Welcome again to the McLean and Co. Newsletter in which we discuss current taxation and business matters. We trust you find it informative.  

We are happy to accept new clients.  We would be happy to assist colleagues and acquaintances as new clients.

INDEX

1. Provisional Tax Due Dates- if your IRD Number is not GST Registered

2. Employer Monthly Schedule Non Payment Penalties

3. KiwiSaver Employer Tax Credit

4. GST Late Filing Penalties

5. Company Annual Return Filing Change

6. Changes to the Minimum Wage from 1 April 2008

EMPLOYER MONTHLY SCHEDULE NON-PAYMENT PENALTIES

New legislation has been introduced to encourage employers to pay tax associated with the Employer Monthly Schedule (EMS) on time.

From 1 April 2008 , an employer who pays their tax after the due date may incur a penalty of 10% of the unpaid tax.  IRD will send a reminder notice when the payment is due before any penalty is applied.  If an employer incurs a non-payment penalty, it will reduce to 5% if they pay the tax owing or enter an instalment arrangement within one month of the date printed on the notice.    An employer who doesn't pay their overdue tax or contact IRD will incur further non-payment penalties each month until the tax is paid.  The maximum penalty is 150% of the overdue tax.

KIWISAVER COMPULSORY EMPLOYER CONTRIBUTIONS

From 1 April 2008 employers are required to contribute to your employees savings in KiwiSaver schemes and complying superannuation funds, if the employee is a member of these.

The initial contribution rate is 1% of gross salary or wages.

You need to make contributions if an employee:

• is having KiwiSaver or complying fund deductions from their salary or wages
• is aged 18 or over
• has not reached the age of eligibility for New Zealand Superannuation (currently 65) or has not been a member of a KiwiSaver scheme or complying fund for five years, whichever date is earlier
• is not a defined scheme member

The contributions are included in the "KiwiSaver Employer Contributions" column of the Employer Monthly Schedule (IR 348).

KIWISAVER EMPLOYER TAX CREDIT

From 1 April 2008 you can claim a tax credit of up to $20 per employee per week if you contribute to your employees KiwiSaver schemes or complying superannuation funds.  You can offset the tax credit against the Employer Deductions Form (IR345) form and pay the net amount to IRD.

Providing you make an employer contribution in the PAYE period, you can claim the lesser of  the :

• actual employer contributions for the employee for the period, and
• amount given by the formula $20 x the number of weeks in PAYE period (where the weeks in the PAYE period means the actual number of weeks, with fractions expressed as a decimal in the PAYE period)

You must work out individually the amount of employer tax credits you can claim for each of your employees and keep  a record of your calculations.  Ensure that you keep the workpaper for this calculation and attach it to your copy of the IR 345 Employer Deductions Form.

If you paid more in Employer Contributions in a particular month then the balance is claimable as an expense when preparing your yearly Business Financial Statements.

THUS IT IS IMPORTANT TO KEEP AND RETAIN FOR PRESENTATION TO THE ACCOUNTANT AT YEAR END:

• YOUR COPY OF THE IR 345 EMPLOYER DEDUCTIONS FORM
• A COPY OF THE IR 348 EMPLOYER MONTHLY SCHEDULE
• WORKPAPERS OF THE CALCULATION OF THE MONTHLY TAX CREDIT YOU HAVE CLAIMED FOR EACH EMPLOYEE EACH MONTH  (AS PER THE ALLOWABLE AMOUNT AS DESCRIBED ABOVE) 

The following describes the calculations:

•  in a particular month of 31 days you contributed $70.00 in employer contributions for a particular employee.   The amount claimable as a KiwiSaver Employer Tax Credit for this employee is the lesser of $20 x  4 and 3/7  [4.4285] equals $88.55 , or the amount actually paid ($70.00).  Thus $70.00 tax credit should be claimed on the IR 345.
• in a particlar month of 31 days you contributed $200.00 in employer contributions for a particular employee. The amount claimable as a Tax Credit is the maximum of $88.55 based on $20.00 per week, as illustrated in the preceding example.  You will still have available the difference of $111.45 ($200.00 less $88.55) , which will be available as a tax deductible expense when your year end Business Financial Statements are prepared. You should remember that you are only entitled to make such claims in relation to Employer Contributions made up to the equivalent of 4% of the gross wages of the employee without the imposition of a superannuation tax by IRD. 

IT IS IN YOUR INTEREST TO CLAIM THE EMPLOYER TAX CREDIT AVAILABLE ON THE IR 345.  THE REASON FOR THIS IS THAT THIS IS A STRAIGHT CASH REIMBURSEMENT AND ALSO WITHIN A SHORT PERIOD OF TIME AFTER YOU HAVE PAID THE EMPLOYER CONTRIBUTION.  THE SURPLUS ($111.45 AS ILLUSTRATED IN THE PRECEDING EXAMPLE) IS NOT CLAIMABLE UNTIL A FUTURE DATE WHEN YOUR  BUSINESS FINANCIAL STATEMENTS ARE PREPARED, AND THE TAX BENEFIT YOU GET FOR THIS LATTER AMOUNT WILL BE BASED ON YOUR MARGINAL TAX RATE   (THAT IS, LESSER THAN DOLLAR FOR DOLLAR)

GST LATE FILING PENALTIES

From 1 April 2008 a GST registered person who files their GST Return late may incur a late filing penalty. From that date, if a registered person does not file their return on time. IRD will send a letter reminding them that their return is overdue. 

If within a following 12 month period after the reminder notice is issued a sunsequent GST Return is not filed on time a late filing penalty will be charged and the person notified..  The amount of the penalty will be $50 for someone on the payments basis or $250 for taxpayers on the invoice or hybrid basis. 

COMPANY ANNUAL RETURN FILING CHANGE

The Companies Office will no longer be accepting manually-filed annual returns from 1 July 2008.  From that date such returns will only be able to be processed online on the internet.

CHANGES TO THE MINIMUM WAGE FROM 1 APRIL 2008

From the 1st of April 2008 there is no longer a youth minimum wage. Instead there is a minimum wage for new entrants that applies to some employees aged 16 or 17. Other employees aged 16 years or over are entitled to the adult minimum wage.

Who is a New Entrant?

When will the adult minimum wage apply to a 16 or 17 year old employee?

The adult minimum wage will apply to them when they have completed 3 months or 200 hours of employment after turning 16 years of age. For example, an employee who has done 250 hours of work before they turn 16 years of age is still considered to be a new entrant after the 1 April 2008.

If your employees are 16 or 17 years of age and are not subject to the minimum training wage, but they are supervising or training other employees as part of their jobs, then the adult minimum wage will apply to them from the 1 April 2008, regardless of the number of hours they have worked or how long they have been employed.

Minimum Wage Rates from 1 April 2008

Employees under 16 years old
there is no statutory minimum wage

16 or 17 year olds
If the employee meets the criteria to have the adult minimum wage apply: $12.00 an hour before tax. If the new entrants wage applies: $9.60 an hour before tax

Employees aged 18 and over
Adult minimum wage $12.00 an hour before tax

Training Wage
$9.60 an hour before tax