct the courier to obtain a signature on delivery so we know the package has been successfully received.

It appears sometimes the courier drivers are not following these instructions and occasionally leaving packages unsigned for which is far from ideal. We have discussed this issue with the courier company and hopefully shouldn't happen again. If you do receive a package from us and the courier driver leaves the package without obtaining a signature can you please let us know?

Thanks for your help in highlighting and solving this issue and please accept our apologies if a delivery hasn't gone to plan.

Reminder: GST Return, Payment Due 6 January 2012

Brena Smith — Sun, 08 Jan 2012 21:17:33 GMT

Hi everyone, we're back on deck after a lovely break and are looking forward to a busy 2012.

A quick reminder for the GST return period ending 30 Nov 2011, the due date for the return and any payment is 16 Jan 2012. The later date than usual is to allow for the holiday period.

We hope you have a fabulous year and let's hope the economy keeps improving. As always if you've any questions about your GST, accounting or anything tax please ask! Always happy to help and talking with us is always free.

Christmas / New Year Holidays 2011/12

Brena Smith — Tue, 20 Dec 2011 21:12:21 GMT

Please note Kiwitax will be closed for Christmas / New Year holidays from about 12pm 22 Dec and we'll reopen Monday 9 January. If you need us urgently please email us, we'll check in from time to time. With regard to quote requests and enquiries we will respond ASAP on Monday 9 January. Thanks in advance for your patience.

If you're around Hawkes Bay tomorrow (22 Dec) you're most welcome to come join us for an end of year / Christmas drink at Thirsty Whale in Ahuriri, from about 1pm. It will be lovely to see you if you can make it.

Thank you so much for choosing Kiwitax to help with you accounting and tax this year, we very much appreciate it. We hope you have a wonderful Christmas and super successful 2012. Stay safe, drive carefully and enjoy!

Kiwitax Website a Finalist for 2011 Plain English Award

Brena Smith — Tue, 15 Nov 2011 02:18:41 GMT

For the second year running we're thrilled to be announced as a finalist for Best Plain English Website Award - Private Sector.

Making accounting and tax as easy and stress-free as possible for clients is super important to us at Kiwitax. Being a finalist for the second year running is another wonderful confirmation that we’re communicating our message clearly without unnecessary jargon. Tax is a complicated topic and being able to strip away this complexity in our communication further confirms Kiwitax is focused on helping small business and property owners.

Thanks WriteMark Plain English Awards Trust for the opportunity to participate and congratulations to category winners Optimal Usability. Well done! Here's a full list of the finalists and winners of the Plain English Awards 2011.

Kiwitax Website Shortlisted for 2011 Plain English Award

Brena Smith — Wed, 26 Oct 2011 19:18:48 GMT

We're super pleased to announce Kiwitax website has made the short list for the 2011 Plain English Awards! We were a finalist in the 2010 awards so are keeping our fingers crossed that we may win this year. The shortlist can be found here...

http://www.plainenglishawards.org.nz/2011-plain-english-awards-shortlists/

Kiwitax GST Calculator for Windows - Faster, Better

Brena Smith — Mon, 24 Oct 2011 01:17:04 GMT

We've added a small usability update to the Kiwitax GST Calculator for Windows which will hopefully save a little time when doing a few GST calculations in a row.

The calculator remembers the last action used, like adding GST, getting GST content etc. and now repeats that action when you press the enter key again. The active last action button glows green so you can easily see what will happen when you press enter again. To use this feature enter the figure you want to work with in a text box, click or tab to the adjacent button and hit enter. The calculator will remember that action and each subsequent enter will calculate the results for any new figure added to the associated text box.

To download and install the calculator please see the instructions on this page

If you already have the calculator installed it should prompt you to install the new update. If not please visit the link above to install the latest version. There's no need to un-install the previous version, simply install again if need be.

This new feature has been added at the request of a user, thanks Carina! If you do have any suggestions to improve any of the Kiwitax GST calculators or any questions please ask!

Reminder: GST Return, Payment & Provisional Tax Instalment Due 28 October 2011

Brena Smith — Wed, 19 Oct 2011 03:17:50 GMT

A quick reminder that GST Returns and any payments are due on the 28 October 2011 for the period ending 30 September 2011. This date is important for 1, 2 and 6 monthly GST returns.

Also for 6 Monthly GST registered sole traders and companies who also pay Provisional Tax: The first instalment of 2012 Provisional Tax is due on 28 October 2011

Provisional tax is based on your last year's Income Tax return so if your income or situation has changed considerably it may be a good idea to have your Provisional Tax payments recalculated to better match your current circumstances. Please contact us if you would like to discuss this further.

As always please ask if you have questions, always happy to help!

Hawkes Bay Anniversary Day 2011

Brena Smith — Tue, 18 Oct 2011 21:34:16 GMT

A quick note to advise this Friday, 21 October is Hawkes Bay Anniversary Day which is a Hawkes Bay only public holiday. Kiwitax office will be closed for the day. Also Monday is Labour Day so we'll be open again on Tuesday 25 October. If you do contact us by phone please leave a message, we will return your call on Tuesday as well as respond to any emails etc.

Hope you have a lovely long weekend everyone!

Urgent: LTC Election Forms

Brena Smith — Mon, 19 Sep 2011 20:58:47 GMT

We've been sending LTC (Look Through Company) election forms to clients who will benefit from a LTC structure. It's super important these are signed and returned so we can get them to IRD before 30 September 2011. This is part of LAQCs ending.

Please note LAQCs do not automatically become LTCs but instead become a normal QC (Qualifying Company) if the election forms are not submitted. This may mean an inability to claim any losses in your personal tax return.

For more infomation about this please see this news item.

If you have any questions please contact us ASAP. Time is running out quickly.

House Calls for Tax Returns

Brena Smith — Wed, 24 Aug 2011 21:32:52 GMT

We've been contacted this morning by a lady saying a person came to her home in Auckland regarding her income tax return. She reported the person said they were from "Kiwitax". She had given the person her name and IRD number, filled in a tax return form and was waiting to be contacted back. We would like to confirm that...

Kiwitax do not make house calls in any part of New Zealand
We currently do not have any branches or agents working outside of Napier, NZ
We work predominantly for business and rental property clients
We are not a "personal tax return" agency and do not seek salary & wage earner clients.

If someone comes to your house saying they are from Kiwitax please do not give any personal details and do not give them your IRD number. Please send the person away and contact the police immediately.

If you have already been visited by someone saying they are from Kiwitax and you have given them personal details please contact the Police and we also suggest you contact Inland Revenue and possibly WINZ in case someone tries to fraudulently use your information. We would appreciate if this has happened to you or someone you know please also let us know - Thanks!

Business Tax Types & What they Mean

Kylie Berry — Wed, 23 Mar 2011 20:53:39 GMT

Here is a brief description of the types of tax that you are likely to come across in business:

GST - Goods and Services Tax - this is chargeable by businesses whose annual sales turnover is over $60,000 per year. It means that the seller needs to add +15% onto their sale price - this 15% is then returned to Inland Revenue on a monthly, 2 monthly or 6 monthly basis via GST returns (less the GST that the business has paid to their suppliers).

Income Tax - This is the main type of tax that all NZ'ers pay - in a business it is paid to Inland Revenue on an annual basis based on the amount of profit the business has made. As an employee it is paid through the payroll system and is classed as PAYE.

Terminal Tax - This is the same as Income Tax but just a different name for it.

Provisional Tax - This is Income Tax as well, however for business it is paid as you go rather than in arrears. Provisional tax is payable when the Income Tax for a financial year exceeds $2,500 tax to pay, the provisional tax is usually based on the prior year income tax figure and is payable in 3 instalments over the current trading year. When the Income Tax Return is prepared the following year, all of the provisional tax payments made will show as a credit for that year.

PAYE - Pay as You Earn - this is the tax that comes out of employees wages each payday and is passed onto the Inland Revenue in the following month. As an employer the responsibility is to pay the employee the net wages for the period, withhold the PAYE tax and then pay it over to IRD the following month on behalf of the employee.

FBT - Fringe Benefit Tax - this is a tax based on 'perks' given to employees/owners of business. These may include private use of company vehicles, entertainment, gifts, medical insurance and low interest loans. It is wise to seek advice from your Tax Agent about these if you are planning on making payments so that you're fully aware of the tax implications in doing so.

First Year in Business Do I Pay Income Tax?

Brena Smith — Thu, 10 Mar 2011 20:13:45 GMT

A common myth people often share is that "you don't have to pay income tax for the first year in business". The fact is any profit earned will require income tax to be paid to Inland Revenue, it's more a case of when you have to pay. In the first year of trading you don't make any income tax payments to IRD. After the first financial year's trading the business financial accounts are prepared which calculates the amount of profit. The income tax amount is then calculated based on the profit earned. Then...

If your business has income tax payable up to $2500 in the first year of trading...

In the second year you pay income tax for the first year's profit
This repeats for each year based on the previous year's income tax payable while income tax for the year remains under the $2500 threshold.

If your business has income tax payable over $2500 in the first year of trading...

In the second year you will have to pay income tax on the first year's profit
You will also have to pay provisional tax payments for the second year's estimated profit during the second year.

If your business runs at a loss in the first year of trading...

There will be no tax to pay for the first year's trading.

Please note you only pay tax on profit, no profit = no income tax. Ideally you're not in business to lose money so profit is the goal and you will always have to pay tax on profit. Also you can only get a tax refund if you have paid tax in the first place. A refund is exactly that, a refund.

In the first year if things are going well and you're making profit it is a good idea to put some aside to pay your tax later, especially if you're heading into provisional tax territory. The combined payments are a double hit in the second year. Many small businesses struggle with this.

It is a little confusing initially so if you're having problems understanding this please ask us.

Paying Inland Revenue by Credit or Debit Card

Brena Smith — Tue, 08 Mar 2011 01:44:36 GMT

Inland Revenue now have the facility to make payments using your credit or debit card on their website. There is a 1.4% convenience charge that you will incur, however there may be some advantages to using this payment method if you are having cashflow difficulties.

A few things to consider:

You may have up to 55 days interest free on your credit card - so by paying Inland Revenue when your payment is due you can then use this free credit time to repay your credit card
Unless a repayment arrangement is setup with IRD prior to an amount being due they will charge you a 1% late payment penalty on payments 1-6 days late then another 4% for payments overdue 7 days or more. They will keep adding additional penalties and interest until the amount is paid or until a formal arrangement is in place
The 1.4% convenience fee is tax deductible however the late payment penalties charged (and in some cases interest) are not tax deductible
The payment is not treated as a cash advance so if you are enrolled in Air Points, Hot Points or other credit card rewards plans you should get points for this transaction

How Can I Pay Myself From My Business?

Kylie Berry — Thu, 03 Mar 2011 02:18:39 GMT

There are a couple of ways to pay owners of a business and to account for the income tax on these.

The most common way is the owner taking drawings - drawings are withdrawals from the business for personal use.

The alternative is wages - the owner will become an employee of the business and PAYE will be deducted each payday like any other employment arrangement. Please note this option isn't available if you're a soletrader as you can't be an employee of yourself!

If you take drawings out of the profits the business is making you will need to put some money aside to account for the tax payable on this. Depending on your level of earnings this can range from around 10% to 33%. For example say you are drawing $2000 a month from your business - you should be saving around 15% of this for income tax. You don't pass this over to IRD each month (unless you wanted to setup a voluntary automatic payment which is helpful on cashflow sometimes) it is paid to IRD in lump sums so can be quite a bit when added together over several months.

If you become an employee the PAYE that is deducted from your wages each week/fortnight/month is paid by your business to the IRD on the 20th of the following month. The tax is taken care of/paid on a more regular basis.

However please be aware that if your business makes extra profits annually over and above these there will be extra income tax payable.

What are Schedular Payments?

Kylie Berry — Thu, 03 Mar 2011 00:45:02 GMT

If you are carrying out services in certain industries and are a soletrader or partnership, the person or business paying you is required to deduct a pre-determined percentage of your income and pass this onto Inland Revenue on your behalf. Schedular Payments are kind of a self employment PAYE where your employer is your customer. Schedular Payments used to known as Withholding Tax.

Your customer or client needs to advise IRD of how much they've paid you and how much tax they have deducted from your payments. You're still able to claim all of your business operating costs against this income and most of the time a tax refund results at the end of the year if you make these claims. Make sure you keep all of your invoices and receipts for all business costs.

You will also be responsible for paying your own ACC levies on this income and are not entitled to holiday, sick, statutory or Kiwisaver payments from the people paying you.

In some circumstances an exemption certificate may be obtained from IRD to allow full payment from the client then you become fully responsible for making tax payments to IRD.

Only certain industries are required to have Schedular payments deducted, these include self employed labour only builders, agricultural contractors and freelance contributors to newspapers and other media. The IRD have a full list of these industries and are found on their IR330 form, if you’re not sure about this you’re welcome to contact us.

Removal of Depreciation on Buildings for Tax Deductions

Kylie Berry — Thu, 03 Mar 2011 00:34:10 GMT

From the 1 April 2011 financial year and onwards, there is no longer the ability to claim depreciation on buildings with an estimated useful life of 50 years or more. However chattels (for example stoves, carpets, dishwashers etc) are still able to be depreciated.

This rule change will predominantly affect rental property investors and will have the result of creating less loss or more profit which may result in more tax to pay or lower refund amounts. It would be wise to speak to your tax agent about the impact of this change. If you have been claiming depreciation on your buildings it may be advisable to start budgeting for this and perhaps saving money for tax if a profit will be the outcome.

Tax returns up to 31 March 2011 will not be affected, the first year to impact will be 31 March 2012.

If you've not been claiming depreciation on chattels it would be wise to identify and value the chattels for the the 31 March 2011 returns and start claiming these to achieve tax benefits now and in the future.

What's Happening to LAQCs on 1 April 2011?

Kylie Berry — Thu, 03 Mar 2011 00:07:43 GMT

From the 1 April 2011 LAQC's (Loss Attributing Qualifying Companies) will cease to exist as we know them today. Inland Revenue are giving these companies the option of changing into another "style" of company or even move to a partnership or soletrader structure. The main two options most companies will move to are a QC (Qualifying Company) or the new LTC (Look Through Company). The final date for LAQCs to transition to an alternative tax structure is 30 September 2011.

In the past an LAQC company has meant that if it made trading losses these losses flowed through to the shareholders to be offset against their other personal income. However if the company made a profit a choice could be made to transfer the profit to the shareholders or leave the profit in the company to be taxed. The government considered this was an uneven tax position so have changed the legislation to prevent this occuring.

Moving to a QC company will mean that any losses the company makes will remain in the company to be offset by future year's profits. If the company makes a profit you can choose to allocate it to the shareholders or leave it in the company to be taxed. Losses cannot be passed onto the shareholders.

Moving to a LTC company will mean that all losses and all profits have to flow through to the shareholders based on their shareholding percentage in the company. No profits or losses can be retained in the company for tax purposes.

There is also the option of transitioning to a partnership (ordinary & limited) or soletrader structure and the appropriate tax implications will be based on those structures rules.

Every company has different circumstances and there is no "one size fits all" answer on which way to go. However as a general idea if your company is making profits transitioning to a QC could be the likely way to go - if your company is making losses maybe the LTC is the best option.

Kiwitax Team are working with clients to help them choose the right way forward. We have a service available to carry out a review where we take an in-depth look into each person's situation and future plans with a view to a desirable outcome. If you'd like us to help you with this please contact us.

How to Add GST to a GST Exclusive Price

Brena Smith — Fri, 08 Oct 2010 02:23:54 GMT

If you have a GST exclusive price and you need to add GST to it here's how...

For 15% GST just multiply the GST exclusive price by 1.15

For 12.5% GST just multiply the GST exclusive price by 1.125

The result with be the GST inclusive price.

Hope it helps!

Should I Spend More Money to Save Tax?

Brena Smith — Mon, 20 Sep 2010 00:59:22 GMT

People often ask us if it's a good idea to spend money to save tax. The idea is by creating additional expense the business can claim the cost as an expense in the business income tax return. This does work but it depends on a few factors.

The key thing to understand is that when a business buys something it doesn't "get back" the full purchase price via its tax return. The most it will save you is 33% and may be much less depending on income. The next thing to be clear on is income tax is only paid on profit, if there's no profit, there's no income tax to pay.

What happens when something is purchased it is often an expense to the business (not always though, see below). Making a purchase reduces the overall profit. As you pay tax basically on a percentage of profit, the tax will decrease in proportion. For example if you buy something for $100, your profit will be reduced by $100 and if you pay income tax at 33% then there will be $33 less tax to pay than if the purchase was not made, less if on lower tax rates.

Some things to consider...

Any item purchased that's over $500 excluding GST becomes an asset. With an asset only depreciation can be claimed which may be a slow process with partial claims being made over several years. You could buy multiple items under $500 though, in separate transactions (if from the same supplier do so on different days too) so each purchase stays below the asset threshold. In general, services (e.g. accounting) are not assets.
Anything purchased must be business related and intended for the business to use in its activity.
Is the purchase something actually required? Just spending money to reduce tax may not be a great idea and potentially wasteful. The profit could be kept and tax paid which is often better than buying unnecessary things.
If there are suitable purchases to make then do so before the financial year ends (31 March for most businesses), so any claims can be made sooner rather than later.

Please keep in mind this is a brief overview and any tax advice should be sought from a professional advisor.

Choosing a Record Keeping System?

Brena Smith — Tue, 14 Sep 2010 22:14:16 GMT

With so many fantastic options available for small business owners to keep track of their financial transactions we're often asked which is the best way to go. The key is to work through the options and find the most suitable solution for both the business activity and the person or people responsible for keeping things up to date. Often the best answer is to go for one which is easy to understand with the user feeling confident and happy about the system. For example some people don't like computer systems for various reasons and prefer to keep it manual while others enjoy using the latest technology. Some things to consider when choosing are...

What you actually need to use it for e.g. prepare GST returns or simply collect information.
Cost, ongoing, upfront, future upgrades etc.
How many transactions are being kept track of.
Ease of use, easy to learn, understanding what's happening and what to do.
Who will use it and what skills are required.
How often it will be used and time commitment required to update information.
Where it will be used, how portable it needs to be.
Ability to backup the data regularly (and restore if required).
Security and sharing of information, who can access it?

At Kiwitax we're happy to work with any and all transaction information however it's passed to us. Clients use anything from shoe boxes, cashbooks, filing systems to spreadsheets, desktop accounting systems like MYOB and BankLink through to online "cloud" software services such as Xero, anything is fine. As we don't sell software or receive commissions the focus is on helping find the best fit solution. If you would like some help choosing a record keeping system please ask.