EMAIL NEWSLETTER APRIL
again to the McLean
and Co. Newsletter
in which we discuss current taxation and business matters. We trust
you find it informative. Any feedback would be welcomed.
and Co. is a
home based chartered accountancy practice based in Clive, Hawkes
Readers are invited to peruse the practice website
provided, gives contact details and indicates how to become a client, contains
an extensive base of articles on business and taxation matters, and has
links to other websites that may assist your business. Being a
small firm itself, McLean and Co. strives to provide a personal and
professional service largely to a self employed person and small business client
base. Enquiries are welcomed.
are happy to accept new clients. Please contact ourselves at the contact
points highlighted above if we can assist you in your accounting and taxation
requirements. Our website lists information required for this in the following
Business and Taxation Articles.
End Tax Deductions.
you can Claim if you are Working from Home.
Assistance- Income Threshold increasesn
to General Business Sites
Act - Key Changes from 1 April 2004
BUSINESS AND TAXATION ARTICLES
McLean and Co. website contains an extensive number of articles prepared by
McLean and Co. relating to taxation and business matters. Here
are a selection that will be of interest:
YEAR END TAX DEDUCTIONS
tax deductions are important to consider at year end as follows:
value of closing stock is taxable income. The higher the value
of closing stock, the higher the value of taxable income and the more tax
to pay. Obviously , your closing stock value must be true and
fair and in accordance with IRD's directions, but if you can legitimately
do so, minimise closing stock value.
Purchases- if you are contemplating purchasing a new fixed asset around
year end, purchase it in March, even if only an unconditional agreement is
signed to commit you to the purchase by 31 March. By doing so in March,
and even if it was on 31 March, a deduction of one month's depreciation
can be claimed.
streaming- if you can legitimately do so, stream income to a
taxpayer with a lower tax rate (perhaps a spouse) - whether you can
do this legitimately depends on your business structure and operating
debts- identify these and write them off prior to 31 March.
you carrying out an aspect of your business activity from home? - if
so claim Home Office Expenses.
Payable (or Creditors)- look at all expenses you owe at
balance date, and claim a deduction for these.
there any business expenses paid out of your pocket that did not go
through the financial books? They can add up so make sure you claim
YOU CAN CLAIM IF YOU ARE WORKING FROM HOME
taxpayer carrying on a business for the purpose of deriving assessable income
is entitled to a deduction for any revenue expenditure or loss necessarily
incurred in carrying on the business.
qualify for deductions, part of your home must be set aside regularly and
exclusively for the business. In
this regard, the place must be used as either:
principle place of business for any trade or business in which you engage|
a place to meet and deal with customers in the normal course of your
conduct administrative and managerial activities (e.g. record keeping)|
connection with your trade or business if you are using a separate
structure that is not attached to your home or residence (e.g. a studio,
you qualify for the home office deduction, you may be able to claim a portion
of certain types of expenses that are associated with your home but arenít
deductible by the average and non-business homeowner.
following is a summary of many of the expenses that can be claimed if you are
running a business which is recognised as a business for tax purposes from
taxpayer who uses his or her home partly in furtherance of the conduct of a
business is entitled to a deduction in relation to that part of the outgoings
which relate to the use of the home for the work-related activities,
interest on mortgage,
house and contents
depreciation on portion
of the house and assets supplied
to the business
rent if the home is
figure what percentage of your home operating expenses and depreciation is
deductible, the usual method is to divide the area used for your business by
the total area of your outbuildings. For
example, if your home and outbuildings measure
400 square metres and you are using 40 square metres for your home
office, you will be able to deduct 10% of certain expenses.
should be careful about apportioning an
appropriate % allocation to all expense claims though, as a number of costs
incurred around the home will have a personal content as well.
∑ with power it is
normally to estimate a reasonable amount which is used for business- in most
cases there is one power account for the whole of the house.
∑ house insurance
and depreciation claims will be made in proportion of the building area
used for income earning activities divided by the total area of the buildings
at the home.
should be claimed
on the basis of the proportion of the land area used for income earning
activities divided by the total land area, if the difference by claiming on
this basis is significantly different than the illustration above as to
could be made in respect of a room that is not exclusively used for business
activity. In this instance
an apportionment could be based on a criteria such as the amount of time spent
on the income-earning activity.
following expense claims are allowable:
a taxpayer has only one line rental charge and is using the phone in
furtherance of business activity half the rental cost, regardless of
whether the rental charged is at the domestic or commercial rate.
A claim of more than 50% is allowable if the actual use of the
telephone supports a higher & claim.|
a taxpayer has more that one line rental charge and is using those other
lines for business activity the full rental line charges for those
business lines, but not the line rental charge for that line which is
effectively a residential line.|
business toll charges on your home telephone lines.|
Yellow Pages Advertising account for your business which may be charged to
your Telecom Account.|
is advisable to analyse business/personal toll calls immediately on receipt of
the toll accounts, as you may forget what calls were for if you donít do
this until the year when your Accountant asks for this.
your home is your base, you are entitled to claim motor vehicle expenses
incurred in derived business income in travelling from your home.
These could be claimed in the following manners:
keeping of an analysis of business trips and applying the IRD specified
rates to kilometres travelled.|
keeping of a log book against a specific vehicle used, and claiming the
total costs relating to that vehicle in proportion to business usage and
total usage as per the logbook.|
and immediate write offs are not available against fixed assets (items over
$200 which are used over a number of periods).
Instead costs should be phased over a number of periods in the form of
only the following insurance types are deductible:
on business assets.|
repayment if the loan is specific to business activity.|
insurances where any benefits that may be paid out are exempt from income tax,
such as personal life and sickness, are not deductible as business expenses.
business taxpayers you will liable to pay ACC Levies.
These are deductible as expenses for tax
should claim expenditure on newspapers, journals, periodicals, books and other
publications. If you claim a
portion of the home newspaper for the business this percentage should have
some relationship to the business usage.
regard to the deductibility of occupational
clothing of a business taxpayer, the basic issues must be whether the
expenditure was relevant and incidental to the derivation of gross income or
was necessarily incurred in carrying on a business for the purpose of deriving
income. To claim it you
would have to show that the clothing is specifically required for that
business (e.g. protective overalls) or it is distinctive to that business
(e.g. clothing emblazoned with monograms of the business).
carried out specifically for business is deductible, but certain
business-related entertainment is subject to a special regime which only
allows a claim of 50%.
such as invoices or receipts must be kept to support claims for all
entertainment expenses. Records
should be kept of the date the expenses were incurred, the name of the persons
entertained, the business they represent, the position they hold, and the
reasons for the entertainment.
Paid on Money Borrowed for the Business
interest paid is deductible, not the total amount of loan repayments if they
are on a principle and interest basis.
Statements should be obtained from your lender which clearly identify
the interest, and an apportionment should be processed if the loan was not
totally business related.
summary does not represent the total expense categories that can be claimed.
There are likely to be others, depending on the type of home business.
ASSISTANCE- INCOME THRESHOLD INCREASES
Income thresholds are the
points at which family assistance entitlement starts to be abated as family
thresholds for family support, the child tax credit and parental tax credit
have been increased to provide an adjustment for inflation for the year ended
September 2003. Income thresholds have been increased from $20,000
to $20,356 and $27.000 to $27.481.
the new threshold levels, family assistance will abate by 18 cents for every
extra dollar of family income above $20,356 a year and by 30 cents for every
extra dollar of family income above $27,481. The increase in
income thresholds has meant the low-income and middle-income families with
income above $20,000 receive more entitlement.
amendments apply from 1 April 2004.
Goods and Service Tax Act has been amended to allow notification of GST
deregistration to be made by telephone.
taxpayers deregistering for GST were required to notify the Commissioner in
writing. However, taxpayers were already corresponding with IRD
requesting the form used for deregistering in writing. The entire
deregistration process can now be completed in this one telephone call,
without the need for a form to be sent, completed and returned.
recently upgraded our website to include a section specifically related to
articles for property owners and investors. Current articles in this
Rental Property- Features and Taxation
Property Investment Structures
a Business Loan- Key Steps
up Wealth through Investing in Property
or Floating Mortgages?
and Interest Debt or Interest Only?
Capital and Total Yields
articles can be viewed by pressing the following
TO GENERAL BUSINESS SITES
Have you looked at our
Business Links Webpage lately? We are continually updating
can be accessed by pressing the following
HOLIDAYS ACT- KEY
CHANGES FROM 1 APRIL 2004
1 April 2004:
* Employers must pay staff a
minimum of time-and-a-half for work on a public holiday, as well as
offer a lieu day, even if they are on salary.
* The five days allocated each
year for sick leave and bereavement leave are separated - giving three
days' leave for bereavement and five for sickness.
* Sick leave can be accumulated
for up to 15 days if not taken.
* 'Pay as you go' for annual
leave entitlements is allowed for employees in a job less than a year -
meaning they can forgo leave for extra money.
* Penalties for employers are
higher if they break the law.
* The minimum adult wage
increases from $8.50 an hour to $9.
* The minimum youth wage
increases from $6.80 to $7.20.
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
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