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.

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”?