A Week in Review
NZBN’s for LP’s
Not strictly tax flavoured, although certainly a useful tax structure for your clients, whether they are expanding their business offshore and the LTC option is simply not workable for one reason or another, or they have a potential non-resident investor for their NZ based business.
Existing NZ limited partnerships have now been issued with a NZ business number (akin to those that have been issued to NZ companies since late 2013), which now becomes the primary identification number for an LP, and will be required to be included on any notices filed to the Registrar, including the LP’s annual return. Naturally any newly incorporated LP will automatically be issued with an NZBN as it hatches from the egg.
ACC Levy Decrease
Yet another stocking filler for Xmas….
The ACC Work levy will drop from the present 72 cents per $100 of liable earnings, to 67 cents per $100 of liable earnings, effective from 1st April 2019. As the title suggests, these levies are paid into ACC’s Work Account, and the monies are used to fund cover for any injuries that happen at work.
No such luck with the Earners levies however, which will remain at their present level of $1.21 per $100 of liable earnings. These levies are paid into ACC’s Earner Account and are used to fund cover for injuries that happen during everyday activities, like standing on your cat who has decided the second step down on the staircase is the best place to sleep at night and falling down the rest of the stairs as a result, or being bunted by the friendly looking goat chained to the fence on the side of the road who you thought looked hungry and needed some grass…
Two last minute QWBA’s for 2018
IR has issued two final draft Questions We’ve Been Asked, for 2018, both going under the reference of PUB00336.
The first provides commentary on the subject of taxpayers earning their income solely from PAYE taxed salary and wages, who receive a one-off amount of untaxed income, which results in a residual income tax (RIT) of more than $2,500 for the income year, and the consequent provisional tax issues for the taxpayer in respect of both that income year and the subsequent.
The answer covers two scenarios, the first where the RIT amount exceeds $60,000, and the second where RIT is less than $60,000.
Under the first scenario, the taxpayer is no longer within the safe-habour threshold, and is consequently exposed to UOMI, where sufficient provisional tax is not paid by the 3rd instalment date, usually 7th May for standard balance date taxpayers. With respect to the following income year, the person can then use the estimation calculation method, to set a nil provisional tax obligation for that income year, requiring no payments of provisional tax to be made (assuming they are relatively confident of deriving no further untaxed income amounts in that subsequent income year).
In relation to the second scenario, as the taxpayer will qualify for the safe-harbour concessions, they can simply defer paying all tax due on the untaxed income until their terminal tax due date – usually 7th February although may be extended to 7th April if using a registered tax agent. As with the first scenario, the estimation calculation method can be chosen for the following income year, to reduce their provisional tax payment obligations to nil.
Under either scenario however, the taxpayer should be aware of the risks of electing the estimation option, which could expose them to UOMI for all instalments for any short paid amounts, and they should therefore consider using the standard calculation method instead (which could limit UOMI to the lesser of 1/3rd of RIT or the amount payable under the standard method), where the likelihood of receiving further untaxed amounts in the following income year is uncertain.
The second QWBA briefly discusses the issue of the provisional tax obligations and consequent use of money interest exposures for a person in their first year of business. Central to the discussion, is whether the person will be considered a new provisional taxpayer, which looks at the concepts of the person having an initial provisional tax liability and whether they have commenced a taxable activity – the commencement date then determining the number of provisional tax instalment dates for the first income year.
In essence, where the first year RIT will exceed $60,000, a UOMI exposure will arise to the extent required payments are not made by the relevant instalment dates. The instalment dates themselves, are determined by whether the persons taxable activity has commenced within 30 days of an instalment date – if so, then that instalment date is ignored, thereby reducing the number of instalment payments required for the first year. So for example, where the person commences their taxable activity on the 15th August, which is within 30 days of the first instalment date of 28th August, they will be deemed to have two instalment dates for their first income year (15th January & 7th May), the RIT split equally between the two instalments.
Where however the RIT for the first income year will be less than $60,000, the person simply has to pay the RIT in full on their terminal tax due date (either 7th February or 7th April), to avoid any UOMI exposures.
The deadline for any comments on either draft QWBA, is 8th February 2019.
See you in 2019
This will be the last edition of AWIR for 2018, so I trust you have enjoyed, and found something useful, in my commentaries over the past 12 months. I certainly appreciate feedback, good or bad, so please never hesitate to send me a message to [email protected], with anything on your mind.
I wish you all a very merry Xmas (whether you’ve been naughty or nice – which could dictate the fullness of your stocking on Xmas morning) and safe travels over the New Year and holiday period.
Look out for 2019’s first edition of AWIR on 14th January.