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. The Charities Register- Benefits for Charities

2. Company Tax Rate- Changes from 1 April 2008

3. Donation Rebates- Changes from 1 April 2008

4. KiwiSaver- using it to your own Advantage

5. Student Loans

CTHWE CHARITIES REGISTER- BENEFITS FOR CHARITIES

Registration offers a number of benefits to organisations that choose to register. To view the Charities Register click here.

The Charities Register makes more information about charities publicly available. It will also provide better information to government, from which it can make policy decisions affecting the charitable sector.

Registration offers a number of benefits to organisations that choose to register, which are outlined these below.

What are the benefits of registration?

• Supporters will be able to find detailed information about your organisation on the Charities Register. Potential donors and supporters can look at the Register before they make decisions about the charities they wish to support.
• Funders will be able to find detailed information about your organisation on the Charities Register.
  Potential funders can look at the Register and access financial and other information.
• Eligibility for tax exemption. As a registered charitable entity, your organisation can expect to be eligible for tax exempt status. Changes to the Income Tax Act 2004 and Estate and Gift Duties Act 1968 say that only charities registered with the Charities Commission will be eligible for tax exempt status. Tax exempt status means registered charities don't have to pay income tax and resident withholding tax and donors of gifts to registered charities don't have to pay gift duty. The changes take effect from 1 July 2008.  
• Show that you meet the required  criteria.
  You can display your unique registration number on promotional and identification material and quote it over the telephone to prospective donors or funders as proof of your registered charitable status.
• Improved public confidence.
  Registered charities should enjoy improved public trust and confidence as information about their activities and the way they use their resources will be available on the Charities Register.
• Contribute to valuable data that will affect policy making decisions.
  By registering, charitable organisations will provide the Commission and the Government with important information about the charitable sector in New Zealand. The collection of this data will help us understand the charitable sector and make policy decisions affecting the sector and the general public.
• Attend annual meetings.
  Representatives of registered charitable entitles can attend our annual meetings and ask questions and make submissions on matters that may affect the charitable sector in New Zealand.

How will the public use the Register?

Members of the public can look at the Register to find information about registered charities, including their activities, areas of operation and charitable purpose.

We are already a charitable trust – do we need to register?

Yes, if you wish to keep your tax exempt status. All charitable organisations that wish to be eligible for tax exempt status after 1 July 2008 will need to register with the Charities Commission.

What if I don’t register?

You can still operate as a charity but after 1 July 2008, you will not be entitled to tax exemptions on the grounds of charitable purpose.

Also, charities wishing to use the term ‘registered charitable entity’, ‘charitable entity’ or any other term implying registration with the Charities Commission must register. 

The Charities Act includes penalties for organisations that say they are registered when they are not.

Further information

For more information about the Charities Commission or registration under the Charities Act, go to www.register.charities.govt.nz/CharitiesRegister/

You can also call the Charities Commission on our free information line 0508 242 748.

COMPANY TAX RATE- CHANGES FROM  1 APRIL 2008

The company tax rate will reduce from 33 to 30% from the beginning of the 2008/9 income year- 1 April 2008 for companies with a standard balance date.

Therefore, based on the current income tax legislation, whereby personal income tax rates are 19.5% to $38,000 of taxable income, 33% between $38,000 and $60,000, and 39% over $60,000, there would be some income tax advantages for taxpayers currently operating under a self employed or partnership basis and with highish taxable incomes.

You should bear in mind with companies that Provisional Tax is payable in the first year of business, and you don't wait until the end of the year to work out any Income Tax payable.

McLean and Co. can set up companies on behalf of clients. 

DONATION REBATES- CHANGES FROM  1 APRIL 2008

The 2007 Budget announced chages to amounts taxpayers who make charitable donations can claim back in tax returns.  The main points are detailed below:

•  the removal of the current caps on the dollar amount of chatriable donations which are eligible for tax relief.  This means that individuals, companies and Maori authorities will be able to claim rebates and a deduction for charitable donations up to the level of their annual net income.

• individuals will no longer be restricted by the $1890 limit for tax rebates, which will encourage those who are already donating substantial amounts to donate even more .   Companies and Maori Authorities will also be able to donate more through the removal of the 5% limit for tax deductions.

KIWISAVER- USING IT TO YOUR OWN ADVANTAGE

Government has passed that it will be compulsory for Employers to make contributions to Employee's Kiwisaver Schemes based on 1% of gross earnings from 1 April 2008, 2% from 1 April 2009, 3% from 1 April 2009, and 4% from 2010.  They have also passed that Employers can start making contributions up to 4% immediately , and that this 4% is tax deductible to the Employer and not subject to any taxes as long as the contibution does not exceed 4% of the gross earnings.

Thus, to use this provision to your advantage, you could set yourself up a company and pay yourself wages.    Your company could immediately contribute up to 4% towards your Kiwisaver scheme.   This would then be tax deductible as an expense of the company, and add to your overall contributions to your own KiwiSaver scheme, thus increasing your personal wealth in the long run.

This would be beneficial to direct family members, say yourself and your wife/ husband if they do work for your business.  You could decide upon the above suggestion for these direct family members, but you do not have to adopt this approach to other employees.  The government legislation detailed in the first paragraph will, however, be applicable to them if they choose to join Kiwisaver.

STUDENT LOANS

Eligibility Requirements

183-day requirement

Student loans for borrowers living in New Zealand for 183 or more consecutive days (about 6 months) are interest free. This is the 183-day requirement. You're eligible as long as you meet the 183-day requirement. This applies if you

• already have a student loan or are getting one, and
• whether or not you are currently studying.

During your 183-day qualifying period, you can go overseas for up to 31 days in total and still be eligible for an interest free student loan.

Once you meet the 183-day requirement, interest charged from the first day of your qualifying period will be written off after the end of the tax year.

Living in New Zealand - Interest Write-offs

As interest free student loans came into effect on 1 April 2006, only interest charged after this date will be written off under interest free student loans. Interest charged before 1 April 2006 won't be written off unless you were eligible for other interest write-offs. 

You'll continue to be eligible for an interest free student loan, until you go overseas for 184 or more consecutive days.

Living Overseas - If you don't meet the 183-day requirement

You won't be eligible for an interest free student loan until you return to New Zealand and live here for 183 or more consecutive days. Let IRD know the date you come back so they can calculate how much interest will be written off. Once you've been back for 183 days, you'll be eligible for a write-off of the interest charged from the date of your return.

Information Matching with New Zealand Customs Service

To help IRD determine whether a student loan borrower is eligible for an interest free student loan, IRD carry out an information matching programme with the New Zealand Customs Service (Customs).

Remember, however, if you are going overseas for more than six months, you are still legally required to let IRD know you will be out of the country.

The legislative authority for this information match is contained in Section 62A of the Student Loan Scheme Act 1992, and Section 280H of the Customs and Excise Act 1996.This permits IRD to both receive information from and provide information to Customs as specified in the legislation.  IRD and Customs have met the conditions of an information matching programme under the Privacy Act 1993 and have the approval of the Office of the Privacy Commissioner.

IRD's data matching programme with Customs is subject to the controls in Part 10 of the Privacy Act 1993 and to oversight by the Privacy Commissioner. IRD and Customs have processes in place to ensure that the Privacy Act 1993 requirements in relation to data matching programmes by specified agencies are met.  IRD shall make reports to the Privacy Commissioner from time to time as per the requirements of Section 104 (1) of the Privacy Act.

The results of this data match will be checked for validity by IRD. The results will not be checked against information held by Customs however.

IRD regularly undertakes information matching programmes with other government agencies, as authorised under the Privacy Act 1993.

You have the right to challenge the information you receive from us as a result of the information matching programme.  To do this, either send us a secure email through the Send and receive mail service (under "Get it done online") or call us on 0800 77 778.

What you need to do if you live in New Zealand

Once you meet the 183-day requirement, you don't need to do anything. Interest, including any interest charged by StudyLink, will be automatically written off after the end of the tax year (31 March).

What Happens if you go Overseas

Who this applies to

This applies if you're going overseas, and have already lived in New Zealand for 183 or more consecutive days (about 6 months).

How long can I go overseas for?

You can travel overseas for up to 183 days and still be eligible for an interest free student loan. When you return, you must remain living in New Zealand for 32 or more days, to keep your entitlement to an interest free student loan.

What if I leave for 184 or more days?

You'll no longer be eligible for an interest free student loan. Any interest charged from the day after you leave New Zealand won't be written off. You'll only get a write-off for interest charged up to, and including, the day you leave.

What do I need to do?

If you're going overseas for more than six months, you need to let us know. See "Find out more" below, for details about what you need to do before you go, and whether you're eligible for an exemption from the 183-day requirement while you're away.

What Happens if you Return from Overseas

Who this applies to

This applies if you've been living overseas and have recently returned to New Zealand, but haven't lived here for 183 or more consecutive days yet.

How long can I go overseas for?

From the day you first return to New Zealand, you can travel overseas for up to 31 days in total without breaching the 183-day requirement.

What if I leave for 32 or more days?

You'll break the 183-day requirement. A new 183-day qualifying period will start from the day you arrive back in New Zealand.

Part days in New Zealand

Any part-days in New Zealand are counted as a full day for example, the day you arrive and the day you leave are full days.

What do I need to do?

If you're returning from living overseas you need to let IRD know when you get back. Either send us a secure email through the Send and receive mail service (under "Get it done online"), or call us on 0800 377 778.

.