News
Who says Aussie is better for tax!
The Australian budget set tax rates for the next two years so how do we compare. The following table sets out tax payable using the basic scales so Working for Families, Medicare etc are not included. Note how Australia “whacks” non-Australian tax resident (“NR”) earners who pop over for a few months!
| Income | NZ Tax | Oz Tax | OZ NR tax |
| $37,000 | 5,459 | 3,388 | 12,025 |
| $48,000 | 7,420 | 6,963 | 15,600 |
| $70,000 | 14,020 | 13,138 | 22,750 |
| $80,000 | 17,320 | 17,213 | 26,000 |
| $100,000 | 23,920 | 26,213 | 33,400 |
| $120,000 | 30,520 | 35,213 | 40,800 |
| $140,000 | 37,120 | 44,213 | 48,200 |
| $160,000 | 43,720 | 53,213 | 55,600 |
So, at a basic tax rate level, above $80,000 New Zealand has lower rates and don’t pay Medicare, capital gains tax or stamp duty – food for thought!!!
Hanover Finance Investors may be able to claim tax losses
Investors affected by the Hanover Finance – Allied Farmers debt-for-equity swap may now be able to treat any loss on share sales as ax deductible.
Investors who were owed money by Hanover can now ask us to assess their Proposed deduction for the loss.
90 Day Trial Period Changes
The 90 Day Trial Period is not offering employers the protection most people expect. Recent court decisions now obligate employers to ensure their recruitment processes enable them to prove they have acted fairly in their recruitment processes. Employers are coming to grief by holding 90 Day Trial Periods and invoking the dismissal clauses only to find they were not entitled to hold a 90 Day Trial Period at all. The Employment Court decisions on two cases are significant.
Employers’ pre-employment systems (including letters of offer) should contemplate:
- Advise candidates a 90 Day Trial Period is in the intended agreement and while the employer wishes to include it in the terms and conditions it needs to be negotiated and agreed upon by both parties.
- Ascertain when the 90 Day Trial Period is to start and end.
- Any offer of employment should be subject to the terms and conditions of the intended Individual Employment Agreement being agreed to and signed off.
- A copy of the intended employment agreement must be given to the candidate and employers should advise them in writing that:
- Candidates must be given time to:
- Be aware that the moment a job is offered and accepted (verbally is enough), the candidate immediately becomes an employee and the employer cannot hold a 90 Day Trial Period if it has not already been discussed, arranged and included in the intended employment agreement before the time of acceptance.
a) They may seek independent advice about the intended agreement;
b) They are entitled to bargain;
c) And they may arrange for someone to bargain on their behalf.
a) Familiarise themselves with the intended employment agreement;
b) Ask any questions;
c) Arrange someone to advise them or appoint someone to bargain for them.
We would also advise the following:
- If employers wish to hold a 90 Day Trial Period employers must get their pre-employment process right and to be certain it complies with the legal process.
- The pre=employment process should offer the candidate the above advice
- Employers must not offer the position to candidates before obtaining a completed employment agreement.
- If the need to dismiss arises, employers are advised to follow the normal dismissal procedures as if there was no 90 Day Trial Period in place or they expose themselves to significant risk.
- If potential employers are short of time to appoint someone to a position it is well worth considering to not hold a 90 Day Trial Period – the other obligations listed above will however, still apply regardless.
Ensure you get it right when starting people on a 90 Day Trial Period
Three importany payroll changes
Is your business ready for the three important payroll changes? These three changes will take effect from the 1st April 2012. The changes affect every employer and employee in New Zealand.
1. Kiwisaver changes:
2. ACC Levy - Rate Reduction:
3. Student Loans:
**MYOB Payroll 2012 will automate the changes.
2012/2013 Child Support Rates
As of 1st April 2012 Inland Revenue have recalculated the rates that are used to assess child support payments.
The minimum annual assessment income for Child Support is $863, even if your actual assessable income in less than $863.
Annual assessable income for Child Support is capped at $126,577.
Annual Taxable Income – Living Allowances = Annual Assessable Income
| New Living Allowance Rates | |
| Single and no children living with you | $14,679 |
| Married, civil union or de facto and no children living with you | $19,969 |
| Married, civil union or de facto and one child living with you | $28,240 |
| Married, civil union or de facto and two children living with you | $31,222 |
| Married, civil union or de facto and three children living with you | $34,205 |
| Married, civil union or de facto and four or more children living with you | $37,187 |
| If you pay Child Support for | Percentage if care not shared | Percentage if you share care* |
| One Child | 18% | 12% |
| Two Children | 24% | 18% |
| Three Children | 27% | 21% |
| Four Children | 30% | 24% |
| Five Children | 30% | 25.5% |
| Six Children | 30% | 27% |
| Seven Children | 30% | 28.5% |
| Eight or more Children | 30% | 30% |
* Shared care for child support means you have care of the child for at least 40% (146 nights) of the child support year.
Holiday Pay and Parental Leave
An employee's annual leave entitlement accrues while they are away on parental leave as the leave is considered to be part of the employee's continuous service. However, a little known fact amongst employers is that the method of calculating holiday pay for employees who have returned from parental leave is different to the normal holiday pay calculation.
Holiday pay is normally calculated as the higher of wither the average weekly earnings for the last 12 months immediately before the end of the last pay period before the holiday is taken, or the employee's ordinary weekly pay at the beginning of the holiday. However the calculation changes when the employee takes holidays in the 12 months following parental leave.
The calculation for holidays taken within 12 months of return from parental leave is based on the average weekly earnings for the 12 months immediately before the end of the last pay period before the holiday, and is not compared to the ordinary weekly pay. This means that it is very likely that the amount of holiday pay maybe less then the employee is expecting.
It is important that both employers and employees are aware of the difference in calculation methods before annual leave is taken.
If you have any questions about the above or for more information please contact us.
Depreciation
IRD has issued new depreciation rates for residential rental property chattels effective from 1 april 2011. For more information contact us.
Buildings can no longer be depreciated effective 1 April 2011. Carparks (buildings and pads) can still be depreciated.
Tax Avoidance
IRD has a new weapon - what did Parliament contemplate! Given that Inland Revenue writes the law and advises Parliament and MP's don't have a clue - arguably Parliament contemplated what ever Inland Revenue contemplated. So logically, if Inland Revenue doesn't like what a taxpayer does with the law it recommends to Parliament and writes - it will yell TAX AVOIDANCE! Unfortunately - if it yells - the Courts will generally agree.
This was the basis of the decision in Penny & Hooper where the Supreme Court confirmed that schemes and arrangements entered into with the purpose of avoiding tax although structurally correct are still caught by the anti avoidance provisions of the Income Tax Act.
Gift Duty
Gift Duty has been abolished - What are the implications? - For more information contact us.
Family Tax Credit
Family Tax credits for children aged under 16 increases from 1 April 2012 - For more information contact us.
Inland Revenue is a Creditor
The Income Tax Act 2007 has a provision which allows Inland Revenue to collect outstanding tax of a company from another similar company if it considers there was an arrangement to avoid paying tax due.
The company can have similar shareholders or directors and the rule applies to most taxes.
The message is clear, know the law - there are trips and traps for advisers and their clients.
Government are enforcing the law with increased effect. It cannot be assumed that there will be no consequences for actions.
"Phoenix" Companies
There is a provision in the Companies Act which provides that it is an offence for a director of a company liquidated because it was unable to pay its debts to be a director of a new company that carries on business and has the same or similar name to the failed company.
The penalty that can be imposed on a such a director is up to 5 years imprisonment or a fine of up to $200,000.
For more information contact us.