A Week in Review
Remember director’s full names
While not exactly tax flavoured, I thought it was important nonetheless, to pass on a recent reminder issued by the Companies Office, that directors must provide their full names for the purpose of the Companies Register. In essence, this should be the name appearing on their driver’s license or passport.
The risk of non-compliance in this regard, is that the director may find they are unable to manage any of the company information on the Register, which may or may not be an issue for them, as I am sure you will appreciate in relation to the characteristics of certain clients of ours (the classic “do I really care since I am paying you to look after everything”).
And continuing with the Companies Office Register theme, you should all be aware by now, that all NZ companies require an NZ resident director, and failing to have one, can result in the removal of the company from the Register.
An exception does exist, however, where one of the directors of the NZ company, is also a director of an Australian company and is registered with the Australian Securities & Investments Commission (ASIC) in this regard. Should you have any concerns surrounding the requirements, however, particularly to ensure your client is complying, the Companies Office has released a guide which may be of assistance.
Budget 2019 date release
It’s official! Budget 2019 will be presented on Thursday 30th May 2019.
This year’s budget is presently being promoted as the “Wellbeing Budget”. It will see the use of the Coalition government’s new Wellbeing approach, which will see Ministers and departments, in essence, bidding for their funding, having to show that their policies will deliver outcomes that will make real differences to NZ’drs wellbeing.
The 5 priorities currently listed for Budget 2019 are:
- Creating opportunities for productive businesses, regions, iwi and others to transition to a sustainable and low-emissions economy.
- Supporting a thriving nation in the digital age through innovation, social and economic opportunities.
- Lifting Maori and Pacific incomes, skills and opportunities.
- Reducing child poverty and improving child wellbeing, including addressing family violence.
- Supporting mental wellbeing for all New Zealanders, with a special focus on under 24-year-olds.
Short stay accommodation items – item 1
In last week’s AWIR, I mentioned IR’s recent release of 7 draft items which each cover specific areas of short stay accommodation and the consequent taxation implications that may arise for the taxpayer deriving the short stay revenue.
In this regard, I mentioned I would comment further in future AWIR editions, as to the relevant take-out points I found useful in each item.
Rather than start from the first item, however, and somewhat pursuing my desire to break the mould wherever possible, I’ve decided to start with the item which I think will probably be of most interest to you all – GST registration issues. By far my most common enquiry over at least the past 12 months, is from those looking to make some money from Airbnb, and whether they may have any GST obligations (PUB00303/g).
To answer the question, I would suggest that it could be as simple as asking your client three questions:
- Are you likely to derive more than $60,000 in revenue (not net profit) in a 12 month period? Yes, then go to question 2. No, then you could potentially still voluntarily register for GST, but I would ask why would you, particularly if there is a chance you may cease the activity without selling your property and consequently have to source the funds needed to pay GST output tax on the value of the property at that time, from other sources (and usually in a situation where the market value of your property has increased since you originally commenced the letting activity). Important note – $60,000 threshold is based on revenue from all taxable activities you are carrying on at the same time, so not just the Airbnb activity.
- Could it be said that the accommodation you provide would be the person’s principal place of residence and that the person has rights of quiet enjoyment? No, which is the likely answer in an Airbnb scenario, then go to question 3. Yes, then the arrangement is likely to be deemed as the supply of accommodation in a dwelling, which is an exempt supply for GST purposes. Important note – short stay accommodation for the purpose of the item means accommodation for up to four weeks in the dwelling, so if this scenario correlates to your guest stays, I would suggest it will be near impossible that you could argue the “principal place of residence test” has been satisfied.
- Are you actually carrying on a GST taxable activity? While the definition of a “taxable activity” itself contains numerous components, I’d submit it really does just come down to whether the activity you are carrying on could be seen to be continuous or regular. Yes, you should register for NZ GST. No, then you can forget about GST for today, but you may need to consider it again tomorrow should any aspects of your present scenario change.
So having made it all the way to question three, you now are potentially faced with the grey area of the legislation (alternatively it may be a very black and white situation), is the activity you are carrying on, either “continuous” (carried on over a period/in sequence uninterrupted in time – must not have ceased in a permanent sense or have been interrupted in a significant way), or “regular” (carried on at reasonably short intervals with a steadiness or uniformity of action – should be of a habitual nature and character)?
PUB00303/g contains a list of factors to consider that may be relevant in the short stay accommodation context, and additionally makes an important point, that even though you may have ruled out GST implications with respect to your activities, reference should also be made to PUB00303/c – f, to confirm what other, if any, taxation implications may arise for you.
If you need some assistance, please do not hesitate to make contact.