April is just around the corner and that means it's a New Financial Year for many of you. That also means it's time to get your records together - ready for preparing your 31 March 2023 Accounts and Returns. We'll be sending out our yearly Questionnaires shortly so keep an eye out for those as they feature a list of details we'll require to get started on your Financials. We know the next few months will be busy and there's a few key dates to keep track of on your calendar. To make things easier, we've listed these below: KEY TAX DATES – March, April & May 2023 - 20 March - PAYE - PAYE due on returns filed for February.
- 31 March - IRD Deadline for all 2022 returns to be filed.
- 7 April - 2022 Terminal Tax Due. We'll be sending out reminders for these this month.
- 8 May - GST - Return and payment for clients with a GST period ending 31 March.
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8 May - Provisional Tax Due. For Provisional Taxpayers with a 31 March Balance Date. We'll send out reminders for these payments in April.
Note: provisional tax due dates apply to clients who have a March balance date. Different dates will apply for those clients who have different balance dates. Check with us if you’re not sure. |
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Our Bank Details - An Update |
This is a final reminder that our old BNZ Account will be closed in April.
We ask that everyone please double check the Bank Account Number on our Invoices before making payments to ensure Internet Banking details for HBT are correct. Most of you have done this already, but this is just a gentle reminder that we will be closing the old BNZ Account.
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End of tax year tips: Review your property portfolio |
Major changes were introduced in 2021 limiting property investors’ ability to deduct interest payments on loans for residential homes from their tax bills. Interest on loans for residential properties purchased after March 2021 is no longer deductible. For residential investment properties bought before March 2021, there’s a phase-out of the old interest deductibility rules that will run until March 2025. |
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Property owners can deduct 75% of interest costs until 31 March 2023
- After that date and until 31 March 2024, property owners can deduct 50%
- Between 1 April 2024 and 31 March 2025, investors can deduct 25%
- After 1 April 2025, investors can no longer deduct any interest.
Property investors need to consider their interest charges and what the phase-out for the coming tax year could mean for their overall tax position. Planning ahead will help to ease the transition. There are exemptions for ‘new builds’ and certain types of property. Exemptions are applied based on the Code of Compliance (CCC) date for the property. A property is considered a New Build if it was added to the land on or after 27 March 2020. This means the exemption covers modular and relocated homes. Please talk to us if you think this might apply to your property. |
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Tax Planning – Provisional Tax |
If you had tax of more than $5,000 to pay in your last income tax return, you likely have to pay provisional tax for the following year. Usually, a taxpayer will find out they need to pay Provisional Tax in this way - through the filing of their return. However, it's not ideal to wait until a return is filed to find out you're a Provisional Taxpayer. There are ways Provisional Tax can be helpful though and being proactive can mean the transition to being a Provisional Taxpayer is not quite so difficult. But first, what is Provisional Tax?
Provisional tax is like paying progress payments on next year’s income tax. The amount you must pay relates to your expected profit for the year. In practical terms, the amount of provisional tax you’re expected to pay is based on the tax you were liable for in the previous year, often referred to as residual income tax (RIT). Does my RIT have to be more than $5,000 to become a Provisional Taxpayer?
Even if you are not over the $5,000 threshold required to pay provisional tax, you may still elect to do so, to spread your tax obligations over the year. This can help you manage cash flow and take away the pressure of paying a lump sum at the end of the year. This is especially helpful if you're expecting a significant increase in income but can just be a way of managing tax payments ahead of time. How can I plan ahead for Provisional Tax? -
At the end of each tax year, aim to get your records together as quickly as possible and to your Accountant for preparing your Accounts/Return. For those with a 31 March balance date, this can be started in April. Most Accountants work on a First in - First prepared basis so the sooner your records are received, the sooner you'll have your results for the year and can prepare for upcoming payments.
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Don't wait until the end of the year to start your tax planning. Make a judgement call if you think you've had a significant increase to your income and let your Accountant know. From there, part year reports can be completed from which to base an estimate on your income for the rest of the year. In turn, you should get a pretty good insight into your tax position and what to expect at year end.
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Whether you're new to business or have been operating for a while, it's never too soon to start a "Tax" savings account. To be safe, transferring about a third of any income received to such an account will provide an excellent financial buffer for paying those Provisional Tax instalments.
It's my first time as a Provisional Taxpayer, what now? For any business, the first-year provisional tax payment can be tough. You must pay last year’s income tax at the same time as the first instalment of next year’s provisional tax. If Provisional Tax has come as an unwelcome surprise to your cashflow, a Tax Pooling agency such as Tax Management NZ may be able to help. They allow an extended timeframe from which to pay any overdue or upcoming taxes and offer a lower interest rate charge than that applied by the IRD. |
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Trusts and Information Disclosures |
If you have a family trust or are a trustee for one, be aware of your obligations. Inland Revenue have specific requirements for active trusts to disclose information and these have altered slightly over the last few years.
From the 2021-22 income year onwards, trustees of complying trusts are required to provide more information to Inland Revenue on their annual returns. ‘Complying trusts’ are those that have a New Zealand resident settlor and New Zealand resident trustees.
The requirement to provide additional information applies to trustees of all trusts that have assessable income and that are required to file a return. Information to be provided includes: - Financial Statements filed along with the IR6 Trust Tax Return
- Details of Beneficiaries including their name, IRD number and date of birth along with details of any distributions made from the Trust to the Beneficiary and vice versa
Certain trusts that have minimal income may make a non-active declaration so that they are not required to comply with the Inland Revenue reporting obligations. |
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Minimum Wage to rise in line with Inflation from April 1st |
One of the important changes to come into play in the new financial year is the increase to minimum wage. The Prime Minister, Chris Hipkins has announced that the minimum wage will go up from April 1 2023, to $22.70 - a 7% increase from $21.20. The Starting-Out and Training minimum wage rates will be maintained at 80% of the adult minimum wage. Costs are increasing Even if you don’t employ one of the 175,000 Kiwis who earn minimum wage, this may impact your business. Wages rise steadily over time, and employees who missed out on a pay rise this year will probably expect one next, if your business has been thriving.
In addition to the rising cost of labour, inflation is forecast to put upward pressure on everyday items. That will likely increase your general running costs and the price of materials. Petrol prices are up, for instance, and supply chain issues have driven up the cost of many imported products. Time to review your pricing
Is it time to put your prices up? Ideally, your business should increase costs by a tiny amount each year, rather than by a big jump every five years, for instance. Small increases help prevent price shocks for customers, and keep your business in line with the rest of the market. Can you also cut costs? In some industries, customers are extremely sensitive to changes in price and you may have strong competition from others in the same market. If you don’t think increasing your prices is an option, or you still need to make more of a change, you may need to cut back your spending.
It's always beneficial to have a running budget for your business and now is a great time to set one up if you haven't already. It's also the perfect time to take a look at your current budget and highlight any areas where you can reduce costs. |
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GST Special Alert - What do I have to do before 1 April 2023? |
New rules modernising GST invoicing and record-keeping requirements apply from 1 April 2023.
The key change is removing the requirement to issue and hold a “tax invoice” document (which meets certain prescribed requirements on details required), and instead having GST requirements met provided specific GST information is held through various business records, for example commercial invoices or agreements. |
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Tax invoices are replaced by taxable supply information (TSI). This is a set list of information that must be provided to any GST-registered customers within 28 days of the date of supply. Information over and above current tax invoice requirements includes: - the ”date of the supply” — when the time of supply is triggered, rather than the current tax invoice requirement of the date on which the tax invoice is issued
- for supplies over $1,000, the TSI must include the recipient's physical address (if that information is available).
For supplies over $200, the changes mean it is mandatory to issue TSI to GST-registered customers within 28 days of the date of supply, and for supplies made to non-GST registered persons you have 28 days from when the customer requests the information. |
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Easter weekend is from the 7th to the 10th of April this year. We know many of you will be busy planning for the Financial Year ahead, but we hope you get some time for rest and relaxation as well. We wish you all a safe and happy Easter weekend. |
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