Unable to pay your provisional tax? Take action NOW

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For taxpayers who are required to pay provisional tax, Thursday, 7th May 2015, for many entities (read our post about what an entity is) is the date the 3rd Instalment of Provisional Tax for the Income Tax year 1st April 2014 to the 31st March 2015 is due. If you are unable to make this payment please be aware that in some circumstances you may be charged interest especially if the provisional tax you paid is less than your Residual Income Tax (RIT).

There has been talk recently on how the penalties mount up increasing the debt far beyond the original Provisional Tax amount owing. Read More »

Did your Business start in this Financial Year? Will you have to pay the IRD Use of Money Interest?

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As a new Non-Individual (Company or Trust) business you could have to pay Use of Money Interest to IRD?

A new business (Company or Trust) is one of the categories of taxpayers that may be liable for interest even if they have no provisional tax liability in their first year of operation.

You may have to pay Use of Money Interest (UOMI), if the Residual Income Tax (RIT) is greater than $2,500. Note: RIT is the amount of tax you have to pay, less any tax credits you may be entitled to (excluding working for families’ tax credits or other tax payments made during the year) and any PAYE deducted.

In the first year of operation of a business there is normally no Provisional Tax Due. This is because Provisional Tax is based on the RIT (tax to pay) on the last income tax return when it is more than $2,500. Therefore because this is the first year of operation the tax liability is often overlooked and a Company or Trust ends up with UOMI to pay. Read More »

FAQ: How does a company Repay a Shareholders Advance?

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Question: From my understanding, considering the company was initially funded by owner funds of $50K put into the company, it should be possible to take owner funds out from revenue earned up to this amount. Is this correct?

Shareholder Current Account

How Funds are Credited

It is common when a company begins operation for the shareholder(s): –

  • To pay up the share capital, for the purpose of this exercise we’ll say it is $120 being for 120 Fully Paid-up $1.00 Shares, and
  • To also advance needed capital so that the company can start operating and for the purpose of this exercise we’ll say it is $50,000. This is commonly referred to as Working Capital.

Let’s look at how this is recorded in the company accounting system. It is essential that the $50,120 be deposited into the company’s bank account. The $120 is coded to the Paid up Share Capital Account and the $50,000 is coded to the Shareholder Current Account, which essentially records any loans either to or from the company. Read More »

Becoming Self-employed – what you need to know

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Going from a person employed on salary and wages to going into business or becoming a self-employed contractor there are certain aspects of this transition that you need to understand and consider very carefully: –

Finally, thank you for taking the time to read this. I trust that the above has been informative and if there is any aspect that you wish to discuss further please contact us.

Disclaimer: This publication has been carefully prepared, but it has been written in general terms only. The publication should not be relied upon to provide specific information without also obtaining appropriate professional advice after detailed examination of your particular situation.

The simple way to save for business taxes

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As a Profit First Professional helping our clients to increase profitability, I educate the business owner / self-employed contractor that like all other business expenses, taxes must be saved for. In Profit First methodology, regarding saving for taxes, we encourage clients to have a minimum of three bank accounts: –

  • Their current operating account which is normally a cheque account which we ask them to rename as the Income Received Account,
  • A savings account named Operating Expenses Account, and
  • A savings account named Tax Account.

For the purpose of this discussion I will keep the explanation simple as to what I require you to do:-

Read More »

What are the relevant laws and regulations a business must comply with?

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As with anything in life you have the freedom of choice however also be aware that with every choice you make there is a consequence.  In this instance you have the choice to either take care of your business compliance responsibilities yourself or to engage the services of a professional such as ourselves.

Let’s take a look at each option.

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Do I need a business bank account?

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As a new start-up or new part time business owner do not fall into the bad habit of co-mingling your finances with your personal money. While it may be the easiest, most convenient and cheapest way of operating, it can have its drawbacks – especially further down the line. As a new business owner you need treat your business as a business, regardless of whether it’s a part-time venture or not; while setting up a separate bank account could mean additional bank fees and expenses, if you don’t you could be storing up a lot of hassle for yourself in the future.

All our clients will vouch that keeping their business spending completely separate from their personal account ensures manageability.

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How to always pay GST on time, every time

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It would be very remiss of me not to address my previous post Unable to pay GST? Take Action Now without offering a solution on how to ensure that you always have funds available to pay your GST in full when it is due so as not to end up being unable to pay your GST.

I start by asking the question “Why is it that any Payments Basis Entity is unable to pay the GST Due on time?” Read More »

Unable to pay GST? Take action NOW

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The 28th of this month is the GST Due Date for the GST Period 1st June 2015 to the 31st July 2015. If you are unable to pay the GST due then please note that: –

  •     An initial 1% late payment penalty will be charged on the day after the due date.
  •     A further 4% penalty will be charged if there is still an amount of unpaid tax (including penalties) at the end of the 7th day from the due date.
  •     Every month the amount owing remains unpaid, a further 1% incremental penalty will be added.
  •     As well as the penalties above you will be charged interest on tax that remains unpaid until it is eventually paid.

Read More »

Storing taxpayer electronic records offshore – Xero Limited Approved

Inland Revenue advised on 21 October 2013 that the following organisations have been approved under s 22(8)(a) of the Tax Administration Act 1994 to store taxpayers’ electronic records outside of New Zealand:

  • • CargoWise NZ Limited
  • • MYOB NZ Limited, and
  • • Xero Limited.

Taxpayers who store their business records with these approved organisations do not need to obtain approval under s 22(2BA) to store their business records outside of New Zealand.

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