The Accounting Income Method
The Accounting Income Method or AIM is the new provisional Tax Payment option and is being introduced by Inland Revenue on the 1st April.Most of you will have already heard recent releases from IRD relating to this provisional tax option. It involves making more regular tax payments throughout the year, in theory the IRD are claiming that you’ll only need to pay provisional tax when your business makes a profit. This should help you to avoid cash flow problems.What are the benefits?- Only paying taxes when you have a profit, which is perfect for seasonal businesses.- Makes it easy to keep tax payments up to date throughout the year.- Helps with cash flow management especially if you have lean cash reserves.- Tax figures are no longer calculated based off the previous year.- Should be little to no terminal tax bills to pay at the end of the year.How does this new tax option work?- You will need to opt into the scheme at the beginning of each financial year, or if you’re a new business you can opt in anytime from the first day of trading.- The AIM accounting software will evaluate your coded transactions and produce a “Statement of Activity’ report.- You can review this report and can make adjustments where necessary or if you’re not sure what corrections need to be made get in touch and we can help.- The provisional taxes payable will need to be paid by the 28th of the following month, refunds can be generated early too if the business is incurring losses.What do you need to do for AIM?- Keep accounts updated and correctly record information.- If you’re late there will still be penalties similar to their current scheme. Annual Tax Returns will still need to be filled at year end.- Have annual gross income under $5 million.- Use an AIM-capable software system (Xero and Online Version of MYOB) - Be a Sole Trader or a Company (Not a Partnership or a Trust).- Not have any FIF investments.If you’d like to know more about this or your other tax options get in touch and call us on 033795338 or send through an email.
Claiming expenses when away on business
You can claim for a lot of daily expenses when you're travelling for work. In general you can claim for:- Flights- Taxi's- Accomodation- Meals and SnacksOverseas travel expenses You can also claim for overseas travel expenses if...- You're away on business trip but take a free half-day to enjoy exploring a new city, the personal part of the trip is incidental. You can claim all of your travel expenses. If you combine a business trip with a holiday, you must split out your expenses and only claim the portion that relates to the working part of the trip. The best way to do this is to keep an itinerary or diary. It should provide enough information to calculate all your costs and make a reasonable split between personal and business expenses. Travel to buy assets or equipmentIf the purpose of the trip is to buy business assets, then these travel expenses are usually treated as part of the cost of the asset - they're a capital expense and can't be claimed. If it is valued at more than $500, has a useful life of more than one year then it can't be claimed in full as a business expense. Have a look here at the full article to see what you can and can't claim in general and what records you should keep if Inland Revenue asks for proof. If you still have any queries over what you can claim get in touch and call us on 033795338.
Paying a lump sum bonus
With Christmas fast approaching you may be starting to think about Christmas functions and Christmas bonuses. Do you know what the tax implications are if you do a lump sum payment to staff? Bonuses are taxed depending on their type and frequency. If it's just a Christmas bonus that is not frequent then it's treated as a lump sum payment. You'll not only need to consider the tax implications of this but also any student loan repayments, Kiwisaver deductions and employer contributions. To calculate the right PAYE 1. Work out what your employee has earned (before PAYE) over the past four weeks. 2. Multiply this figure by 13.3. Add the lump sum payment. 4. Work out what income bracket your employee is in. 5. Deduct PAYE from the lump sum payment at the rate appropriate. If you're not sure of the PAYE rate for an income bracket, or to see the full article have a look here.
Common GST mistakes to avoid.
Here I explain some of the common GST mistakes made by kiwi businesses, so you can ensure your next return is looking ship-shape.1. Claiming GST on overseas transactions and unregistered suppliers.GST cannot be claimed on services and products sourced from overseas suppliers. Often these are often overlooked. For instance, services or goods from overseas might be Microsoft, Facebook, MailChimp, Google Apps. The GST on these cannot be claimed.2. Registering for GST too early or too late.For a new or small business deciding when and whether to register for GST can be tricky. In New Zealand a business is required to register for GST when they earn $60,000 or more per year. If your business sells mostly to the public, registering early will see you paying more tax than you may have had to, but if you register too late you pay face financial penalties from the IRD.3. Leasing and hire purchase.If you’re buying assets or equipment (or there’s an option to take ownership) you can claim GST up front. But if you’re only leasing or hiring an asset the GST is claimable on each payment. There are many different types of leasing deals out there, so be careful with the fine print as GST may only apply to part of the regular payment.4. Missed claiming business purchases paid from personal account.When buying assets for business use, you can claim a GST deduction, especially when it is to be used 100% for business purposes. When a purchase is made through a personal account it may be missed from the business records and as such GST is forgotten about & not claimed. Keep in mind that where there is private use, such as vehicles, you can’t claim all of the GST – because you need to adjust for the expected private use component.5. Incorrect figures and accountancy practices.We’re all human and mistakes do happen, so it’s easy to enter the wrong numbers or miss an invoice when completing your GST return. Like registering too early or too late, you may face penalties for this from the IRD. We offer accounting knowledge at bookkeeping prices so we can help manage your GST returns, payments, invoicing and even your financial statements. To find out more give us a call on 033795338.
What is the research and development loss tax credit?
The research and development (R&D) loss tax credit allows business losses from eligible expenditure associated with R&D to be cashed out instead of being carried forward. Generally, tax losses are carried forward to the next income year.Losses that are cashed out are no longer available to apply against income in future years.For income years beginning on or after 1 April 2015, you may be able to "cash out" (have refunded) up to 28% of any tax losses associated with eligible R&D activity if your company is resident in New Zealand.Read more information about the R&D loss tax credits in our pages 19 to 29.You can repay the R&D loss tax credit by paying:- future income tax (ie,by trading into profit), and/or- R&D repayment tax following a loss recovery event (LRE). New imputation credits for income tax paid by a company won't be available to a company that has cashed out R&D losses until that company has repaid the cashed out amounts.To read full original article, please select here: www.ird.govt.nz