When do I become liable to pay Provisional Tax?
Provisional Tax is usually paid on 28 August, 15 January and 7 May each year, and is paid on account of your end-of-year tax bill.
You become liable to pay Provisional Income Tax if your Residual Income Tax (RIT) for the income year exceeds $2,500. Essentially, RIT is the amount of income tax payable on income which has not had tax (eg PAYE) deducted when you received it.
Examples where income may give rise to provisional tax payments include shareholder salaries, partnership and self-employed income.
When do I become liable to pay use of money interest?
Individuals who estimate, companies and trustees where RIT exceeds $2 500 pa.
Individuals who do not estimate where RIT exceeds $50 000 pa
What are the key GST issues?
What are the benefits that Fringe Benefit Tax must be paid on?
Fringe Benefit Tax (FBT) is payable on non-monetary remuneration or benefits provided to employees, including shareholder employers.
There are four main groups of taxable fringe benefits:
- Motor vehicles available for private use. The key word is "available" - FBT is payable even if the vehicle is not actually used privately as long as it is available for private use.
- Low-interest loans - loans to employees with lower than market interest rates or the IRD prescribed rate.
- Free, subsidised or discounted goods and services.
- Employer contributions to sick, accident ot death benefit funds, superannuation schemes, and specified insurance policies.
- Car parking for non company vehicles off premises of employer
- The GST registration threshold is taxable supplies of $60,000 or more.
- Services provided to non-residents may be GST zero rated.
- The annual turnover maximum for GST registration on a payments basis is $1,300,000.
- In the case of delayed settlements (more than 12 months), the vendor must account for GST on an invoice basis for supplies over $225,000 (even if registered on payments basis).
- The secondhand goods input tax credit for supplies between associated persons is the lowest of the following:- GST paid on the original cost of the goods from a third party, 3/23rds of the purchase price, or 3/23rds of the open market value.
- Upon GST deregistratrion, GST to be paid on assets held will be calculated on open market value (except for assets held before October 1986).
- Transfer of realty between GST registered persons is zero rated.
Do I need to be registered for GST?
The Inland Revenue Department requires individuals and businesses to be GST-registered when their total turnover in their taxable activity has exceeded, or is likely to exceed, $60,000 in a 12-month period.
Below this threshold you may apply for Voluntary Registration. The GST Registration form allows you to elect, within set criteria, the return taxable period (one-, two- or six-monthly) and the accounting basis you will use to complete you GST returns (Payments Basis or Invoice Basis).
Should you need to apply for GST registration, please contact us to ensure that the best option for you is chosen.
What is the difference between returning GST on a Payments Basis and an Invoice Basis?
When completing your GST return on a Payments Basis, you account for GST only when payment is made or received. It is important to note that cheques written but not presented by the end of the return period and deposits made but not yet cleared should be included in the returned amounts.
Generally, this accounting basis is only available to those entities that are either non-profit bodies, or those where the total value of taxable supplies in the last or next 12 months does not exceed $1.3 million.
Using the Invoice Basis you generally account for GST on your sales in the earliest taxable period in which you issue an invoice for the supply, or receive any payment. For purchases, you claim the GST in the earliest taxable period in which you receive a tax invoice, or make payment.
The Invoice Basis is different from the Payments Basis in that you account for debtors and creditors at the end of each taxable period. This can complicate the paperwork and have cash flow effects for you, so talk with us about which option is right for you.
I have just purchased a business asset and am GST invoice basis registered. How do I return the GST on the purchase price?
The way GST is returned on the purchase of an asset depends on the method used to pay for the asset. If you have paid cash for the asset, the full GST amount may be claimed at the time of purchase.
If, however, the asset was purchased on Hire Purchase, a Finance Lease or Operating Lease arrangement, the situation can be more complex. It is important to read the documentation associated with such an arrangement.
For Hire Purchase, generally you can claim the full GST on the purchase price of the asset. However, any associated interest and finance charges are not subject to GST and may not be claimed in the purchase price.
For Operating Leases, GST is claimed on each lease payment as it is made. Again, however, any interest or finance charges that may make up the payment amount are not subject to GST and should be adjusted for in determining the GST content of each payment.
Finance Leases are generally treated the same way as Hire Purchase.
Note that these are only guidelines and that, with the varying ways leases especially are structured, it is important to carefully read the documentation accompanying any finance arrangement to determine its appropriate treatment. Should you require further clarification over these guidelines and how they apply to you, please contact our office.
What happens when my GST outputs exceed $250 000pa continually and I am filing 6 monthly GST returns?
You are obliged to advise the IRD to change your GST return periods to 2 monthly or request in writing if you wish to continue to file 6 monthly to the Commissioner, who will take into account the following factors for consideration:
The registered person's history of filing and paying tax
The registered person's record keeping practices
Whether the registered person has been placed within category C (filing returns at six monthly intervals) before
The nature and volume of the registered person's taxable supplies where if the value of the taxable supplies increases steadily throughout the year and is foreseeable that it will remain above the threshold, you are likely to be directed to shift to 2 monthly filing. Otherwise, if the breach of threshold is due to seasonal or low volume/high value taxable supplies, you might be able to remain filing your GST returns 6 monthly.