Tax Facts

Taxation Facts

At BASNZ we have drafted the following taxation facts as we thought the following information on various tax issues would be useful. Please understand that personal circumstances always vary so please ensure you contact us for specific advice. We care for our clients and their financial requirements and are dedicated to provide a tailored solution for your individual requirements.

Portfolio Investments Entities (PIEs)

Widely held investment entities which are tax resident in New Zealand can now take advantage of New Zealand’s PIE tax regime. To qualify as a PIE they must be widely held and cannot hold more than 20% of any company or unit trust they invest in (subject to some exceptions). A PIE is exempt from tax on gains from the sale of shares in New Zealand resident companies & in Australian companies listed on an approved Australian Securities Exchange index. PIEs are not taxed like companies. Instead their income is taxed only once – either to the PIE (if the investor is an individual) or the investor (if the investor is a company or another PIE). For individuals the PIE pays tax at a rate no higher than 28%. Non-resident investors in PIEs pay no tax on income from outside New Zealand. 
Team of tax experts discussing the financial statements
Professionals analyzing the financial reports for taxation

Scheduler Payments (formerly withholding payments) 

If you are working on a contract basis this means you are and independent contractor rather than being an employee. You will be taxed at a flat rate referred to as scheduler tax. If scheduler tax is being deducted from your income as opposed to PAYE deductions it may not always be made known to you. Scheduler payments are common in activities such as promotional work, newspaper delivery, temp work, laboring& acting/modeling.
 
Tip: If you are receiving Scheduler payments you may be able to claim for expenses that were directly related to the work you were doing. In order to claim, make sure you keep all of your receipts and records. If you want to claim petrol as an expense, you will need to keep a log or mileage book.

Taxpayer Penalties

Taxpayers who do not meet their tax obligations may face penalty or interest charges. To avoid such charges, you should pay the full amount of tax you owe by the due date. The main kinds of charges for failing to meet tax obligations are:
 
- A shortfall penalty where the correct amount of tax is higher than the amount you paid (due to under payment)
- A late payment penalty if you post or deliver a payment to us after the date it was due
- A late filing penalty if you do not file a return by the due date
- Interest on the tax you owe if you have underpaid your tax. The interest rates charged are based on market rates.
- EMS non-payment penalties where you file an employer monthly schedule but do not pay the full amount payable on that schedule. These penalties are in addition to any of the other penalties that may also then be payable. For more information refer to the IRD's website: www.ird.govt.nz/how-to/debt/penalties.
Team of tax payers
Professionals consulting the financial services

Depreciation

Depreciation allows for the wear and tear on a fixed asset and must be deducted from your income. You must claim depreciation on fixed assets used in your business that have a useful lifespan of more than 12 months. Not all fixed assets can be depreciated. Land is a common example of a fixed asset that cannot be depreciated. You will have to keep a fixed asset register to show assets you will be depreciating. This should show the depreciation claimed and adjusted tax value of each asset. The adjusted tax value is the asset's cost price, less all depreciation calculated since purchase. In most circumstances you can choose between straight line and diminishing value methods of calculating depreciation. You do not have to use the same depreciation method for all your assets, but you must use whatever method you choose for an asset for the full year.
 
The method used for an asset can be changed from year to year.
 
- Straight Line Depreciation 
  Depreciation is calculated on the original cost price of the asset and the same amount is claimed each year. If you are registered for GST the cost excludes any GST you have already claimed in your GST return.
 
- Diminishing Value Depreciation
  The amount of depreciation is worked out on the adjusted tax value of the asset. This value is the original cost less any depreciation already claimed in previous years. If you are registered for GST the original cost price should not include GST you have already claimed in your GST return.
 
- Depreciation Rates 
  The table below shows the depreciation rates for certain commonly used assets. New assets acquired after 1 April 1995 can be depreciated at these rates plus a 20% loading. Use the IRD's depreciation rate finder for a quick way to find the rate for assets in the 1996 income year or later.
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