Welcome to the latest newsletter from Stewart & Co Limited In this newsletter:
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With regards to gifts to customers these will be 100% deductible. The Inland Revenue Department have recently confirmed that gifts to clients of food and/or alcohol are not subject to the entertainment regime. Previously, the general understanding was that gifts of food or alcohol to clients were only 50% deductible. It is likely however that you may come under the FBT exemption limits and not need to include these in your FBT return. The current limits are $300 per employee per quarter (to a maximum of $1,200 per year) or $22,500 per year for all employees. The relevant cost is their GST inclusive value of the gift. If you are unsure as to the tax treatment of any of your Christmas gifts then please do not hesitate to contact us. Also remember that in general, Christmas functions come under the entertainment rules and are only 50% deductible for tax purposes.
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| Taxation – who pays? Some recent Inland Revenue Department statistics show the following:
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| New Copyright Law
New copyright legislation that came into force some months ago (September 2011) places employers in a vulnerable situation. The Internet Service Providers in New Zealand have acknowledged a requirement to serve notice on account holders who are responsible for infringements. The effect and danger is where an employee downloads material and infringes copyright law using the employer’s computer. The employer may not be aware of the misuse of the internet but could become liable regardless. The legal fees, fines and awards could be considerable. The Internet Service Provider can close the employer's account. Apart from the infringement of copyright, an employee who cares to access sites that leave the employer’s broadband open can cause a massive invoice for the employer through exceeding their current broadband plan. Then there’s the exposure to viruses, worms and a multitude of seriously undesirable infections. Employers need to be able to prove to the Copyright Tribunal they have taken every reasonable step to prevent an employee from infringing copyright and a punitive fine would be ‘manifestly unjust’. This is a defence. What to do 1. Ensure your employment agreements refer to ‘file sharing’ and consequences for employees who 2. Develop a strict password and access procedure. 3. Put in place the technology allowing you to identify individual users. 4. Ensure all employees know and understand their use of business computers is monitored and they will be personally liable to any costs caused by their misuse of the internet. 5. Identify and quantify what costs could be a possibility in the event of an employee’s misuse of the 6. Employees must know that disciplinary action will follow any breach of the internet policy and such 7. Put in place restrictions and block the inappropriate websites. If employers are uncertain of the protection offered by their existing employment agreements or have in place very old agreements that will not offer any protection, then a policy statement should be originated, promulgated and signed off by each employee. If you require a copy of a simple policy, please contact us.
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| Declaring Off-shore Income The Inland Revenue's Compliant Focus document released last year stated that Inland Revenue will increase its focus on New Zealand tax residents who haven't declared income received from offshore sources. As part of this focus, the Inland Revenue Department has recently obtained information from 16 treaty partners under exchange of information agreements identifying New Zealand residents who have earned overseas income but may not have declared that income in New Zealand tax returns. At a recent Inland Revenue Department seminar, the local District Commissioner outlined how the Inland Revenue Department are now able to monitor transactions from within New Zealand to foreign bank and credit card accounts. They look for transactions which are atypical of a tourist, and when they see an account being used for purposes more like a resident, they investigate. We think that in most cases not declaring income is likely caused by a lack of understanding about the international tax rules that apply. Nonetheless, taxpayers with international investments need to be aware that the Inland Revenue Department is now actually obtaining information about taxpayers' offshore income and assets through exchange of information agreements with treaty partners and expects to be provided with accurate information in tax returns. An article from Deloittes
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| Working for Families Tax Credits and Trust Income
From the 2011 year onwards, there have been significant changes come into effect with regards to what is family income for determining Working For Families tax credits. In particular, income generated in Trusts may now be considered in the calculation as follows:
Perhaps the most significant of these changes is the inclusion of Trust income in the calculation of family scheme income. Although however in some cases, the FBT on a vehicle (which incidentally is the value of the benefit plus the FBT tax amount) may also be significant.
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GST Update As a result of a GST investigation for a client, we noted shortfalls in the documentation to support GST claims. Remember that for supplies between $50 and $1,000 (including GST) a simplified tax invoice is acceptable. It must show the words ‘Tax Invoice’, have the name and GST number of the supplier, the date of the tax invoice, a description of the goods or services supplied and the total amount payable for the supply stating that GST is included.
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