BUSINESS TAX UPDATE REMINDERS. Getting your tax invoices right. Swinton Appliances. Inland Revenue s tax news for businesses.

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1 BUSINESS TAX UPDATE Inland Revenue s tax news for businesses Getting your tax invoices right Issue No 53 July 2014 IR 381 Businesses that are GST registered need to provide a correct tax invoice within 28 days of the purchaser asking for one. Tax invoices that don t meet legal requirements can cause problems for both the issuer and the recipient. There are legal requirements spelling out what needs to be in a tax invoice. If you re GST registered, make sure you provide or obtain a properly made tax invoice. You may also need to issue a credit or debit note and there are similar requirements for these. Tax invoices A tax invoice doesn t need to be issued for supplies of $50 or less, and a simplified tax invoice is acceptable for supplies between $50 and $1,000. For supplies worth more than $1,000, a tax invoice must show: the words tax invoice in a prominent place the name, or trade name, and registration number of the supplier the name and address of the recipient the date the tax invoice is issued a description of the goods and services supplied the quantity or volume of goods and services supplied either the total amount including the tax charge, or the amount excluding the tax but showing the tax per cent to be included. Example Swinton Appliances Jackson Street PO Box Phone: (04) PETONE PETONE Fax: (04) To: Mereana s Place GST number Main Street PETONE Date: 08 November 2012 Quantity Description of goods and services Unit price Total 1 Gas Oven $1, $1, Plus goods and services tax $ Total amount due $1, Note: The information listed above must be on both the copy held by the supplier and the copy given to the recipient. For example, if the registration number is printed on a removable remittance slip, the invoice will no longer meet the requirements once the slip is removed. (continued on next page) Tax Invoice Name and address of the supplier The words tax invoice Supplier s GST registration number Name and address of the recipient Date of issue Description of the goods and services supplied Amount, excluding tax, charged for the supply Quantity of the goods supplied GST charged Total amount payable Welcome to Business Tax Update In this issue: Getting your tax invoices right, Budget 2014 roundup of tax changes, myir secure online services, rank six ideas to save your business time, changes to Westpac services, follow Inland Revenue on Twitter, changes to clarify when accommodation and employee allowances are nontaxable, completing your employer returns, stay on top of your record keeping, understanding the standard costs for childcare and boarding service providers, differences between contractors and employees, employing temporary staff. If you have any suggestions for topics you d like covered in this newsletter, BusinessTax.Update@ird.govt.nz REMINDERS 1 July: The prescribed rate for calculating FBT on low-interest employment-related loans increased from 5.90% to 6.13%. 7 July: Income tax returns are due for those who don t have an agent or an extension of time. 20 July: Fringe benefit tax quarterly return (IR 420) is due for the first quarter of File online at Get it done online. Note: If a due date falls on a weekend, public holiday or regional anniversary day, you can pay and/or file on the next working day without a penalty being applied. 1

2 (continued from previous page) For more information about tax invoices visit (search keywords: tax invoice). Credit and debit notes Where the price decreased (credit note) or increased (debit note) after a tax invoice was issued, a credit or debit note must be issued. You ll also need to make an adjustment in your GST return. A credit or debit note must show: the words credit note or debit note in a prominent place the name, or trade name, and registration number of the supplier the name and address of the recipient the date it was issued a brief explanation of why it was issued. It must also have either: the GST-inclusive price shown on the tax invoice, the correct amount payable including GST and the difference between the two amounts of GST charged, or the difference between the incorrect and correct GST-inclusive amounts, and a statement that the difference includes GST. Note: Only one tax invoice and one credit or debit note can be issued for each supply. If a copy is needed, it must be clearly marked Copy Only. Where a change in the amount charged is caused by a change in the GST rate, eg, 12.5% to 15%, a statement explaining this should be included on the note. Budget 2014 round-up of tax changes The Government s 2014 Budget was announced on 15 May and proposed changes to tax policy, parental tax credit and student loans. Some of these have already been enacted and others will be implemented once the legislation has been passed. Black hole research and development (R&D) expenditure Currently some business costs can t be offset against income for tax purposes. This is proposed to change for some types of R&D business expenditure Cashing out tax losses for R&D-intensive start-up firms This proposal will let businesses cash-out an amount of their tax losses arising from qualifying R&D expenditure. This means that instead of carrying the tax loss forward to apply against future assessable income, the company will receive a cash payment. Cheque duty repealed Cheque duty was levied at the rate of 5 cents per cheque. Government has repealed the duty with effect from 1 July Cheque duty can t be charged and refunds can t be claimed after this date. You can read more on the repeal of cheque duty in the Tax Information Bulletin Vol 26, No 6 (July 2014) at Newsletters and bulletins. Extra funding for tax compliance An extra $132.3 million has been allocated to Inland Revenue over the next five years to follow up on unfiled returns. Parental tax credit extended The following changes to the parental tax credit come into effect on 1 April 2015: the maximum amount of $150 per week increases to $220 per week the period the tax credit is paid for increases from 8 to 10 weeks following the birth of a child the parental tax credit abatement formula has changed to better target lower- and middle-income families. Student loan threshold maintained Government has proposed holding the student loan repayment threshold at its current level of $19,084 until 1 April myir secure online services Our secure online services make it quicker and easier to manage your tax and entitlements. All your key information is in one place, making it easy to find balances and due dates, and update your personal information. Register for a myir secure online services account today and: request and confirm personal tax summaries file an EMS or IR 3 tax return register for GST and file your GST return instantly update your bank accounts, phone numbers, addresses and details view payments to or from Inland Revenue (including child support) apply for/manage your Working for Families Tax Credits see if you re due a refund. myir is available 24 hours a day, seven days a week. Go to myir, and click on Register to find out more. If you re also registered for voice ID and forget your password, you can reset it at any time. It only takes a few minutes to register. Call and follow the instructions. Make sure you have your IRD number handy. BUSINESS TAX UPDATE Issue No 53 July

3 Rank six ideas to save your business time We re making it faster and easier for businesses to deal with us and have lined up six ideas we think can help you save time. Please tell us how useful the following would be to your business by ranking them online at 1. Being able to file your GST and PAYE returns via your smartphone 2. Being able to file your return online with just a few clicks if your tax is nil 3. alerts that remind you when your tax return is overdue 4. A faster, more powerful way to search our website 5. More online video guides 6. Live online seminars to help with tax issues. Or if there s another way we can save your business time, you can tell us at Changes to Westpac services From 1 October 2014, you ll only be able to make cash or eftpos payments at Westpac counters. Westpac will no longer accept cheque payments, forms or returns. (If you post any payments after this date they must be received on or before the due date to avoid late payment penalties and interest.) For more information about the changes please go to (search keywords: payment changes). Follow Inland Revenue on Twitter for regular tweets on a range of tax and social policy matters including our most recent media releases, due dates and consultations. Changes to clarify when accommodation and employee allowances are nontaxable The Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 enacted late June 2014 has introduced a number of changes to the tax treatment of employee allowances. These changes clarify the tax treatment of employer-provided accommodation, accommodation allowances and other payments provided to employees as reimbursement for expenses. For detailed information about these changes, including if you can retrospectively apply the new rules, read the Employee allowances special report on the Tax Policy website Key features The following key features are subject to certain conditions: Accommodation and accommodation payments provided to employees on out-of-town secondments of up to two years or while on outof-town capital projects of up to three years, are exempt from tax. These time periods are extended under specific transitional rules for people working on Canterbury earthquake recovery projects. Accommodation and accommodation payments provided to employees who are required to work regularly in more than one location are exempt from tax. Accommodation and meals when employees attend a conference or training course are exempt from tax. When accommodation is taxable, it is generally taxable on its market rental value. Accommodation provided to New Zealand Defence Force personnel, ministers of religion and people working overseas is treated under the rules that apply specifically to these people. Other features include meal costs linked to work related travel, which will not be taxed for up to three months, and distinctive clothing (such as uniforms) used for work purposes now being tax exempt in specific circumstances. When do the new rules come into effect? Most of the new rules will take effect from 1 April However, employers may have the option to apply some of the new rules from 1 January 2011 provided they meet certain criteria. If you have any queries Any case-specific queries or requests for amendments or voluntary disclosures can be sent to accommodation@ird.govt.nz BUSINESS TAX UPDATE Issue No 53 July

4 Completing your employer returns There are some things you can do to make sure you re completing your returns correctly. Check that all payments match Please check that the figures correspond on your Employer monthly schedule (EMS/IR 348) and Employer deductions (EDF/IR 345) form and your payment matches boxes 9 and 10 on your EDF. If you file two EDFs per month, their combined totals must match the payments and corresponding figures on the EMS. We ll need to contact you to confirm the figures if they re different, and this may increase the processing time. It may also cause incorrect credits and debits to your account. Don t send duplicate returns If you file your EMS or EDF through ir-file, you don t need to send us a paper copy as well. Doing so will create duplicate returns, which will delay processing. You can stop paper copies being sent to you by filing your EMS and EDF through ir-file using the: on-screen forms option and making your payments electronically file transfer option and selecting File monthly using payroll file transfer under Filing method in the left-hand menu. (If you re using the file transfer option, you must use compatible payroll software.) Don t send us any PAYE remittance or itemised employer deduction forms printed from your software package. These are for your office use only. If you re not sure which forms to print, please contact your payroll software provider. If you file returns printed from your software package but receive pre-printed returns from us, please discard these don t post them back. If you need to change any details on an EMS or EDF you ve filed, call us on (for changes to one or two employees), or for more changes complete an Employer monthly schedule amendments (IR 344) form. Show all gross earnings Make sure your employees gross earnings are showing on the EMS otherwise we ll need to contact you to confirm the correct figures. If you have employees on the WT tax code, ensure that the gross earnings are entered in the Gross earnings and/or schedular payments column and the Earnings and/or schedular payments not liable for ACC earners levy column. For employees who earn salary or wages, the gross earnings figure must be entered in the Gross earnings and/or schedular payments column. Only use the Earnings and/or schedular payments not liable for ACC earners levy column if the amount paid is a redundancy payment or the earnings are over the maximum for ACC purposes. Retirement and redundancy payments aren t liable for ACC earners levy. To make sure this isn t deducted from the payment, complete your EMS by showing: the gross salary or wage plus the retirement or redundancy payment in the Gross earnings and/or schedular payments column the gross retirement or redundancy payment in the Earnings and/or schedular payments not liable for ACC earners levy column. If an amount entered in the Earnings and/or schedular payments not liable for ACC earners levy column is greater than the amount in the Gross earnings and/or schedular payments column or not on the EMS at all, we ll need to contact you to confirm the correct figures. Stay on top of your record keeping Keeping complete and accurate records is important in any business. Not sure where to start or how to keep your records under control? We have a new video about record keeping that ll help get you sorted. The sixth instalment of our Introduction to business videos follows Jeffery the plumber and what he does to keep on top of his record keeping. He runs a successful plumbing company and keeps a record of every business transaction including all cash and noncash sales and expenses. The video also shows how he meets the required minimum financial reporting requirements. Our other videos explain in plain language topics like depreciation, expenses, registering for GST, and income and provisional taxes. Each video links to more detailed information on our website and is designed to get you up to speed quickly (they re all under 7 minutes). You can find the videos at Demos and videos. Why not check them out now? We re sure you ll find the answers to many of your tax questions. BUSINESS TAX UPDATE Issue No 53 July

5 Understanding the standard costs for childcare and boarding service providers If you provide a childcare or boarding service in your home, you must pay tax on any profit (taxable income) you make. There are two ways to work out whether you have to pay tax on this income the actual-cost method and the standard-cost method. If you use the actual cost method you need to keep records of your actual income and expenses for the year (if you have five or more boarders or provide childcare for five or more children you must use this method). At the end of the tax year you then complete an income tax return to declare any profit or claim any loss. The standard-cost method uses an average price for basics such as food, heating, power and transport. If you choose this method and the income you receive is less than the standard cost allowed, you don t have to file a tax return, keep records of related expenditure or pay tax on this income. You also can t claim a loss for income tax purposes. Two of the weekly standard-cost components for boarder service providers have increased: The weekly standard cost for one to two boarders has increased from $250 each to $254 each. The weekly standard cost for third and subsequent boarders has increased from $204 each to $208 each. If you provide boarding services, you can work out if you need to file an income tax return by using our standard-cost home-based boarding services calculator at Work it out (no information is sent to us when you use this calculator). Two of the standard-cost components for childcare providers have increased: The variable standard-cost component, which covers expenditure on items such as food, transport and educational resources, has increased from $3.37 an hour for each child to $3.42 an hour. The administration and record-keeping fixed standard-cost component has increased from $329 a year to $334 for a full 52 weeks of childcare services provided. If you provide childcare services, you can use our worksheet Home-based childcare 2014 year (IR 413) to work out if you need to file an income tax return at the end of the tax year (31 March). You can download an IR 413 from Forms and guides or call us to request a copy on Differences between contractors and employees With many companies in the construction sector taking on extra workers, as in the Canterbury rebuild, it s a good time to think about the differences between contractors and employees. The tax obligations are different for employees and self-employed contractors, so it s important to get it right from the start. In general, if you control what your worker does, how and where the work is done, and whether your worker must follow your rules, then usually that person is an employee. A self-employed contractor will typically control the hours they work, be responsible for sourcing and getting the work done, be free to work for other people and provide the main working equipment needed for the job. There are many other factors that can help you make the right decisions. For more information see our Self-employed or an employee? (IR 336) leaflet and Smart business (IR 320) guide. You can view and download these from our website at Forms and guides. Employing temporary staff Are you taking on extra staff for a special occasion, or expecting a higher than normal workload? If so, don t forget you ll need to adjust your records to show this. You ll need to: make sure you get a completed Tax code declaration (IR 330) from every employee, or deduct tax at the no-notification rate deduct PAYE from their wages and show this on your Employer monthly schedule (EMS/IR 348), and include their start date, tax code and amount of deductions make KiwiSaver deductions, contributions (if required) and deduct employer superannuation contribution tax, if the employee gives you a KiwiSaver deduction form (KS 2) show an end date on your EMS for each employee as they finish with you. Taking on temporary staff could be an indication that your business turnover is increasing, even for a short period of time. If you re not already registered for GST, remember to check if your turnover is likely to be: more than $60,000 for the last 12 months, or more than $60,000 for the next 12 months. If your turnover exceeds this amount you'll need to register for GST. You can register for GST on our website at (search keywords: GST registration). Business Tax Update comments generally on topical tax issues relevant to businesses. Every attempt is made to ensure the law is correctly interpreted, but articles are intended as a brief overview only. The examples provided are not intended to cover every possible factual situation. BusinessTax.Update@ird.govt.nz BUSINESS TAX UPDATE Issue No 53 July