KIWISAVER CHANGES FOR 2012
Budget 2011 introduced changes to the member tax
credit (MTC) and the taxation of employer superannuation contributions. Many
of these changes come into effect this year.
The following are the key features:
- The maximum MTC is now $521.43 per year for the year ended 30 June
2012 and the following years.
- The MTC is now 50c for each $1 contributed by individual KiwiSaver
members (or members of complying superannuation funds), up to a maximum
of $521.43.
- The exemption from employer superannuation contribution tax (ESCT) for
employer's superannuation cash contributions (up to 2% of salary and
wages) to employees' KiwiSaver and complying superannuation fund
accounts is removed from 1 April 2012.
- ESCT deducted from employer's superannuation cash contributions to any
superannuation fund (not just KiwiSaver funds) must be calculated at a
rate equivalent to an employee's marginal tax rate from 1 April 2012.
The current default deduction rate (a flat rate of 0.33) is
removed.
Note
Increases in the default and minimum employee contribution rates and
the compulsory employer contribution rate (from 2% to 3%) were also
announced in Budget 2011. These higher contribution rates don't take
effect until 1 April 2013.
Changes to ESCT from April 2012
The 2% exemption from employer superannuation contribution tax (ESCT) no
longer applies from 1 April 2012. So if an employer is contributing to a
KiwiSaver scheme or a complying fund, all their employer cash contributions
will be liable for ESCT.
The rate for calculating ESCT will change from 1 April 2012. The 33% flat
rate option can only be used if contributions are paid into a defined
benefit fund. Otherwise ESCT needs to be calculated at the employee's
marginal ESCT rate.
Alternatively, the employer cash contributions can be
treated as salary or wages and the employee can be taxed through PAYE (with
their agreement).
If the later is the case the PAYE amounts for employees will change. So
employers should make sure they apply amended PAYE rates to employees who
are KiwiSaver members from 1 April 2012. To ensure that employers are aware
of the new rates request a copy of the amended PAYE Tables from that date
from IRD, or use the PAYE TAX Tables provided
on the www.ird.govt.nz
website from 1 April, 2012.
ENTERTAINMENT
EXPENSES
SPECIAL TAX CODES (STC)
A special tax code is a tax rate worked out to suit your individual
circumstances. A special tax code could help you pay the right amount of tax
when you:
- have a second job or other income over and above your main job
- are a beneficiary or receiving ACC and working
- receive an overseas pension that is taxable in New Zealand
- have business losses from a previous year to carry forward and you want
to offset them against your salary or wages
- have had a large tax refund or bill in the past and your current
circumstances are the same.
If you decide that a special tax code is right for you, you will need to
complete a Special
tax code application (IR23BS) form. You don't have to wait till the
start of a new tax year to apply.
PROS AND CONS OF BUYING A
FRANCHISE
PROS OF BUYING A FRANCHISE
- Turnkey System: A franchise system is a proven system for
operating the business and generating profits. If your skills are
weak in sales & marketing or operations then a turnkey franchise
may be best.
- Franchise Support: Small business owners often have very
little support or lack a support team with business acumen. Buying a
franchise offers the opportunity to share your challenges with other
like-minded business people. As franchise companies state, you're in
business for yourself, but not by yourself.
- Brand Name: The more established franchises provide a market
awareness & brand name to franchisees. This can amount to great
savings in customer acquisition costs and allow for more time in the
operation of the business.
- Lower Inventory Prices: The collective buying power of a
franchise group allows for lower costs in purchasing inventory and
equipment. Independent businesses usually have less bargaining power
with suppliers.
- Easier Staff Recruiting: Finding good employees is a
critical success factor for many independent small business owners.
A franchise business with a recognized name will have greater
recruiting pull than an unknown business entity.
CONS OF BUYING A FRANCHISE
- Less Freedom: Franchisees are required to share financial
information and conform to uniform operating procedures. An
independent business owner makes all the business decisions.
- Royalty Payments: Franchisees are
required to make royalty payments in return for support in
operations and advertising. Some franchisers may not provide all the
necessary resources for the success of your particular location.
Talk to other franchisees for feedback on the level of support they
receive.
- Higher Start-Up Costs: Buying a brand name franchise is
often beyond the financial capability of many potential business
owners. An independent business may be more realistic financially if
the owner is willing to focus on building a strong business
operation.
- Broken Promises: The franchiser may not have the ability to
provide market or field support. Owners can become reactive and
expect the head office to solve all the problems. In your own
business, the only person you count on is you.
The buying a franchise option works best for individuals who work
well in a team environment and have limited business and industry
background. For others, the road to "true" entrepreneurship
could represent the ideal path to business ownership. Thus it is
important that prospective buyers take the time to
consider your options, buying a franchise may be right for them
