IMPORTANT NEW TAX RULES NOW APPLY.
A number of new tax rules effecting self-employed taxpayers apply as from this 2009 tax year.
New Provisional Tax dates
New provisional tax rules apply for the 2008/09 and subsequent income years. Provisional taxpayers who are registered for GST will pay provisional tax on the same day as GST when provisional tax is due. The due date for paying provisional tax under the new rules will therefore depend on the frequency which the GST returns are filed.
If you have a standard balance date of 31 March, and you are registered for GST your provisional tax dates will be as follows:
Monthly or 2 Monthly Returns:
|
Old Provisional Tax Dates
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New Provisional Tax Dates
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7 July
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28 August
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7 November
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15 January
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7 March
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7 May
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6 Monthly Returns:
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Old Provisional Tax Dates
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New Provisional Tax Dates
|
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7 July
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28 October
|
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7 November
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7 May
|
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7 March
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If you have a 31 May balance date and file 2 monthly returns your new provisional tax dates are 28 October, 28 February and 28 June.
If you have another non standard balance date, please contact us if you are unsure as to your new provisional tax payment dates.
Terminal Tax dates remain unchanged (1 month after balance date).
If you are not registered for GST you will pay provisional tax on the 28th day of the 5th, 9th and 13th months after balance date. However, to take account of Christmas and Easter holidays, the payment for 28th December is due 15th January and the payment for 28th April is due 7 May. If you are a March balance date taxpayer your provisional tax payments will be due 28 August, 15 January, and 7 May.
As usual we will continue to send you payment reminder notices.
New Company Tax Rate
As from this tax year the company tax rate is 30% (it was 33%). The provisional tax for companies will be reduced accordingly.
The Trustee rate remains at 33%.
Individual rates are also unchanged:
| 0 - $38,000 |
|
19.5% |
| $38,001 - $60,000 |
|
33% |
| over $60,000 |
|
39% |
The new lower company tax rate will assist company’s cash flow and should act as an incentive to retain company earnings rather than pay them out to shareholders. However there is a (“Cullen”) sting in the tail…unless all pre-2009 retained earnings are paid out by 31 March 2010, the imputation tax credit applicable to those earnings reduces from 33% to 30%! We will be advising clients on the most appropriate strategy for them before 31 March 2010. The promised tax cuts will influence that strategy.
Research and Development Tax Credit
The new 15% tax credit for qualifying research and development (R&D) expenditure now applies.
The tax credit is a cash credit of 15 cents for each eligible R&D dollar spent. The tax credit will be offset against the tax liability of the business or refunded in cash where the business is an exempt taxpayer or in a loss position. There is no cap on the level of tax credits claimed except in relation to internal software development. A minimum R&D expenditure threshold of $20,000 applies, except where the R&D is outsourced to a listed research provider.
To qualify for the tax credit a business must be an eligible business, undertake eligible R&D activities and incur eligible R&D expenditure. You may be surprised how wide the definition of eligible R & D expenditure extends…basically, doing something for the first time may mean it is R & D. Ask us if you think you may have a claim.
Charitable Donations
Legislation enacted in December 2007 introduces significantly greater incentives for charitable giving. The effect of the changes is that:
- an individual can claim a tax credit equal to 33 1/3% of all donations made to charities, up to that individuals taxable income;
- a company may deduct all donations to charities, up to its net income (calculated prior to taking the deduction for the donation); and
The IRD website lists eligible charities (www.ird.govt.nz)
New Rules for Partnerships
Legislation enacted in March 2008 introduces a new limited partnership vehicle to replace the current special partnership regime and clarifies the tax rules that apply to all partnerships including general partnerships.
Limited partnerships are a form of partnership involving general partners, who are liable for all the debts and liabilities of the partnership, and limited partners, whose liability is limited by their contribution to the partnership. Limited partnerships will have both separate legal status and flow through tax treatment.
The legislation contains an anti-streaming rule for both general and limited partnerships to ensure that income, tax credits, rebates, gains, expenditure and losses from a particular source or of a particular nature are allocated to partners in the same proportion as each partner's share in the income of the partnership.
Loss limitation rules ensure that losses claimed by a limited partner reflect the level of that partner's economic loss (i.e. limiting any tax loss claimed by a limited partner to the amount that the limited partner has at risk in the partnership).
There have also been changes to the tax rules applying to admittance, retirement and dissolution of partnerships. Please contact us if you require further information.
Redundancy
Individuals who receive redundancy payments on or after 1 December 2006 are entitled to a rebate of 6 cents per dollar of redundancy payment, to a maximum of $3,600 (i.e. the rebate is capped at $3,600 for redundancy payments of $60,000 or more). Rumour has it that this was as a result of the Labour Party’s union affiliations hence the back-dating! Whatever, it will be helpful to those incurring redundancy in the future.
CREDIT CRISIS UPDATE
We appreciate the many complimentary comments we received on our recent Credit Crisis Flyer. Most found the early warning and frankness of the comments helpful.
Thankfully to date there have been no further significant financial collapses, although some commentators are convinced there is more to come. The effects of a recession are now clearly evident in some sectors of the economy, e.g. reduced retail sales and job losses.
Our view is that the next 3 months are crucial. If the world economy survives that period without any further major collapse then it is likely the hoped for soft landing will eventuate. Then, once the US election is out of the way (and for NZ our election) growth will recommence. Whatever, the prudent stance in the meantime is to proceed with extreme caution.
