New Farm Expense Tax Deduction Rules pg. 2

Parental Leave pg. 2

Key Dates pg. 2

IRD into Stage Two of Business Transformation pg. 3

Income tax returns about to get easier pg. 3

Safe Houses: Stop Press! pg. 3

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March • 2018 | Issue • 008 | OUR NEWSLETTER FOR GROWING BUSINESSES

A NEW YEAR FOR YOUR BUSINESS. We trust you had a break over the Christmas and January period and have returned to your business refreshed and ready for the challenges that 2018 will bring. Did you make any New Year resolutions? Did you consider any goals for your business for the year ahead? There is a saying “Failing to plan is planning to fail”. Your plans do not have to be lofty written documents but are more a case of stepping back from your business and considering where it is headed. It is valuable to complete a SWOT analysis of the business. That is;

1. What are its Strengths? 2. What are its Weaknesses? 3. What Opportunities are available? 4. What are the Threats that may affect your business?

We find this activity to be helpful for most businesses. A top performing business is never truly satisfied with past results. It is always looking to improve. Small improvements in several areas accumulate to yield a significant overall benefit to a business.

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03 ACCELERATE | March • 2018 02

NEW FARM EXPENSE TAX DEDUCTIONS RULES From 1st April 2017 Inland Revenue have decided to split farms into two categories – Type 1 and Type 2 farms. The distinction is made depending on the value of the farmhouse relative to the total value of the farm. If this value is 20% or less, then the farm is Type 1 and if the house value is more than 20% of the total farm then the farm is Type 2.

The main impact of this distinction is that some of the expenses that could have been claimed in the past will not now be fully claimable on the Type 2 farm. For example, the claim for rates and interest on a Type 1 farm remains 100% but, for a Type 2 farm the claim will be limited to the farm land portion. The only part deductible on the farm house will be an amount covering the home office. Other expenses that could also be treated differently in the two farm types are telephone, house repairs and house insurance.

These changes will affect both your income tax and GST claims. If you suspect your farm is Type 2 and you prepare your own GST returns, then it will be beneficial to talk to us about changes you should make to your record-keeping.

PARENTAL LEAVE PUTS AN ONUS ON EMPLOYERS Prime Minister Jacinda Ardern probably won’t take 18 weeks’ paid parental leave when she has her baby this autumn, but New Zealand law says she's entitled to it. Staff who’ve worked for you or any other employer for an average of at least 10 hours a week for any 26 weeks of the year preceding the birth or assumption of care of a child can take paid parental leave so long as they are the primary carer of the child and take leave to care for the child. Whether that staff member can take extended leave without pay will depend on whether they have been employed with you for an average of 10 hours a week for the previous six months. If so, they can take six months’ leave (in total, i.e. including primary carer leave). If they’ve met these criteria for a full year, their total leave is one year. If employees give the right notice for the right parental-leave reason, you have to keep their jobs open until they return to work. If they’re taking more than four weeks’ parental leave, you have to keep their jobs open, unless those jobs are defined as key positions or there’s redundancy. If any of those jobs are key positions, or there’s redundancy, affected staff go into a 26 week “period of preference” at the end of parental leave. That means that if any time during those 26 weeks you have a job that’s similar to what they were doing, you have to offer it to them first. A job may be a key position because it needs special skills and there aren’t enough people with those skills. Or it would take too long to train or find a temp to do the job. Affected staff can disagree that their jobs are key positions. There are rules around communication regarding employee applications for parental leave and employer responses, and whether or not the employee is going to return to work. We can help you avoid stepping on any landmines here.

KEY TAX DATES MARCH 2018

DATE CATEGORY DESCRIPTION

5 March PAYE Large employer returns and payments

20 March PAYE Small employers return and payment Large employers return and payment

20 March RWT RWT return and payment due for deductions from dividends and deductions of $500 or more from interest paid during February

20 March N-RWT / Approved Issuer Levy Payment and return for February

28 March GST Return and payment for February

IRD INTO STAGE TWO OF BUSINESS TRANSFORMATION

ACCELERATE | March • 2018 03

IRD’s been working hard to be easier to do business with. As you read this, its new tax system is kicking in, giving you new and simpler ways to manage your GST obligations through myIR.

Enhancements include the traceability of GST transfers, and Notifications and Alerts sent when there is something for you to do in your myIR account.

From April, IRD will address more areas, including:

• Withholding Tax

• Gaming Machine Duty

• Fringe Benefits Tax

• Payroll subsidy

• Employment information (PAYE) collected in START.

But the biggest change will be to tax law.

AIM (Accounting Income Method), a new option for calculating provisional tax, allows payments to be based on your actual profit in that period – so if you don’t make a profit, you won’t pay provisional tax.

NEW LAW WILL MAKE DIRTY MONEY EASIER TO SPOT Money laundering is big business in New Zealand. Every year $1.35 billion of fraud- and drug -related money is laundered through seemingly legitimate businesses. In response, the Government introduced specific Anti-Money Laundering and Countering Financing of Terrorism legislation to address this risk.

Previously, only a few types of organisation had to comply with the legislation. Following amendments to this legislation passed last year, it is now confirmed that this legislation extends to these groups taking effect from these dates (or earlier if the Government legislates by an Order in Council):

1 July 2018: lawyers, conveyancers and businesses that provide trust and company services 1 October 2018: accountants who provide particular kinds of business services 1 January 2019: real estate agents 1 August 2019: businesses trading in high-value goods, sports and racing betting.

If you are in any of these categories, of course you must make sure that your business complies. We can point you in the right direction. But please also note that as your accountant we are in one of the categories that must comply with the changes. And to do this, be aware that we will sometimes need to ask you for more information than we have in the past. This is because we need to be able to document that we have verified your ID and both you and your business entities are all above board.

SAFE HOUSES:

STOP PRESS! Revenue Minister Stuart Nash has confirmed the bright-line test on residential property sales will be extended from two years to five years. At present, income tax must be paid on any gains from residential property sold within two years of acquisition, with some exceptions (such as the family home). The extension means that profits from residential investment properties bought and sold within five years will generally be taxable. To make this happen, changes to law are currently making their way through Parliament. It is expected these will receive Royal Assent in March. And it is expected that this will affect properties acquired on or after the date of Royal Assent. We will have more for you on this when the legislation passes. Meanwhile, if you are in the process of entering into sale and purchase agreements to acquire property, please give priority to discussing the tax implications with us.