PKF International
PKF Poutsma Lemon Limited
PKF Poutsma Lemon Ltd, Keri Keri, New Zealand
Accountants and business advisers


Revenue Minister Michael Woodhouse today announced tax measures to help those affected by the Kaikoura earthquakes.

"This is a difficult time for many in the Kaikoura region and those affected by the earthquakes should be looking after themselves and their families first and foremost, rather than worrying about not meeting their tax obligations," Mr Woodhouse says.

"Following an Order in Council this morning, Inland Revenue will waive use of money interest when a person is prevented from paying on time as a result of the recent earthquakes.

"This applies to all late tax payments and at this stage, is scheduled to expire on 31 January 2017."

Mr Woodhouse also welcomed Inland Revenue's decision to cancel late filing and late payment penalties for all affected taxpayers.

"Yesterday was a PAYE filing date, but while people are trying to put their lives back in order, they shouldn't be worrying about missing filing dates if the quakes have prevented them from filing," Mr Woodhouse says.

"I'm also very pleased that IRD has announced discretions on income equalisation for farmers and fishers who are significantly affected by the earthquakes."

"Normal tax rules do not take into consideration extraordinary events like last week's earthquakes. For Kaikoura and surrounding areas, it is important we provide some more flexibility to reflect the reality of the situation they face."

Sourced from https://taxpolicy.ird.govt.nz/news/2016-11-22-quake-relief-measures

IRD is stepping up recovery efforts overseas


IRD is in talks with foreign tax departments as it steps up efforts to recover money owed by overseas-based student loan borrowers.

Kiwis living overseas accounted for more than 90% of the $1.07 billion overdue repayments to the Student Loan Scheme as at 30 June 2016.

IRD said an information exchange agreement with Australia had identified 10,400 student loan borrowers living across the Tasman.

They are also working with debt collection agencies in other countries, but believe around 65% of overseas borrowers are in Australia.  

In 2014, the government amended the Act to allow for border arrest of borrowers in default on their repayments. The first arrest was made in January 2016, with two further arrests since.

There was a 17% increase in loan repayments from overseas borrowers in the last financial year. IRD had been working on their communication with borrowers and trying to make it easier for repayments, but couldn't say whether the increase was in the second half of the financial year after the first arrest was publicised.

At least 18 Kiwis living in Australia declared bankruptcy to wipe their student loans (after the Government had done everything possible to recover the debt).  10 of the biggest overseas debts wiped over the past 4 years each exceeded $190,000!

If you are overseas and remain as such, your repayment obligations are based on your loan balance.

  • Loan balance under $1,000 = Repayment obligation $1,000
  • Loan balance $1,000-$15,000 = Repayment obligation $1,000
  • Loan balance $15,000-$30,000 = Repayment obligation $2,000
  • Loan balance $30,000-$45,000 = Repayment obligation $3,000
  • Loan balance $45,000-$60,000 = Repayment obligation $4,000
  • Loan balance over $60,000 = Repayment obligation $5,000

Repayment arrangements may be available if you are significantly behind in your repayment obligations (if you aren't stopped from leaving the country first). You may also have part-year overseas-based or NZ-based obligations if you leave or return during a tax year.

If you are living in New Zealand and earning salary or wages, you should be using a student loan (SL) repayment code so that your employer deducts the right amount of student loan repayments.

If you are living overseas, travelling overseas or would like some advice about your student loan, contact our office today.

Originally sourced from nzherald.co.nz

Donald Trump - President of the United States of America


The controversial Donald Trump has won the United States Presidential Election (as I'm sure you know by now). 

Stocks on Wall Street traded higher following his promise to cut corporate tax rates from 35% to 15% and to increase employment by rebuilding its aging infrastructure. 

The NZ dollar fell to 73.00 US cents compared to 73.70 cents as the polls closed. 

His anti-trade position and opposition at the TPPA could affect our export market which currently earns NZ over $5 billion a year in products and $2 billion a year in services. 

The Prime Minister has congratulated Mr Trump and says he looks forward to continuing a strong relationship with the US. 

As he edged closer to victory, Google searches for "Move to New Zealand" and "Places to move if Trump wins" jumped exponentially! 

It will definitely be an interesting 4 years!

Would NZ change their habits with a tax on fast foods and soft drinks?


The NZ Herald states some Kiwi's would change their eating and drinking habits if the Government imposed a 'fat tax' on fast-food and a 'sugar tax' on soft drinks.

 

If the Government imposed a 'fat tax' on fast-food:

  • 73% might reduce their buying frequency
  • 24% might alter their habits with a twenty percent tax and a further twenty eight percent might change with a twenty five percent tax
  • 14% would stop buying altogether

 

If the Government imposed a 'sugar tax' on soft drinks:

  • 39% would change their fizzy drink habits
  • 36% might change their habits with a fifty percent tax
  • 19% might buy fizzy drinks less often with a twenty percent tax and a further twenty percent might change with a twenty five percent tax

 

In New Zealand, 40 people are diagnosed with diabetes each day and 260,000+ people live with the disease; double that of 10 years ago. Obesity is a risk factor for type 2 diabetes and NZ has a 31% rate of obesity; triple what it was in 1970.

 

Diabetes NZ has launched a comprehensive online support and self-management "toolkit" to help people with diabetes to live well. Diabetes is not only a drain on our health system, it is a life-changing and life-limiting disease that can lead to stress, anxiety and poor self-care.

 

A recent article suggests the tax on soft drinks in Mexico could prevent hundreds of thousands of adults from developing diabetes and cardiovascular disease, saving approximately $1 billion in healthcare costs over the next 10 years.

 

Would a 'sugar tax' on soft drinks and a 'fat tax' on fast food affect your drinking and eating habits?

 

Consultant attacks farm tax changes


The Inland Revenue Department appears to be buying a fight with farmers and their tax advisers as it seeks to change a rule that has been in force for more than 50 years.

Polson Higgs tax partner Michael Turner said most would not see an incentive to change something that has worked well for the last 50 years.

"However, the IRD, after prescribing the practice for farmers' farmhouse expenses since the 1960s, has decided in 2016 to rewrite the rules on the tax deductibility of these costs."

The IRD had issued a draft interpretation on how some costs relating to the farmhouse, such as rates, insurance and repairs and maintenance, should now be treated, he said.

The proposals included automatically reducing the percentage of farmhouse costs that are treated as part of a business from 25% to 15%.

When farmhouse costs were in excess of 20% of total farm costs, the farmer would need to establish their own percentage.

The inference was it would be less than 15%, Mr Turner said.

Business people often had offices at home and they could claim a percentage of their house expenses as office costs.

However, farmers typically worked from their house for meetings with professional advisers, working on their budgets, feeding workers or even mixing lamb formula during lambing season.

"A lot happens in the home for farmers. You feed your bank manager at the kitchen table, or talk to them in the lounge. Even workers wanting to go to the loo have to use the bathroom.

"And IRD has also slipped in a change from farmers able to claim 100% of home phone to 50% - talking about having a go at a sector when they are down."

According to the IRD's existing rules, interest and rates are assigned to the farm only and farmers can claim 25% of house expenses as tax-deductible.

Rates would need to be apportioned to the farmhouse if the proposals were adopted.

The change to 15% from 25% was not a significant one regarding money but it was a significant change to a rule that had lasted more than 50 years, Mr Turner said.

"We are not convinced the department's new suggested percentages has any more science behind it than the accepted practice for the last 50 years.

"We are also unconvinced the small amount of revenue that may be raised based on the proposed approach will come close to offsetting the compliance cost of following the new proposed rules."

It had taken the IRD 26 pages to articulate its policy and how it might be applied.

But nowhere in the 26 pages did IRD justify the reduction from 25% to 15%, he said.

"It simply starts from the proposition that the previous policy was a 'concession' negotiated with the farming industry."

Inland Revenue is seeking comments by December 22, with the policy coming into effect in the 2017-18 tax year.

At a glance:

• IRD wants to change the rules on how farmers claim office expenses.

• Phone expenses reduced to 50% from 100%.

• Compliance costs likely to rise Science behind changes questioned.

Sourced from www.nzherald.co.nz

Myth-maker, cut me a tax!

There's a certain inevitability about talking up tax cuts as soon as we're within coo-ee of a general election. And no sooner are council elections out of the way than the next cycle starts with such cuts dangled as a possible prize.

Not that we can afford them. But being able or not able to afford something never stops politicians telling voters they can have it if it helps them win re-election.

New Zealand is one year away from seeing whether National can win four terms straight, a feat not achieved since the Holyoake years (1960-1972) when the country was a very different place to what it is now: heavily-subsidised, straitjacketed in regulation, yet living comparatively well in semi-isolation off the fat of the land.

It was the greatest socialist democracy on Earth, with the public owning around 74 per cent of everything. The aptly-named quarter-acre half-gallon pavlova paradise, with full employment, virtually no overseas debt, and health and education statistics the envy of almost every other country.

And that was under a National government. How times change.

Now we have lost 90 per cent of our public assets for no tangible return, have a permanent true unemployment rate of around 10 per cent, a galloping debt crisis with around $500 billion owed (public and private), and are plunging rapidly down the table in health and education statistics. Not to mention the loss of the ability for the young to gain that quarter-acre home of their own.

Again, under a National government.

The difference is the Holyoake era came at the apex of Keynesian economics, which principally expected government to be the main controlling influence of an economy. Whereas once the neoliberal Friedman school took hold in the 1980s, government was expected to reduce both in size and influence, leaving "the markets" in control and the public at their mercy.

Not the smartest idea, but one that has taken hold so vigorously that despite shocks like the recent GFC causing a brief lurch back to the Keynesian approach, Prime Minister John Key can still parrot this week "we philosophically believe in less tax and smaller government".

But as John Maynard Keynes observed, "Capitalism is the astounding belief that the wickedest of men will do the wickedest of things for the greatest good of everyone."

So as soon as creative accounting manufactures an apparent budget surplus, the first thought is not to build more hospitals or schools, or support industry to employ more people, or improve the lot of the homeless and working poor, or even to resume government contributions (as Bill English promised he would) to the NZ Super Fund; no, the first thought is, "let's have a tax cut".

After all (they reason), a tax cut will keep us in power, doing less at greater cost - a cost that means more of the pie for our mates. What could be better?

But the announced $1.8 billion operating surplus ignores there are significant "actuarial" holes in the accounts totalling nearly $10b: $5.1b for ACC losses, $2b Cullen Super Fund losses, $1.5b Emissions Trading Scheme liability from increased carbon cost, plus another $1.3b in net Crown debt. So in reality there's no extra money, only extra liabilities.

When Key's government took power, Nick Smith called a similar $4.8b hole in Labour's books a "financial crisis". But that won't stop National pulling Key's guestimate of $3b out of the virtual hat next year for an election bribe tax cut, will it?

Nor, sadly, stop voters believing we can afford it. Seems only another Great Depression could now shake the myth of neoliberal competence.

Sourced from www.nzherald.co.nz

Deductibility of Farmhouse Expenses


On 21 October 2016, Inland Revenue released draft interpretation statement: "Income tax - deductibility of farmhouse expenses" for consultation. 

The interpretation statement considers the deductibility of expenditure relating to a farmhouse that forms part of a farming business.

The current concession which allows a flat 25% deduction for farmhouse expenses without any evidence, as well as 100% deductions for interest and rates is to be withdrawn. 

However, in situations where any compliance costs of calculating the private use element far outweighs any likely deduction, the interpretation statement allows some sole traders and partners of partnerships to claim an automatic 15% deduction (a more realistic amount) for farmhouse expenses and 100% deductions for interest. These deductions are allowed when the cost of the farmhouse is 20% or less than the total cost of the farm. Other sole traders and partners of partnerships may be able to adopt the measures recently proposed in cl 62 of the Taxation (Business Tax, Exchange of Information, and Remedial Matters) Bill (clause 62 proposes inserting new s DB 18AA to provide a square metre rate method to determine the amount of a deduction for a building that is used partly for business and partly for other purposes). 

Any changes from consultation will apply from the start of the 2017–18 year.

Source: www.ird.govt.nz 

More Full-Time Work Lifts Weekly Earnings

 
Median weekly earnings from paid employment rose $44, to reach $924, between the June 2015 and June 2016 quarters, Statistics New Zealand said today. This increase of 5.0 percent was the largest annual increase since the June 2007 quarter. Paid employment includes both wage and salary earners and self-employed people.

"A rise in the proportion of full-time wage and salary earners, and the number of hours being worked, together pushed up median earnings for workers," labour and income statistics manager Mark Gordon said. Full-time workers (working 30 or more hours) typically have higher weekly and hourly earnings than people in part-time employment.

Workers living in Auckland, Waikato, Gisborne/Hawke's Bay, and Canterbury received significantly higher median weekly earnings from paid employment than a year ago. In the North Island as a whole, earnings increased 7.0 percent (up to $944 a week), compared with 2.0 percent (to $880 a week) in the South Island.

"While the increase in weekly earnings is similar to that before the 2008 economic downturn, increases in hourly wages were more modest," Mr Gordon said. "Median hourly earnings from wages and salaries increased 2.9 percent, similar to increases in the past seven years, but well below the 6.1 percent increase 10 years ago."

 

June 2016 quarter

Annual change

Median weekly

Median hourly

Median weekly

Median hourly

($)

($)

($)

(%)

($)

(%)

Earnings from paid employment

924

23.22

44

5

0.54

2.4

Earnings from wages and salaries

937

23.49

55

6.2

0.66

2.9

Earnings from self-employment

720

21.31

30

4.3

2.13

11.1

Income from government transfers

319

...

6

2.0

...

...

 

Sourced from www.stats.govt.nz 

Thinking of buying a house? New rules just made it harder

Property investors will need a 40 per cent deposit under tough new restrictions. Restrictions to lending limits on residential properties are also being extended nationwide. The new rules are being urgently introduced in an attempt to put a lid on New Zealand's spiralling property prices.

Reserve Bank Governor Graeme Wheeler has outlined the new rules, and told banks they will be expected to act immediately. The new loan-to-value ratios (LVRs) would take effect on September 1, but the Reserve Bank wants banks to "observe the spirit of the new restrictions" in the lead-up to the new policy.

All the major banks (Bank of New Zealand, ASB Bank, ANZ Bank New Zealand, Westpac and Kiwibank) said they were supportive of the move and have since acted early to introduce restrictions on lending to property investors as part of the Reserve Bank's bid to slow the heated housing market.

New rules - to begin September 1

Investors 
• Restrictions for investor lending extended from nationwide from Auckland only
• Banks will be forced to require a 40 per cent deposit - up from 30 per cent - for at least 95 per cent of the loans they make in this area.

Home buyers
• Restrictions for owner-occupier lending extended from Auckland to nationwide.
• Required deposit level remains at 20 per cent for at least 90 per cent of bank lending.

Exemptions
- The exemption allowed under the current LVR policy will continue to operate, including for construction lending and major non-routine repairs of dwellings

The Reserve Bank said to "simplify" the LVR policy, it has proposed removing the distinction between lending in Auckland and the rest of the country. Last month, the Reserve Bank left the official cash rate at 2.25 per cent, but Wheeler warned investors could soon be targeted by new LVR rules. The Reserve Bank introduced LVRs of 20 per cent in 2013 to rein in the housing market, and last year it raised the limits to 30 per cent for investors in Auckland. It will consult on the changes until August 10.

The announcement comes after Prime Minister John Key expressed frustration about the Reserve Bank's response to rising house prices, saying that it should not need any more time to investigate stricter rules for property investors and should "just get on with it". Reserve Bank deputy governor Grant Spencer on July 7 said that the bank was considering new LVR restrictions, but would not introduce them before the end of the year.

Do you currently have an existing loan application? See how your bank will treat the new rules application date.

Kiwibank has "communicated the new restrictions to staff and will not accept applications that are not compliant with the proposed new speed limits". Kiwibank said it will honour existing commitments made to customers and continue to "prioritise first home buyers and owner-occupiers as we have in the past."

ASB said existing approvals and pre-approvals above the new 60 percent loan to value ratio would be honoured until their documented expiry date.

BNZ said "all investor home lending applications from today will require a 40 percent deposit".

ANZ, the country's biggest lender, said it would extend the maximum loan to value ratio of 60 percent for property investors across New Zealand, after previously only requiring a 30 percent deposit in Auckland. It's also extended the 85 percent LVR in Auckland owner-occupied homes across New Zealand. The bank said it intends honouring all existing pre-approvals but any renewals will be subject to the new policy.

   

Law changes for Residential Landlords

Law changes to the Residential Tenancies Act are now in force (effective from 1 July 2016). Changes to the Residential Tenancy Act (RTA) aim to reduce fire-related injuries and deaths and to make homes warmer, drier and safer for the million New Zealanders who live in rental accommodation. Here is the Key information about some of the new changes direct from Ministry of Business, Innovation and Employment.

Smoke Alarms
From 1 July landlords will need to have working smoke alarms installed in all their residential rental homes. 

- There must be a minimum of one working smoke alarm within 3 metres of each bedroom door, and in a self-contained caravan, sleep out or similar there must be a minimum of one working smoke alarm. 
- Long life photoelectric smoke alarms are now required where there are no existing alarms. When existing smoke alarms are replaced, the replacements must be long life photoelectric smoke alarms. Hardwired smoke alarms are also permitted.
- The landlord is responsible for making sure smoke alarms are in working order at the beginning of every new tenancy.
- Tenants will be responsible for replacing worn-out batteries in the smoke alarms and informing their landlord of any defects.

It is an unlawful act for tenants to cause or permit any interference with, or to render inoperative, any means of escape from fire – which includes smoke alarms. The maximum fine for this offence is $3,000. 

Insulation
All residential rental homes in New Zealand will be required to have insulation to keep a home warm in winter and cool in summer. Social housing (where tenants pay an income related rent) must be insulated by 1 July 2016 and all other rental homes by July 2019. 

Landlords are required to provide a statement on the tenancy agreement for any new tenancy commencing 1 July 2016 about the location, type and condition of insulation in the rental home. 

Installing conductive foil insulation in residential and rental homes is now banned.

Insurance cover - information for landlords
It is important that landlords have some form of insurance cover for their rental properties and that they check with their insurer to be clear about landlord and tenant obligations regarding smoke alarms and fires. Landlords should be aware that:
- Where tenants cause a fire through carelessness (negligence) which damages or destroys the property, they may be entitled to immunity from liability if the landlord has insurance coverage.
- Tenants' immunity exists unless the fire is caused intentionally by them or their guests, by a criminal act on the property (such as manufacturing methamphetamine), or if the tenants have caused the landlord's claim to insurance coverage to be irrecoverable.

Tenancy abandonment process
The new law introduces an expedited process for a landlord to regain possession of their rental property when the property has been abandoned.

The expedited process for regaining possession will enable a Tenancy Adjudicator to decide the case based on evidence landlords have provided in their expedited abandonment application. Landlords will not need to be present when the Adjudicator considers the evidence under this new process.

The Tenancy Tribunal Application Online form has been updated to include the new expedited abandonment process. 

Enhanced enforcement function
The Chief Executive of the Ministry of Business, Innovation and Employment will have greater enforcement powers, including investigating and taking proceedings to the Tribunal on behalf of the tenant, even without the tenant's consent.

Retaliatory notice
It is now an unlawful act for a landlord to end a tenancy in retaliation for a tenant exercising a right under the tenancy agreement, the relevant law, or by making a complaint relating to the tenancy. This is called a 'retaliatory notice' under the Residential Tenancies Act. Tenants who take direct action against landlords will now be able to challenge an alleged retaliatory notice up to 28 working days after it has been issued.


 

Home     About     Services     Links     News     Careers     Events     Tools     Contact Us    

 

     SitemapContact Us | Websites for accountants by Wolters Kluwer

Keep in Touch

Register for free email updates from PKF Poutsma Lemon

* essential