: Proposed changes to Provisional Tax. 1. The elimination/reduction of Use of Money Interest (UOMI) from 1 April 2018 What is UOMI? It is interest paid/received on the difference between the amount of provisional tax paid and the actual amount of tax liability a business owes. Who will benefit? Small to medium businesses with turnover less than $5 million. What will change? Currently businesses estimate the amount of tax they think they will pay for the coming year and pay that amount in 3 instalments. What does this mean for our clients? As we use Xero, there's nothing our clients need to do.
What should happen as a result of the changes? Small to medium businesses should find paying provisional tax easier to deal with and their cash flow should also improve. 2. Contractors will be able to choose a withholding rate that suits their individual needs, instead of the tax rate being fixed. 3. Some of the other changes include: We keep up to date with the latest tax and accounting pronouncements and changes. Bright-Line Test | Sales of Residential Land Tax | Mahoney. The 'bright-line rule' (or 'bright-line' test) applies to residential properties purchased on or after 1 October 2015. This means you will pay tax on income you earn if you buy and sell a house within two years, unless it is your main home or another exception applies.
Everyone who buys, sells or transfers New Zealand property must provide a New Zealand IRD number to their property lawyer or conveyancer during the land transfer process, unless they are eligible for the main home exemption. If applicable, you will also need to provide your taxpayer identification number (TIN) from any overseas countries where you have to pay tax on your worldwide income. Applying for an IRD number If you don't have an IRD number, you can apply for one and the IRD will send it to you within 10 days of receiving your application.
To apply for an IRD number, you need a fully functional New Zealand bank account. Residential Property Main Home Exception Also, you are not eligible for the main home exception: Tax Checklists | Assets | Home Office | Motor Vehicle. : Depreciation. : Business Structures. As accountants, our clients often ask us what is the best way to structure their new business. The table below summarises the 4 main business types in New Zealand: The company is a very popular business structure in New Zealand. This is because the Director's personal assets are protected due to the limited liability nature of companies. As at June 2015 there were 550,000 limited liability companies registered. This means the company is a separate legal entity so the company's assets are treated separately to the Director's assets. Look-through companies (LTCs) are a new form of registered company with the benefits and obligations of ordinary companies but their owners need to elect for the company to be an LTC.
: GST. The GST (goods and services tax) is a 15% tax added to the price of most goods and services in New Zealand, most imported goods and some imported services. Why do I have to pay GST? GST is a tax levied by the government that you collect on behalf of the government. When must your register for the GST? When you carry on a taxable activity and your turnover (gross income) for the past, present or future 12 months was, is or will be $60,000 or more.
Can you voluntarily register for the GST even if your turnover is less than $60,000? Yes, you can. What is a taxable activity? An activity carried on continuously or regularly that supplies goods and services for payment. What are taxable supplies? These are the goods and services that are supplied. What are your responsibilities if you're registered for the GST? When must you file GST returns and pay any GST owing? You have until the 28th of the month following your taxable period. Why do some goods and services have no GST on them? GST isn't charged on: : Provisional Tax. Many of our clients find provisional tax confusing. One way of looking at it is to compare it to PAYE (pay as you earn) that employers deduct from the regular salary or wages they pay their employees. For people who don't deduct tax on a regular basis, provisional tax allows them to pay instalments so they meet most of their tax obligations throughout the year rather than facing a large tax bill at the end of the financial year.
Those who don't have tax deducted during the year include business owners, the self-employed, contractors, rental property owners and those who receive income from a partnership, estate, trust or from overseas. Provisional tax therefore helps such people to manage the payment of tax by spreading the burden through instalments. You need to pay provisional tax if the amount of tax left to pay (residual income tax) on your last tax return is more than $2,500.
There are three existing methods for provisional tax.