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Repairs & maintenance on buildings – deductible or capital?

A common question we receive from clients who have rental properties (commercial or residential) is what is deductible as repairs and maintenance, and what are capital improvements?This is an area of constant discussion between clients and us and recent reviews by IRD into various clients' tax returns have thrown the spotlight back on these costs....

February 7, 2024

Are donations tax deductible?

New Zealanders are a generous lot, and many of us like to give back to our communities, charities and not-for-profit organisations by way of donation. Donations come in several forms including donations of cash, donations of trading stock and donations of our time/services. This article will look at each type of donation and discuss what donations are tax deductible and the rules around this....

February 2, 2024

Claiming deductions for the business use of motor vehicles

We were recently asked a question about motor vehicle deductibility by one of our clients. The same questions will likely apply to most business owners wanting to maximize motor vehicle deductions, so we’ve shared our answer below.Richard is a shareholder of Bird Nests Limited and has purchased a company vehicle that he will use for business only. Richard advises that he has no private usage of the vehicle.Can Bird Nests Limited claim 100% of the GST on the cost of the vehicle and claim all th...

November 28, 2023

Deductibility Of Entertainment Expenses

The days are getting longer, and Christmas work functions are about to get into full swing. This article looks at an often-confusing area of business expenses: deductibility of expenses regarding food and drink and entertaining clients and staff. Before diving into some specific examples, all deductible expenses must be incurred in earning income or have a nexus to carrying on your business. If the expense is of a personal nature (even if paid out of the business bank account), it is non-de...

November 8, 2023

Election Tax Policies - Depreciation on Commercial Buildings

Both National and Labour campaigned on removing the option to claim depreciation on non-residential buildings. This change will enable the government to raise $525 million a year to use towards other tax policies, such as administering income tax cuts and increasing working for families. It is important for owners of non-residential buildings to understand this change because: Owners will no longer be able to deduct depreciation on commercial buildings; they will pay more tax. &nb...

October 24, 2023

Making Smart Decisions When Repaying Debt

After selling a property, the vendor is hopefully left with some cash after repaying debt. The vendor then has options to consider about what to do with this cash: spend it, invest it, or repay other debt. This decision will come down to each client’s individual goals and financial situation. It is important to consider the tax implications when considering what to do with the leftover cash from a property sale. The tax implications will also depend on which entity owned the property bein...

October 11, 2023

Are you buying a business, or buying shares in a business?

There is a fundamental difference between buying a business and buying shares in a business (company). The differences are significant, and they can cause confusion. For example, what happens to the cash in the bank account on the day the business is sold? This depends on if the business is being sold or if the shares in the business (a company) are being sold. This article will explore the key differences between buying a business and buying shares in a business to help potential investors...

October 11, 2023

Evans Doyle in the Cambridge News

Tim and Jane were recently profiled in the Cambridge News for a people in the business section. They were asked various questions about their business success, what a usual day looks like, advice to business owners, and more. Read the article below (you may need to zoom in due to the text size)....

August 17, 2023

Cashflow Forecasting

Cashflow forecasting is critical to the survival and growth of any business, without establishing targets for the year you may be flying blind.We find that our most successful clients are those who have set targets each year and monitor their results on a regular basis.  Our team are here to help you to set, monitor and manage financial targets and improve business performance.A cashflow forecast will set monthly financial targets and provide you with a monthly breakdown of all your income ...

August 14, 2023

Are your casual employees really casual?

Casual employment agreements are often used to support businesses during busy periods. However, there are implications if there are changes resulting in regular work pattern. A true casual employee has: ·         ‘as needed’ shifts with no guaranteed hours and can decline to work·         has no regular work pattern·         no ongoing expectation of employment...

June 27, 2023

Dividends - An Overview

A dividend is a distribution of profits a company makes to its shareholders. Sometimes, they can be confusing, especially the extra 5% dividend withholding tax (DWT) and the difference between cash and non-cash dividends. This article explains dividends in more detail.What we have noticed is that our most successful clients understand accounting and tax well. They know the rules of the game and then can tweak and adjust their game plan to win. Our aim is to extend this knowledge to our clients s...

June 8, 2023

2023 Budget: Trust tax rate will increase to 39%

In May, the government released their budget which announced a tax change to the trust tax rate. From 1 April 2024, the trust tax rate will increase from 33% to 39%. It is possible that the increase in the trust tax rate may not go through considering the election later this year (and the limited time to pass legislation beforehand) - watch this space.When the government increased the top individual marginal tax rate to 39% for income above $180k in 2021, the government was advised by ...

June 8, 2023

Minimum Wage Increase from 1 April 2023

There are four significant changes occurring to payroll from 1 April 2023.1.  Adult minimum wage (over 16 years old) will increase by $1.50 to $22.70 per hour and the starting-out and training minimum wage will increase by $1.20 to $18.16 per hour2. The annual ACC earner levy rate is increasing from 1.46 percent to 1.53 percent 3. The annual ACC earner levy threshold is increasing from $136,544 to $139,3844.  The student loan threshold is increasing to $439 per week...

March 1, 2023

End of Financial Year Checklist

As we approach the end of the financial year, it's important to start thinking about preparing your financial statements. To ensure that everything is accurate and up-to-date, we recommend that you take the following steps:Remember to complete a stock take. This will help you to determine the value of your inventory at the end of the financial year and will also help you to identify any discrepancies.Ensure that you have an accurate work-in-progress (WIP) report. This will help you to determine ...

March 1, 2023

Trusts: Deemed Settlor Risks

Trustees of a family trust often consider distributing income to beneficiaries (sometimes those on a lower marginal tax rate). They may not necessarily make a cash payment. This arrangement creates a beneficiary loan between the trust and the beneficiary; the trust owes the money to the beneficiary because they have been paid the income (by way of income distribution for tax purposes) but not withdrawn the cash.There are new tax issues that can arise from beneficiary loan accounts because of the...

March 1, 2023

Paying Employees When Disaster Strikes

With the recent cyclone and flooding affecting regions throughout the North Island, here are some important points to remember regarding your employees and payroll.  First and foremost, ensure the safety of your employees and yourself. During and after emergencies, honest and open communication is vital to maintaining relationships. Remember your employees may be under additional stress....

February 20, 2023

GST Accounting Basis: Payments, Invoice, or Hybrid

When registering for GST, taxpayers have a choice to register on an invoice basis, payment basis, or hybrid basis. For businesses that meet the criteria, we usually recommend registering on a payments basis because it is simpler, has less administrative time and costs, and GST payments align with regular cash flow cycles.This article explains the GST payment basis criteria and why we usually recommend this option....

January 31, 2023

Home Office Claim

A home office claim represents a tax deduction for the portion of your home that you use as an office. It’s calculated as a percentage of your total home expenditure.You would pay for these costs regardless if you are in business or not, so why not make the most of an extra tax deduction to reduce the tax that you pay?Most small and medium businesses use a portion of their home as an office. Make sure that you claim a deduction for these expenses.This article reminds you about calculating the ...

January 24, 2023

Taxing Subdivisions on Own Home

With rising interest rates, many clients are looking at opportunities to utilise an existing property to develop, make a profit and pay down debt. While the below example looks at a subdivision and construction of two townhouses, other clients are looking at AirBnB for residential rental properties (which are higher yielding but more work) or renting out a spare room at home. We’ve recently come across the below question (name and location changed for privacy reasons). Question Justin bought a...

November 30, 2022

Significant impacts of removing interest deductibility on residential property

In March 2021, the government announced the removal of interest deductibility on residential rental properties. For properties acquired before 27 March 2021, the removal of the interest deduction is being phased in over the next five years, as outlined below. Date interest incurred Percentage of the interest that can be claimed 1 April 2020 to 31 March 2021 100% 1 April 2021 to 30 September 2021 100% 1 ...

November 30, 2022

Company Wind-up Process

Once a business sells (or stops trading) or a company sells its property (real estate), we recommend winding up the company. This is important because, otherwise, IRD will continue to expect a tax return for each financial year (even if the company does not trade), and the Companie's Office will require an annual return filed each year. This article outlines the steps required as part of the company windup process. There are other options available (such as more formal liquidation). However, in ...

July 26, 2022

Personal Services Attribution Rules

Specific income attribution rules apply when an individual provides personal services through an associated entity (such as a company, trust, or partnership). The purpose of these rules (tax legislation) is so that the individual does not avoid a higher income tax rate by diverting income to an associated entity. This article explores the income attribution rules in more detail and outlines when they apply and the exemptions. There may be valid commercial drivers for an individual to use an asso...

July 26, 2022

Summary of Trusts

A trust can be an efficient vehicle that can provide asset protection, allow for succession planning, and may provide incidental tax savings. Profits are taxed at 33% compared to the top marginal tax rate of 39% for individuals with income over $180k. This article looks at a brief overview of the nature of trusts and trustees. A trust is an arrangement where a person (the Settlor) settles on a person or persons they trust (the trustees) property for the benefit of others (the beneficiaries) on t...

July 26, 2022

Accounting Principles

Understanding accounting is crucial. It is one of the most important skills for business owners, investors, and creating wealth. High net worth families and our most profitable clients understand accounting and the difference between cash and profit. This article’s purpose is to help you understand one of the core concepts of accounting, accrual accounting. Accrual accounting is an accounting method where revenue or expenses are recorded when a transaction occurs, rather than when cash is rec...

May 6, 2022

Company Office Annual Returns

Every company in New Zealand is maintained in a company register called the New Zealand Companies Office. This register has a list of every single company in NZ (both private and public), and includes the key details of the company; its name, incorporation date, directors, shareholders, founding documents, shareholding changes, etc. This information is available to the public to view, and search. For example, Air New Zealand Limited (a listed company) details can be found here. This is all publi...

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