We have written a number of posts with regard to the dangers of simply shifting profits from New Zealand businesses to Australia in order to reduce the incidence of double taxation or to achieve particular taxation gains.
There are legitimate ways of protecting Australian businesses from a significant amount, if not all, double taxation providing it is done correctly.
New Zealand provisional taxpayers can hardly wait to shelve their crystal balls and balancing acts from the new tax year starting 1 April 2018.
That being said, Inland Revenue are introducing a new method of meeting your provisional tax obligations. The idea behind it is to calculate and match a New Zealand taxpayers income tax payments with their profitability.
In order to attract highly skilled people to New Zealand, an automatic temporary tax exemption was granted from 1 April 2006 to individuals who qualified as transitional residents to reduce tax barriers.
Who qualifies as transitional resident?
If you run your New Zealand business from Australia, you might prefer to store your records here in Australia. But NZ tax law requires all taxpayers to keep their business records in New Zealand.
The good news is there are some situations where Inland Revenue may authorise you to keep your New Zealand tax records in Australia.
If you’re running a small business in New Zealand you need to account for income tax on an accrual/invoice basis – but there are some exceptions.
Although Australia has a useful option for small businesses allowing them to account for income tax on a cash basis, this option is rarely open to Australian businesses to do the same in New Zealand.
Inland Revenue has announced some quite significant changes that may have an impact on Australians doing business in New Zealand from the start of the 2018 tax year.
We are sometimes contacted by clients who advise that in finalising their Australian financial statements and income tax returns they have come across a transaction that should have been included in the financial statements and income tax return of the New Zealand entity.
The question often arises, “do we need to file an amended income tax return”?
Shareholder employees can now be on a PAYE salary and then top up at the end of the year with a lump sum on which they can pay provisional tax.
Previously, in New Zealand shareholder employees were only allowed to be either a PAYE salary earner or a shareholder’s salary earner. They couldn’t be both.
There is a mandatory “shortfall” penalties regime in place in New Zealand which Inland Revenue apply automatically and for a large number of cases.
Inland Revenue can charge penalties in the range from 20% up to a whopping 150%. These penalties cannot be remitted and are good reason in themselves to encourage you to engage a knowledgeable tax advisor.