NEW IRD INTEREST RATES
IRD have lowered the use-of-money-interest (UOMI) rates on under-paid and overpaid tax. The UOMI rate on underpaid tax falls from 9.73% to 8.91% and the UOMI rate on overpaid tax falls from 4.23% to 1.82%. The differential between the two UOMI rates is now over 7%. The new rates apply from 28 June 2009.
This means that whilst the penalty for underpaying tax will not be so severe, the rather attractive risk free investment return on overpaid tax has now gone. Remember that using IRD to provide you with credit has the advantage that they do not require registered security for the “loan”. In this tough economy using the IRD correctly to provide business credit has merit. Especially if you can come to a deferred payment arrangement. We can help arrange this if required.
In addition, the Government has lowered the prescribed rate that is used to calculate FBT on low-interest, employment-related loans from 8.05% to 6.41%. The new rate applies from 1 July 2009.
INCREASED IRD AUDIT ACTIVITY .
As per the Budget the projected tax take is significantly lower than forecast so we can expect Government will be urging IRD to be more aggressive in collecting revenue. IRD recently published “advance notice” of areas of focus in its compliance management programme for 2009/2010.
While the document (some 40 pages) outlines a number of areas the IRD intends to focus on, items of interest include:
- Property transactions - the IRD’s focus appears to continue to be on property acquired with the intention of resale.
- Income from offshore investments (calculation of FIF income, overseas data matching exercises to identify unreported income).
- Artificial tax losses - more focus on investigating substantial tax losses.
- Online traders not reporting income - watch out Trade Me addicts.
- Hidden economy, including GST fraud, focus on the hospitality industry and on agricultural/horticultural contractors.
- High wealth individuals - global wealth structures.
- Misusing charity tax-exempt status.
- Transfer pricing - importing offshore losses through non market pricing, potential gaming of interest rates, advance pricing agreements, continued monitoring of limited risk distributor structures and compliance with the thin capitalisation rules.
- Aggressive tax planning, including business restructures, hybrid financial instruments, imputation structures and structured finance.
The identified areas of focus are not anything new. However, the fact that the IRD has publicly announced its compliance strategy does provide greater certainty as to what the IRD is viewing as “high risk”, and therefore areas warranting further care and attention. If you have any concerns or questions please contact us.
FRASER ACCOUNTING JOINS NZ CA
After careful consideration Fraser Accounting Ltd is now a member of the NZ CA Ltd, an association of Chartered Accountants. Whilst remaining an independent business we will be able to draw on the considerable expertise of the other NZ CA member firms, there are now 28 around New Zealand.
Benefits to our clients will include access to a larger knowledge pool in specialist areas such as business valuation, taxation, accounting technology, financial modelling and business law. NZ CA provides members with continuing education courses and hi-end practice management technology. Overall we will be more efficient and effective resulting in better quality service to our clients.
The new association does not affect existing professional relationships with other referral sources or institutions we already use or belong to as required for the benefit of our clients.
If you want to know more about NZ CA, or read their topical business newsletters please click on www.nzca.com
