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Making tax simpler
In April, the Government announced proposals to simplify business tax, with legislation to be passed in August this year. They asked for feedback by end May on the best way to implement these proposals. The earliest of the changes would take effect from April 2017, with more coming online in 2018. At the moment, this would change the tax landscape to look something like this: From 1 April 2017 Use of money interest Hundreds of thousands of taxpayers will be better off following the government’s proposed revamp of business tax, as they will be removed from Inland Revenue’s use of money interest regime, says Tax Management NZ chief executive Chris Cunniffe. Taxpayers using the standard uplift method (paying 105% of last year’s tax bill) will no longer be charged interest if they underpay at their first and second provisional tax dates, provided they pay the income tax they owe at their last provisional tax date. Businesses and individuals who have residual income tax below $60,000 will also not be subjected to interest. It is expected that 67,000 taxpayers will benefit from this. Penalties Incremental late payment penalties will be removed from new debt for goods and services tax, income tax and working for families tax credits. Credit reporting of tax debt Inland Revenue can disclose significant tax debts to credit reporting agencies, so that other businesses considering extending credit can make more informed commercial decisions. Information sharing Inland Revenue can share information with the Registrar of Companies to help enforce company law requirements. This will help weed out non-compliant companies continuing to trade with an unfair commercial advantage over compliant businesses. Withholding tax and schedular payments Contractors will be able to elect their own withholding tax rate. Contractors working for labour-hire firms can be covered by withholding tax. Contractors and their payers can forge voluntary withholding agreements so that contractors can have tax withheld on a payday basis, reducing the impact of provisional tax. From 1 April 2018 A new way to calculate and pay provisional tax The accounting income method (AIM), which will be available to taxpayers with turnover of $5 million or less, will allow those who have IRD-approved accounting software to pay income tax on a two-monthly basis. Up to 110,000 taxpayers will be eligible. Companies can pay tax as agents for shareholder-employees in respect of their shareholder-employee salary. This will reduce the impact of provisional tax for shareholder-employees. Taxpayers who are forced to use the estimate method due to volatility or seasonality may find tax pooling a useful option to manage income tax payments, as they will be subjected to IRD interest. Tax pooling would also provide businesses with cashflow constraints greater flexibility around when and how they pay their provisional tax payments. But what will it mean for me? The outcome of the consultation phase on tax simplification may still change how or whether some aspects are implemented but it seems certain that the broad outline of the changes will go through. Best case scenario for small businesses: this should reduce complexity and make it easier to pay tax. You’ll pay tax more frequently based on your business’ actual income. You may end up paying less in tax, penalties, and interest. However paying tax more frequently may require you to keep a closer eye on cashflow to keep money coming in to pay the bills. Worst case scenario for small businesses: you may end up paying more tax if you don’t stay aware of your tax obligations and ensure the accuracy of the data input into your business software. We can assist you with regular monitoring and checking your systems are accurate and fit for purpose.  Underpaid income tax?Underpaid provisional tax can cause a few headaches.
Maybe you did not keep up with your provisional tax payments throughout the year? (oops) Perhaps you did not end up paying enough because you had a better-than-expected financial year (yay! but damn, an increased tax liability). It could be that seasonality or volatility make it difficult to forecast your provisional tax payments. Whatever the case, owing the taxman additional income tax can put pressure on your business’ cashflow. With Inland Revenue’s interest clock continuously ticking at 8.27 per cent (and at 9.21% for tax debt incurred up until 8 May 2016) while that tax remains unpaid, the cost can quickly add up. Tax pooling An option we have discussed before is tax pooling. It is a service designed to reduce interest costs and provide payment options for provisional taxpayers. How does it work? For underpaid income tax, you can settle what you owe IRD by paying through a tax pooling intermediary such as Tax Management NZ (TMNZ) at an interest cost lower than the interest IRD charges on underpaid tax. The payment you make is essentially a purchase of tax that TMNZ paid to IRD on the original date the provisional tax was due. As this payment is date-stamped, IRD treats the tax as paid on time once it has processed the transfer from the tax pool to your IRD account. Any late payment penalties and interest showing on your account will be reversed once this happens. When might this be useful? Tax pooling can be used if you have underpaid income tax for the current tax year (2016) or the one just completed (2015). Is tax pooling secure? Tax pooling intermediaries are registered with IRD and operate under legislation set out in Income Tax Act 2007 and Tax Administration Act 1994. The system was proposed by IRD so private markets could provide ways for provisional taxpayers to manage their income tax obligations and reduce their compliance costs. The tax pool accounts operated by tax pooling intermediaries are held at IRD and managed by an independent trustee. The independent trustee also oversees the bank accounts in which your payments are made. Timeframes for using tax pooling Tax pooling gives you an extra 75 days past your terminal tax date to pay what you owe IRD. So, if you have a 7 April terminal tax date, you have until 15 June to settle underpaid provisional or terminal tax liabilities for the 2015 tax year. For underpaid income tax relating to the 2016 tax year, you have until mid-June 2017. What to do next Contact us if you would like to discuss tax pooling as an option to clear up your underpaid provisional tax debt. We are very pleased to announce the new arrivals with the birth of Mia and Lukah.
 Discussion paper for investors
Good investment advice should always consider an investor’s tax situation as part of any strategic plan designed to help them achieve their investment goals. When it comes to investment portfolios, tax planning is about enhancing investors’ after tax returns without incurring any additional risk. There are seven key ways we seek to add value in relation to tax:
We recognise that none of the above tax planning items are exceptional, however, in our view, great advice is not found in doing the exceptional, but in doing the obvious exceptionally well. If you want a copy of our discussion paper, please contact Marc or Shaun on 06-8433058.  Times are changing in the accounting world and we feel our responsibility as Accountants has widened. It is becoming much more important that we advise on such issues as protecting your business and future proofing your circumstances.
ACC is an inevitable cost to any business and every business is required to pay ACC levies. These can be reduced in many instances and we recommend Christine Hay of Financial Sense Limited to look into this for our clients. Christine is an independent adviser who specialises in helping our clients with shareholder protection, key person protection and ACC implications. The structure of an insurance adviser working closely with the accountant has proven to be very successful and a point of difference. Just having the correct policies is not enough, the ownership needs to be correct for your business or trust. We often find there are ACC savings to be made and benefits added and these savings are ongoing each year. Christine has the unique advantage of being able to discuss the most tax and cost effective way of structuring your insurances for your individual circumstances, working alongside your accountant to incorporate your insurances with ACC to gain the best advantage. Christine offers all of our clients a free, no-obligation review of their current business and individual protection and can advise any changes that may need to be made and areas where savings could be made. Please feel free to contact our office if you would like to take up this offer and we can organise it for you.  Earlier this year our firm celebrated it’s 60th Anniversary. 60 years ago, on the 9th April 1956, Ash Oldershaw & Paddy Sutherland commenced practice as “Oldershaw and Sutherland” and began servicing their clients from Hansens Building on Dalton Street, Napier.
Over the next 60 years the firm operated from the Perfects Building on Emerson Street, 220 Hastings Street, Milton House on Milton Road and then finally Marewa House on Kennedy Road in 1988 where we are still located today. It was in 1988 at this same time when the firm changed it’s name to Oldershaw & Co. And over this same 60 year period other Partners of the firm have also included John Goudie and David Compton. Our current Partners are Neil Edmundson, Marc Nel, Alastair Cromie and Shaun Brown. While our firm has changed locations and Partners over the past 60 years, our firm’s core values (Trust & Integrity, Honesty, Innovation and Service) which we pride ourselves on have not. And it is these same core values that we, and future Partners of the firm, look forward to providing you with over the next 60 years.  If you miss paying your tax on time, you could end up incurring use of money interest and late payment penalties charged by Inland Revenue.
Sometimes missing your tax payment could be because you are waiting for a large customer to pay you, or perhaps you have some increased capital expenditure that has arisen. And so your current cash facility just won't stretch far enough to enable you to meet your tax payment at present. Oldershaw & Co Ltd In conjunction with Tax Management NZ (TMNZ) can offer you a solution that enables you to pay your income tax when you want and and not when the IRD expects you to, which can help save you money and enables you to carry on running your business. TMNZ uses tax pooling which allows any clients in an overpaid tax position to sell tax to clients that are in an underpaid tax position on the dates that they need. When using tax pooling to pay your tax obligations, the tax that you buy is transferred to your IRD account on the date you require which allows the IRD to remove any use of money interest and late payment penalties. Some of the benefits of tax pooling with TMNZ include:
If this sounds like something you or your business could be interested in or you would like further information, please contact us to see how we can help you.  Times are changing in the accounting world and we feel our responsibility as Accountants has widened. It is becoming much more important that we advise on such issues as protecting your business and future proofing your circumstances.
ACC is an inevitable cost to any business and every business is required to pay ACC levies. These can be reduced in many instances and we recommend Christine Hay of Financial Sense Limited to look into this for our clients. Christine is an independent adviser who specialises in helping our clients with shareholder protection, key person protection and ACC implications. The structure of an insurance adviser working closely with the accountant has proven to be very successful and a point of difference. Just having the correct policies is not enough, the ownership needs to be correct for your business or trust. We often find there are ACC savings to be made and benefits added and these savings are ongoing each year. Christine has the unique advantage of being able to discuss the most tax and cost effective way of structuring your insurances for your individual circumstances, working alongside us to incorporate your insurances with ACC to gain the best advantage. Christine offers all of our clients a free, no-obligation review of their current business and individual protection and can advise any changes that may need to be made and areas where savings could be made. Please feel free to contact our office if you would like to take up this offer and we can organise this for you.  Over the past weeks Inland Revenue has received reports of a telephone phishing scam from several hundred customers around New Zealand, including some of our own Oldershaw & Co clients.
The scam calls have been made to landlines and mobile phones, with messages being left on voicemail if the calls haven’t been answered. The callers state that they are from the Inland Revenue Department and the following scenarios have been reported: that the customer is wanted for historic tax evasion or tax avoidance, has a red flag on their file, is in debt and they or their lawyer must return the call as soon as possible. Inland Revenue have advised that their staff would not leave messages like these. We are also aware of various Phishing Scams being sent with regards to the Companies Office. If you receive a suspicious letter, email, SMS scam message or a fraudulent call, please feel free to contact us with as much information as you are able to.  As part of the new financial reporting regime for not for profit entities, your organisation may be required to prepare and report a new Statement of Service Performance. This new statement’s purpose is to report the activities of the entity over the past year, and is a powerful opportunity to tell your organisation’s story, especially as it relates to achieving your organisation's mission.
As the information which will need to be reported in this new report is unlikely to be captured by your traditional accounting or book-keeping methods, you should begin putting in place methods and systems for capturing this additional information that will be required. You also need to ensure that this information which will be used to produce this report is able to be audited. And you may also need to consider the comparative year which may also need to be reported on and how you will capture this information that is required. At Oldershaw & Co we can help you with:
If this sounds like something your organisation may require or you would like further information, please contact us to see how we can help you. |
Oldershaw TeamHere you'll find all the news from the Oldershaw office plus our take on relevant accounting talking points. Archives
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