Copy
What's New?...
This newsletter is best viewed in your browser by clicking here
Welcome to the Vision Accounting e-newsletter for December 2016. Another year has sped by, and it is time to start looking forward to having some time off.

Seismic signals

Meanwhile our thoughts are with those faced with putting home and business life back together. If your business has been affected by these recent extreme events, please talk to us about tax relief that may be available from Inland Revenue.

It’s highly relevant at this time that Inland Revenue is re-consulting on whether obtaining a detailed seismic assessment (DSA) on a building is a deductible cost for a business. Where a building is identified as quake-prone the owner must assess its vulnerabilities and how to overcome them. This starts with the DSA. Inland Revenue recognises that taxpayers need to know how their buildings are likely to cope in an earthquake.

The Inland Revenue draft looks at situations in which a DSA can be obtained. Current indications are that in most situations DSA costs will be deductible. However where DSA costs are incurred as part of a capital project to seismically strengthen, develop or improve a building, they will be capital and non-deductible. The current round of consultation on this closes on 2 December. We’ll let you know the outcome.

What’s very important?

Buying off the plan? The bright-line test and you

We’ve talked before about how changes to tax law around buying and selling property might affect you. Now that the changes are in operation and the bright line test is being applied to determine tax liability, an issue highlighted only recently might leave you exposed.

As we’ve discussed before, people who buy or sell a property within two years of acquiring it must pay tax on the gain. The main home is exempt and there are some other exceptions such as inheritance and relationship break-ups.
However, what happens when you have bought a house and land package off the plan but titles haven't been issued yet and settlement is still 12 months off or more? Do you intend to move the asset into your family trust on settlement? If you have signed the purchase agreement in your own name but want to have the family trust settle the deal, it looks like you may be caught under the bright line test. Inland Revenue may deem your interest to have been disposed of within two years, in which case if there is a gain it will be taxable.

A spokesperson for Inland Revenue has commented that ‘in the case of a purchase off the plans, the house has never been used as the main home and therefore cannot qualify for the main home exemption.’ Inland Revenue have no plans at this time to review their position on this. If you think this might affect you, please contact us to discuss your tax position.

Be canny with cashflow

In the race to have everything done before the Christmas closedown, make sure you take some time to look at your cashflow and plan for the new year. January is a month with some key tax dates, with a lot of things falling due on 16 January in particular. As well as the usual PAYE return dates, GST returns for both November and December are due in January. And for many, January and February can be big months for provisional tax. Plan ahead to make sure you’re covered. Contact us if you think cashflow will be tight and you’d like to talk through options for how to manage it best.

What you need to know

Ho Ho Ho! Knowing what’s deductible


Do your plans for the festive season include functions to celebrate with clients and the team? What about gifts? If they do, here are some tips on the tax implications.
 

Entertainment


When you’re entertaining clients or colleagues, some entertainment expenses are tax deductible while others aren’t. It can be tricky working out what’s deductible as a business expense and what isn’t.
The basic idea is that an expense is business-related if you spend the money to help your business earn income. Most business-related expenses are fully deductible. If the expense doesn’t help your business earn gross income, it’s private and you can’t claim it as a tax deduction.

It becomes a little trickier when there’s an element of private enjoyment. You might think that the firm’s Christmas party for clients is a business related expense and should be fully deductible because it’s promoting your business, products or services. However:
  • if your clients or employees have a greater opportunity to enjoy the entertainment than the general public, you can only deduct 50% of the costs
  • if anyone associated with the business has a greater opportunity to enjoy the entertainment than the general public, you can only deduct 50% of the costs
Generally speaking, if there’s an element of private enjoyment, the expenses (in addition to the food and drink) associated with events where you entertain clients and/or staff will only be 50% deductible. For instance, this would include the hire of crockery, glasses, waiting staff and music.

There are exceptions. Entertainment supplied for charity is 100% deductible. For instance if you throw a Christmas party for the children’s ward at the local hospital, this is fully deductible. Entertainment enjoyed outside New Zealand is 100% deductible. If you take the team to the Gold Coast for Christmas (lucky them) it will be fully deductible. However, if they contribute towards the cost of their airfares (or anything else), you will need to reduce your expense claim by the amount of the contribution.

Functions and events


Some entertainment expenses are fully deductible but some are not. Use these examples as a guide.

50% deductible

  • Christmas drinks for team members or clients in the office
  • Christmas drinks for team members or clients in the pub
  • Hire of a launch to entertain clients
  • Restaurants providing food and drinks to team members at a social function in their restaurant
  • Staff Christmas party on or off the business premises
  • Function hosted in a marquee at the races (or in a corporate box at the rugby). Includes the cost of tickets and any food and drink provided
  • A weekend away for the team at holiday accommodation in New Zealand. Includes any food and drink provided
 

100% deductible

  • Donating food to a Christmas party in a children’s hospital
  • Providing morning and afternoon tea for your team
  • Providing entertainment, including food and drink at your promotional stand for the Cracker Christmas Festival
  • Holding the Christmas party in Fiji (woo-hoo!)
 

0% deductible

  • Taking your family (who don’t work with you in your business) out for dinner to thank them for being patient while you worked long hours and paying for this using the business credit card

GST

If that’s not enough to think about, you will need to make a GST adjustment for entertainment expenses which are 50% deductible. This adjustment will be required to be made at the time your income tax return is filed. Of course, we can help and advise you on this.

Gifts to clients

If your Christmas giving includes gifts to clients, remember that some gifts will be fully deductible while others will be only 50% deductible. Use these examples as a guide.

Gifts

The rule of thumb with gifts is that if they consist of food or drink, you can only claim 50% of the expense as a tax deduction. If you are giving out gift baskets or hampers and some of the contents are food or drink, but not all, the food or drink items are 50% deductible but the other gift items are 100% deductible. When you come to claim the tax deduction, you will need to apportion the expense between the 100% deductible items and the 50% deductible items.

50% deductible

  • Bottle of wine or six pack of beer
  • Meal voucher
  • Basket of gourmet food
  • Box of chocolates/biscuits
  • Christmas ham

100% deductible

  • Calendar
  • Book or gift voucher
  • Tickets to a rugby game (but not corporate box entertaining)
  • Movie tickets
  • Presents (not food or drink)

FBT on gifts and entertainment

If you are giving gifts to your team you may also be liable for fringe benefits tax. There's a $300 exemption from paying FBT per employee per quarter so if the value of the gift is less than $300 you may be exempt. However, if the value of total benefits for an employee goes over $300 for the quarter year (and provided the total value of all benefits doesn’t exceed $22,500 for the year), the full value of the benefits is subject to FBT.

As for entertainment events, if you invite your team to an event that qualifies as a business-related entertainment expense which is only 50% deductible, you are not liable for FBT as well. So if you are entertaining employees at a party or you’ve hired a launch or holiday accommodation and the expenses for that are only 50% deductible, it isn’t subject to FBT. (On the other hand, if the event is being held outside New Zealand, it will be subject to FBT.)

There are exceptions to this that make it a tricky area so if you’d like more information on a whether a specific event you’re hosting is 50% deductible but may also be liable for FBT, please contact us.

Vision Accounting Christmas and January Closure

Our last working day will be Thursday 22nd December, returning to work on Monday 16th January 2017.

 

Safe and Happy Holidays

On behalf of all the Vision Accounting Team – we would like to wish you and your families a very happy, safe and fun filled Christmas and New Year. Enjoy the holiday time with family and friends, and we look forward to working with you in 2017. Remember we are in the office until the 22nd December, so we are here if you need us – just give us a call or send us an email.
 

Ask us a question

Have you got an accounting question that leaves you worried or confused?


We love a challenge – see if we can come up with the answer that gives you the ‘ah ha! moment'.

Contact Virginia at Vision Accounting NOW on 09 415 0319

Remember

We offer the service of a one on one meeting to review your financials and help set you up for a strong 2017.
This one meeting can make a huge difference to the cashflow and profit of your business.

If you would like to schedule a business review meeting, or have a no-obligation chat – we’re happy to help.     

Thanks, and have a great month,
Virginia and the team at Vision Accounting

Please forward this email to a friend if you feel it would be of use to them.

Contact Us

Tel: (09) 415 0319
Email: admin@visionaccounting.co.nz
Web: www.visionaccounting.co.nz
Physical Address:
106A Bush Road, Albany, Auckland
(When posting documents please use the PO Box address, as there is no mail delivery to our street address. Thank you.)
Postal Address:
PO Box 303 157
North Harbour
Auckland 0751






This email was sent to paul@cdq.co.nz
why did I get this?    unsubscribe from this list    update subscription preferences
Vision Accounting Solutions Ltd · PO Box 303 157 · North Harbour · Auckland, . 0751 · New Zealand

Email Marketing Powered by Mailchimp