Check Out The Latest NZ Tax Updates
We include updates and reminders about NZ tax changes for those carrying on a business in New Zealand and for individuals who still have tax ties there.
Introducing The AIM Accounting Method Of Calculating New Zealand Tax.
We earlier commented on changes to New Zealand’s tax system where it would be possible to pay income tax based on actual profits earned to date.
This has come about through greater integration between accounting software packages and Inland Revenue where taxpayers can now file their GST returns directly through their accounting software.
While New Zealand doesn’t have a typical capital gains tax, it can apply in some situations.
One of those situations relates to the situation when a rental property is purchased and subsequently sold.
There have been changes made to the way employers can calculate the tax to be deducted from holiday pay when it is paid as a lump sum to an employee before they take their leave.
New Zealand employers can now opt to pay holiday pay as a lump sum extra pay or if the lump sum was paid to the employee in their usual pay cycle, tax can be calculated over the pay periods that their holiday covers. This 2nd approach is referred to as the “alternative approach”.
Many people mistakenly believe that the Double Tax Agreement in place between Australia and New Zealand protects business from being taxed twice.
Unfortunately, and without proper planning, that just isn’t the case.
It is a common (and some would say wise) practice for small businesses to hire contractors when specialised skills are required for a short, rather than a long time.
However the New Zealand tax rules are different for Australia, particularly for medium term projects where the question can arise as to whether the individual is a contractor or, instead, a short-term employee. This is important because the obligation is on the employer.
The Foreign Account Tax Compliance Act, or FATCA as it is more often referred to, is a type of reporting regime that insures people and businesses in the United States to meet their tax obligations there. US citizens and tax residents are required to report their worldwide income to the IRS no matter where in the world they happen to live.
It also requires any foreign financial institution to register with the IRS.
There has been a significant change with regard to Inland Revenue policy on overdue taxes owed by New Zealand and overseas owned companies. Previously this was considered a confidential matter between Inland Revenue and the taxpayer.
In order to protect creditors, New Zealand legislation has been altered to allow Inland Revenue to provide information to credit reporting agencies on companies who have outstanding taxes that exceed a “tax threshold”.
Inland Revenue has issued a GST policy directive which may impact on Australian companies who are involved in building activity within New Zealand.
There have been cases when New Zealand entities have been completing building and construction projects in New Zealand on behalf of an overseas customer.
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.