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. Tax Facts

2. Maximising KiwiSaver Government Contributions

3. Changes to WINZ Benefits from 15 July 2013

4. Claiming a Tax Credit for Donations

5. Income Allocations being Investigated by IRD

 

TAX FACTS

Did you know:

• 6% of registered individual NZ taxpayers pay 37% of personal tax paid in NZ

• 40% of registered individual taxpayers pay 6% of personal tax paid in NZ

• 8% of registered individual taxpayers pay no personal tax

• a $1 increase of National Superannuation costs $35,000,000

 

MAXIMISING KIWISAVER GOVERNMENT CONTRIBUTIONS

To maximise your full MTC entitlement of $521.43 you need to have contributed at least $1,042.86 (the equivalent of $20 per week) into your KiwiSaver account. If you have not put in at least this amount, you can top up your KiwiSaver account for the current KiwiSaver year (1 July 2012 to 30 June 2013) before Friday 28 June 2013.

 

TRANSFER YOUR AUSTRALIAN SUPER TO YOUR KIWISAVER ACCOUNT

From 1 July 2013, you will be able to transfer your Australian Super back to your KiwiSaver account. If you have worked in Australia at any time since 1992 you will have Aussie Super.

You can read more about the process and the merits of bringing back your Aussie Super on this  website.

The other change that the Trans Tasman Portability Agreement enacts is that from 1 July 2013 if you permanently emigrate to Australia, you will no longer be able to withdraw your KiwiSaver account balance (less member tax credits which are repaid to the government) in cash after 12 months has elapsed. You will now only be able to transfer your KiwiSaver account balance (including member tax credits) to a complying Australian superannuation fund.

CHANGES TO WINZ BENEFITS FROM 15 JULY 2013

There will be a number of changes to Work and Income benefits from 15 July 2013. Benefit payments aren't changing, but responsibilities for parents/caregivers and expectations for job seekers are.

Three new Benefits

One of the biggest changes is most current benefits will change to three new benefits:

• Jobseeker Support
• Sole Parent Support
• Supported Living Payment.

Work and Income is writing to everyone affected by the changes. The transfer will happen automatically, so you don't need to do anything. Your payments will remain the same.

If you don't currently have work obligations, this will continue until your situation changes.

People getting NZ Super and Veteran's Pension will not be moved to a new payment type.

For further information visit Work and Income's website or call Work and Income on 0800 559 244.

 

CLAIMING A TAX CREDIT FOR DONATIONS

If you've made a donation to an approved donee organisation you can claim a tax credit for it by filing a Tax credit claim form (IR526) or through payroll giving (if your employer offers this).

The Tax credit claim form (IR526) is now only for donations. From 1 April 2013 you can no longer claim for housekeeper or childcare tax credits.

Relating to clients of McLean and Co., IRD will not process the Tax Credit Claim Form until the Income Tax Returns of the Claimer have been filed.  This is because you are entitled to claim for donations up to the level of taxable income for the year, and IRD will not be aware of this until the Income Tax Return is filed.

Filing a Tax credit claim form (IR526)

You can send to IRD this form to IRD once a year with details of any donations you've made for the tax year (1 April to 31 March).

Include all receipts for donations with your completed Tax credit claim form (IR526). Donation receipts must show:

• the person's name (or their spouse/partner's name)
• the amount and date
• a statement that it is a donation
• an official stamp with the name of the donee organisation.

If you don't have to file an Individual income return (IR3) and you made a tax credit claim last year, you should have already received your Tax credit claim form (IR526). If you didn't make a claim last year or didn't receive your claim form, you can print a copy or call our 0800 self-service line on 0800 257 773 and IRD will send you a copy.

Print a copy of the Tax credit claim form 2013 (IR526)

If you have to file an Individual income return (IR3), we recommend you file your Tax credit claim form (IR526) at the same time so IRD can check the income in your IR3 before sending your refund.   Therefore it is recommended that you bring it in to McLean and Co. at the time we are assisting you with your Income Tax Return obligations.

 

INCOME ALLOCATIONS BEING INVESTIGATED BY IRD

IRD is investigating up to 500 people it believes may have given themselves artificially low salaries to avoid paying the top personal tax rate.  Taxpayers were given a 16-month grace period in which to make a voluntary disclosure - granted after the outcome of the Penny and Hooper case in 2011 - which finished at the end of March.  About 800 people made voluntary disclosures in that time and according to IRD they are on track to recoup about $20 million in unpaid tax as a consequence.

The IRD had now identified up to 500 further cases which, based on intelligence, looked as though they were "prime candidates"  to make some contact with.   An IRD representative has stated to the media  "In terms of the criteria we've used - the type of industry they're in and the type of income they're generating, what their past compliance history was like, whether or not there's been an identifiable dip in their reported personal income - they look as though they might be using the same sort of structure [as the Penny and Hooper case]."   and  "Those people, who could expect to receive a letter from IRD shortly, had not but "probably" should have come forward during the disclosure period"

Ian Penny and Gary Hooper were two Christchurch surgeons who used company structures and family trusts to artificially lower their salaries to avoid a higher personal income tax rate introduced in 2001. The Supreme Court sided with the IRD when it ruled that "income derived from personal exertion should belong in its appropriate taxation band and should not be inappropriately diverted away".    The IRD offered the concession in November 2011, calling on people "in a similar situation to Penny and Hooper" to come forward and discuss their arrangements.  The sweetener for those who made a voluntary disclosure was they would only have to open up their books on the past two years filed before November 24, 2011, which was when the concession was made.   IRD have advised that those people who did not come forward would now not only have their tax positions reassessed over a four-year period but could also face "substantial" penalties on top.

Those penalties would start at 100 per cent of the tax owed but could be lightened if a person chose to "come and talk things through" with the IRD.

IRD have stated that they had worked through about 550 of the 803 taxpayers who made confessions and only 3 per cent had been cleared as being overly cautious.

"Most people actually had something we would agree was just on the wrong side of the line in terms of aggressive tax planning.  That 3 per cent have just been a little bit conservative - that's not a bad thing to do."     "The IRD was likely to finish assessing the 803 people by the end of July but the extra 500 cases could go on for much longer"