Client Gift Deduction Rules

By . Posted in Small Business, Small Business Advice, Solutions, Tax Advice.

While we encourage giving your valued clients gifts to say thank you, congratulate them on an achievement, or whatever the reason for celebration may be, there are certain rules in regards to deducting these gifts as a business expense that we want you to be aware of.

The rules around deducting client gifts can have a few grey areas, so remember that only certain client gifts can be fully deducted. The tricky part is when you are gifting food or drink – if you provide or consume the gift away from your business premise, the gift is only 50% deductible. However if you provide or consume the food or drink at or from your business premise, the gift is 100% deductible.

Any gifts outside food and drink, e.g homewares, are 100% deductible whether you provide them on or off your business premise. The IRD have given a real world example to help understand the rules around this, which we’ll put below to help you understand the rules a little more. If you have any questions or concerns about gifting, get in touch with your Sidekick Accountant and they’ll happily help you out.


IRD EXAMPLE

Bob is a real estate agent. Each time he arranges the sale of a house, Bob delivers a bottle of champagne to the owner. He also sends a gift basket by courier to the purchaser. The gift basket contains a bottle of wine, some cheese and various household items such as tea towels and soaps.

Bob will only be able to deduct 50% of the cost of the bottle of champagne. This is because he is providing entertainment in the form of drink and doing so off his business premises.

For the gift basket, Bob can deduct the full cost of the tea towels and soap, because an appropriate apportionment should be made for items that are not food and drink. However, he can only deduct 50% of the cost of the wine and cheese (or, if the cost is not separately identifiable, an amount appropriately apportioned as the cost of the wine and cheese).



New Property Tax Rules & 2 Year Bright-line Test

By . Posted in Small Business Advice, Solutions, Tax Advice.

New Property Tax Rules & New 2 Year Bright-line Test

Effective 1st October 2015, the following rules are coming into play in New Zealand. Get in touch with us if you would like to know more.

Transferors and transferees must, for the transfer of land:
• Provide IRD number (including non-resident persons), and
• Their “Tax Identification Number (TIN) if resident in overseas jurisdiction, and
• Must provide this at the time of transfer of land – This “Tax Statement” goes to LINZ as part of transfer documentation (they send to IRD)

Exemption from the new rules applies to persons who are:
• Not an “offshore person” and
• Transferors selling their main home, or
• Transferees buying with intention for their main home

The Main Home Exemption
• Exemption only applies to residential land
• Not available where residence is on a commercial farm (economic business test)
• Not available if used mainly for investment purposes nor if mainly as business premises
• Exemption can only be applied once – won’t apply to other homes (eg. holiday home)

Exemption is not available where:
• Person is an “offshore person”
• The property is to be, or was, owned by a trust (and estates)
• Exemption used twice or more in last 2 years before current transaction

Trusts
• The main home exemption can’t be used
• All trusts will be required to provide IRD number
• And foreign TIN and NZ bank account if offshore person

Regular Sale of Main Home
• If home sold 3rd time within last 2 years IRD number required
• Government aim is to catch person’s with regular pattern of selling family home
• Gives IRD information to target these persons and determine whether taxable

New 2 Year Bright-line test

A disposal of residential property within 2 years of acquisition will be taxable unless an exception applies.
Date of Acquisition
• Current rules: the date of acquisition is generally the date the S & P was entered in to
• IRD state this date could be difficult to find and may not have access to S & P
• Therefore bright-line acquisition date = date title registered which will show on land online

Disposal Date
• Date the contract is entered into
• For gifts and other similar distributions where no sale contract – Disposal date will be normal rules = depends on documentation
• Subdivided land: lots acquisition date same as original undivided land
• Different dates for acquired and disposed make the 2 year period a tighter squeeze

Transitional Rule
• New rules only apply to a S&P entered into after 1/10/15
• Example – Shania Twang enters in a S& P on 2/6/15 – 1/11/15 title registered for purchase – 1/12/15 Contract to Sell
• Not caught by the new rules due transitional provision

Definition of Land
• Any estate or interest in land
• Option to acquire land, estate or interest in land
• Therefore includes freehold and leasehold

Main Home Exception Proposed Rules
• Bright-line test will not apply to main home
• Will only apply to one property at a time – different from current rules
• Proposed rule: the land has a dwelling on it; the dwelling is occupied mainly as a residence by the owner; and the dwelling is the main home of the owner.
• Can be owned by a trust so long as beneficiaries occupy
• Must be occupied mainly as a residence
• Based on actual use rather than intention
• Where several residences, main home = property with most connection


Sidekick Houses

Handy Tax Updates for August

By . Posted in Tax Advice.

We’re all about keeping you in the loop – so here’s a summary of some Tax Updates released from the IRD this month. Follow the links (the words in pink) to find out more.

Do you have a standard March balance date?

If the answer to this is yes, then remember that your first instalment of provisional tax is due on the 28th of August – if you calculate the amount using the standard or estimation option. Click on this link to read a little more to see if this due date applies to you.

Purchased second-hand goods for your business?

Something you may not know is that even if you didn’t pay GST on the purchase, you can still claim a GST credit. Just make sure the details of the purchase are recorded, and the goods need to have been located in New Zealand at the time of purchase. There are a few more ins and outs to purchasing second hand goods for business purposes, so be sure to check out this link.

New to business?

The IRD has made life nice and easy for you by putting together some handy videos to help you understand some basics like business structures, income and provisional tax, registering for GST and more. We love when people make all things business easy to understand! Click here to have a browse of the videos.

Think the topics below apply to you?

If yes, then you can find out more information here.
· Upcoming child support scheme changes
· Moving to Australia – what about your KiwiSaver?
· Paid parental leave maximum entitlement rate increases
· Record-keeping for holiday homes

Ahh… Life’s just so much easier with a Sidekick!

End of Financial Year – What you Need to Know as a Business Owner

By . Posted in Business Growth, Company News, Contractors, Small Business, Solutions, Startups, Tax Advice.

For most of us, the 31st of March will be the end of our 2014 financial year. We hope it’s been a successful, happy and profitable one for you and your business! Here are some tax tips and helpful information to ensure a smooth end of year process for you.

Need help getting your tax in order? Flick us a message, and we’ll be by your side in no time.

End of Tax Year Obligations – What do I need to do?

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Budget 2014 Key points for Small Business Owners

By . Posted in Business Growth, Small Business, Solutions, Startups, Tax Advice.

budgetpic

Last Wednesday, Mr Osborne unveiled the Budget for 2014. In case you missed it, here is a summary of the key information and important upcoming changes for small business owners.

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