McLEAN AND CO. Chartered Accountants

Accounting          Taxation         Business Advice and Development Assistance           Audits                             

 P.O. Box 10 , Clive         133 Main Rd, Clive           Tel. (06) 8700952          Fax. (06) 8700955 

Email murray@mcleanandco.co.nz                                  Website www.mcleanandco.co.nz

 
 
EMAIL NEWSLETTER  JULY 2009
 
 

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

 

NEW CLIENTS

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

 

INDEX

  1. Extension of Time/ 2010 Provisional Tax

  2. IRD Audit/ Compliance Focus for 2009/ 2010

  3. Employment Contracts for Employees

  4. Choosing the Right Structure

 

 

EXTENSION OF TIME TO FILE INCOME TAX RETURNS/  2010 PROVISIONAL TAX 

We have received queries about some clients who are concerned that their 2009 Income Tax Returns will be late, in view of recent IRD advertising that 7th July is the last date for filing.  Remember that if you are registered under the IRD agency with McLean and Co. that this does not apply to you, except if the instance mentioned in the next sentence applies to you.  It only applies to taxpayers who have not registered with a tax agent, and taxpayers who are registered with an IRD registered tax agent who have lost their extension of time status due to the fact that previous year returns have been filed late.  With extension of time 31 March balance date taxpayers (the vast majority of taxpayers) you get up to 31 March the year after the balance date of the Tax Return you are filing before being penalised for filing late, but if you miss this dateline in any one year you lose extension of time.

Relating to the first instalment due for 2010 Provisional Tax we have also received queries on this.  The first Provisional Tax due date for 31 March balance date taxpayers changed last year to 28 August and has not altered this year.  We shall be forwarding recommendations to pay to any clients we believe should be paying this on 28/8/2009, and who we haven't provided the service to by then, in mid August.  

 

 

IRD’s AUDIT/ COMPLIANCE FOCUS FOR  2009/2010

IRD recently published “advance notice” of areasof focus in its compliance management programme for 2009/2010.  Given the current economic crisis it is not surprising that key areas of focus aremanaging tax debt and identifying the “hidden economy” to combat fraud.

Some items of interest include:

  • Property transactions, the IRD’s focus appears to continue to be on property acquired with the intention of resale.

  • Income from offshore investments (calculation of FIF income,overseas data matching exercises to identify unreported income).

  • Artificial tax losses – more focus on investigating substantial tax losses.

  • Online traders not reporting income.

  • Hidden economy, including GST fraud, under the table jobs, focus on the hospitality industry and on agricultural/ horticultural contractors

  • High wealth individuals - global wealth structures.

  • Transfer pricing – importing offshore losses through non market pricing, potential gaming of interest rates, advance pricing agreements, continued monitoring of limited risk distributor structuresand compliance with the thin capitalisation rules.

  • Aggressive tax planning, including business restructures, hybrid financial instruments, imputation structures and structured finance.

  • Unpaid child support

     

EMPLOYMENT CONTRACTS FOR EMPLOYEES

Every employee must have a written employment agreement, whether it be an individual agreement or a collective agreement. The Employment Agreement Builder has been created by the Department of Labour to provide guidance to employers and employees on content for the creation of individual employment agreements.

The Builder provides examples of clauses drawn from a range of existing employment agreements, indicates which clauses are legally required in all agreements, and also offers a range of clauses to meet the additional needs of your workplace. Once you have identified the clauses you wish to include in your employment agreement, you are able to assemble the clauses into one draft agreement for saving and printing out.

This builder provides content for employment agreements that meet or exceed legal minimum standards.

To access this, go to:

www.ers.govt.nz/relationships/builder/

 

 

CHOOSING THE RIGHT BUSINESS STRUCTURE

There are four primary options for structuring your new business; you can choose to operate as a Sole Trader, Partnership, Company or a Trust. The best fit for your business depends on your specific situation, preferences and the nature of your business. Each option has advantages and disadvantages.

Sole Trader Partnership Company Trust
Set up No formal structure required. Most operate under a legal partnership agreement. A separate legal entity, set up under the Companies Act. A separate legal entity, set up by a trust deed.
Ownership You own the business and have complete control. Partners share ownership and control. The company is owned by one or more shareholders, who appoint directors. Assets are held and managed by the trustees on behalf of beneficiaries.
Tax You pay personal income tax on profits at your own tax rate. Losses can be set off against other personal income. Each partner pays personal income tax on their share of profit at their own tax rate. Losses can be set off against other personal income. A company currently pays tax on company profits at 30%. Profit can be distributed to shareholders as dividends, but losses can’t usually be transferred. Currently a trust can pay tax at 33% and/or make before or after tax distributions to beneficiaries. Losses can’t be transferred to others.
Risk You are personally liable for all business debts and tax. You are personally liable for all partnership debts and tax. Usually limited to the assets of the company. Usually limited to assets held within the trust.
Main advantages Easy to set up. Less compliance. You share the responsibility. Limited liability. May be easier to raise funds. Limited liability. Potential for distributing income.
Main disadvantages You have a personal liability. It may be harder to raise money. You have personal liability. There is potential for upsets in the partnership. More compliance. Higher set up costs. More compliance. Higher set up costs.
 

 

 

McLEAN AND CO KNOWLEDGE CENTRE AND ARTICLES ABOUT TAXATION AND BUSINESS IN GENERAL PRESS HERE FOR BUSINESS STARTUP KNOWLEDGE CENTRE PRESS HERE
FOR INFORMATION ABOUT COMPANY INCORPORATION PRESS HERE FOR PREVIOUS MONTH EMAIL NEWSLETTERS PRESS HERE

FOR PROPERTY INVESTMENT AND TAX INFORMATION PRESS HERE

FOR FRANCHISE INVESTMENT AND TAX INFORMATION PRESS HERE


The information provided in this email newsletter is for informational purposes only.   McLean and Co. accept no responsibility for the opinions and information expressed in the information provided and it is provided "as is" without warranty of any kind.    The user assumes the entire risk as to the accuracy and use of this document.   Readers are asked to seek professional advice pertaining to their own circumstances.    The McLean and Co. email newsletter may be copied and distributed subject to the following conditions:
  • All text must be copied without modification and all pages must be included.
  • This document must not be distributed for profit.    

 

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