Legislation changes
There has been a raft of legislative change recently introduced which have recently come into effect;
Provisional tax
The provisional tax changes mentioned last year will apply from 1 April 2018. These include the proposed accounting income method (AIM) of paying provisional tax.
While current methods for calculating and paying provisional tax will still be available, AIM proposes that you pay provisional tax from your accounting software, where you are a business with less than $5m annual gross income. AIM capable software will calculate provisional tax owing throughout the year and enable you to pay provisional tax direct to Inland Revenue. So the year-end tax return becomes more about verifying payments made through the year and making any adjustments or corrections needed.
We closely monitor provisional tax payments for clients. The AIM method will not suit all taxpayers. If you’re interested in discussing if this method will suit you, please contact us. Likewise, once legislation passes, if we believe this will be a good option for you, we will be in touch.
Use of money interest
From the 2018 income year (i.e. from 1 April 2017 for standard balance date taxpayers) use of money interest will be removed from the first two provisional tax instalments for those who pay in three instalments and who continue to use the standard method to calculate and pay provisional tax (commonly referred to as the ‘uplift method’).
Businesses (including companies) and individuals with residual income tax of less than $60,000 and paying provisional tax in three instalments using the standard method will not be subject to use of money interest. This will provide a lot more flexibility for managing provisional tax. Prudent taxpayers will continue to make payments based on estimated taxable income to smooth cashflow.
Changes for Motor Vehicle available to close companies
Among the changes is an amendment that allows close companies to elect to apportion expenditure on motor vehicles the company provides to shareholder-employees between business use and private use as an alternative to paying FBT. The amendment enables a close company to make an election to apportion expenses between business and private, and where an election is made no FBT will be payable.
The company must make an election to apportion motor vehicle expenses on this basis in the income year in which the company acquired the motor vehicle. This means that close companies already paying FBT on motor vehicles provided to a shareholder-employee must continue to do so.
The new rule only applies to motor vehicles acquired or first used after 1 April 2017, and only applies where the only Fringe Benefits provided by the Company as a whole are motor vehicles to shareholder employees.
Before making a decision on how to treat motor vehicle expenses, you should talk to us about which is the best option for you.
RWT exemptions
From 1 April 2017 RWT exemption certificates will not need to be renewed annually.
Employees and Contractors
Minimum Wage – changes effective 1 April 2017
The adult minimum wage rate will increase from $15.25 to $15.75 per hour before tax. The starting out wage and training minimum wage will increase from $12.20 to 12.60 per hour before tax.
Contractors
From 1 April 2017 contractors subject to schedular payment rules will be able to elect their own withholding tax rate. The schedular payment rules will be extended to contractors that work for labour-hire firms. Contractors not covered by the schedule payment rules will be able to opt in to the rules with the consent of the person paying them. If these rules apply to you please contact us to discuss an appropriate rate of withholding tax.
