TAX TIDBITS
Issue Eighteen, July 2007
Welcome to our latest issue of Tax Tidbits.
I'm the new editor of our newsletters. If you have suggestions or improvements that you would like to see , please don’t hesitate to contact me on (09) 307 8500 or cstratton@hwi.co.nz
Craig Stratton
In this months issue:
Administrative Reviews of Child Support
GST on the Sale and Purchase of Property
Tax Relief for Tax Payers affected by recent weather events
Provisional Tax - looking forward
FBT Interest Rate
ADMINISTRATIVE REVIEWS OF CHILD SUPPORT
Part 6B has been introduced to the Child Support Act 1991. This new provision entitles the Commissioner of Inland Revenue to review an assessment if an investigation into a paying parent's financial affairs suggests that earnings are being structured to reduce paying capacity.
In deciding whether to change an assessment, the following issues must be considered:
- Do special circumstances exist for the income, earning capacity, property and financial resources of either parent or the child (or children)?, and
- Would a change of the assessment be just and fair for the child, paying parent, and custodian?, and
- Would a change be otherwise appropriate?
You can find more information on Commissioner reviews in the department’s booklet Helping you to understand child support reviews (IR175) .
GST on the Sale and Purchase of Property
On the 28 th of June 2007 an interpretation statement was issued by the Office of the Chief Tax Council detailing the department’s interpretation of whether an Agreement for the
The interpretation statement concludes that a conditional sale and purchase agreement for property does not constitute an “invoice” under the GST Act and therefore fails to trigger the time of supply. Upon the agreement becoming unconditional it will not constitute an invoice for the purposes of the GST Act. An unconditional agreement also fails constitute an invoice for the purposes of the GST Act.
Please contact HWI to discuss GST relating to the sale and purchase of property before filing your GST return.
Tax Relief for Tax Payers affected by recent weather events
The Inland Revenue Department is able to provide different sorts of assistance for tax payers affected by the recent adverse weather events.
This assistance could take the form of:
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Extensions of time for filing income tax returns
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Remission of penalties
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Financial relief through installment arrangements
If your ability to file returns has been affected by the recent weather events or you have queries regarding the deductibility of repairs to your business please contact HWI to discuss the matter in greater depth.
Provisional Tax - Looking Forward
From 1 April 2008 a change in the tax legislation means that there will be another method of calculating your provisional tax liability. This new method is based on the figures that you include in your GST returns. It prescribes that provisional tax payments will be made bi-monthly with your GST payment if you are registered for GST on a two monthly cycle or every six months if you are registered for GST on a six monthly basis.
To be eligible taxpayers must;
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Be GST registered, and
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Have a Residual Income Tax (RIT) liability between $2,500 and $150,000, and
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Align the GST cycle with their balance date
The benefit of the new calculation method is that more provisional tax will be paid when your sales (and hopefully cashflow) are stronger. The downside is that more Use of Money Interest may be incurred if sales are stronger later in the year.
If you believe that this new calculation method may assist you with your future cashflow please contact HWI to discuss what additional information may be required in the future.
FBT Interest Rate
Any loan provided by an employer to an employee at a rate of interest that is below the market rates is a fringe benefit which can give rise to a liability for FBT.
As from 1 July 2007 the prescribed interest rate for fringe benefit tax on low interest loans has increased to 9.79% (up from 9.55%) and will affect all second quarter (1 July to 30 September 2007) FBT returns.
If you are unsure whether a loan to an employee is subject to FBT or if you need help calculating the liability please contact HWI for assistance.
Disclaimer Information contained within this document is of a general nature and does not constitute advice. Readers are cautioned not to act or reply on it without first seeking professional advice.
