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
Industry
Benchmarks
IRD Initiatives for Cash Businesses
Minimum Wage Rates from 1 April 2012
School Children and Deductions for PAYE
INDUSTRY
BENCHMARKS
A benchmark is a standard or reference that allows comparisons to be
made. The ranges have been chosen so that most businesses in an industry are
within or close to the published benchmark range. Industry benchmarks have
been developed to help you assess your business performance by comparing
your business with others in your industry. They also provide guidance on
what figures IRD expect to see reported for the majority of businesses in
your industry.
Performance Benchmarks
Performance benchmarks are a type of industry benchmark. These benchmarks
provide key financial ratios for your industry to help you work out if your
business performance:
is similar to other businesses within your industry
falls within or outside the industry benchmark range for your industry
differs from the industry benchmark range and why this may be.
How Industry Benchmarks have been developed
Statistics New Zealand has calculated the industry benchmarks using
information provided on your Financial Statements and Tax Returns. All
businesses supplying Financial Statements and Tax Returns are included in
the calculation of standard performance range, where the turnover for those
businesses is up to or less than $10m.
IRD supplies each business's Financial Returns and attachments
to Statistics New Zealand, who use this information to calculate the
industry benchmarks. Statistics New Zealand does not return any information
about any specific business data to IRD, nor anything that could
be used to identify any individual to Inland Revenue.
You can find the formulas Statistics New Zealand used by going to:
If the industry benchmarks have been published for your industry, you can
find the formulas used and definitions of terms with your industry-specific
information by going to:
compare how your business is performing against others in your
industry
check that you are meeting your tax obligations by accurately
reporting all your income and expenses
assist you with your business planning and/or budgeting
work out if you need to review your business and record keeping
practices
evaluate the likelihood of being reviewed by IRD.
The benchmarks will give you a better picture of your competitive
position.
How IRD Uses Industry Benchmarks
IRD uses industry benchmarks, amongst other indicators, to
identify businesses that may not be returning all their income or that may
be overstating their expenses.
Information reported in your Financial Statements and Tax Returns is
compared with the benchmark for your industry. This is to check if you're
within the expected industry benchmark range for your reported turnover.
IRD identify your industry by:
your business industry code (BIC)
the description of the main business activity on your Tax Return
the trading name of your business.
Your business could be outside the industry benchmark range due to a
number of possible factors affecting business performance and this may not
always be clear to IRD. For example you may have higher costs or
lower selling prices than most other businesses in your industry. If the
reason is not clear to IRD, they may ask you to confirm information you have
reported in the Return and explain why. IRD may also use the industry
benchmarks amongst other indicators to identify businesses that may be
avoiding their tax obligations by not reporting some or all of their income.
If you think a mistake has led to you reporting outside the industry
benchmark range then:
Sixteen cash-dominated industries including Restaurants and Electricians
are being targeted by IRD as part of its crackdown on the
underground "cash" economy.IRD has released "benchmarks" or expected
financial ratios for a range of industries, including Cafes, Painters or
Decorators, Electricians, and Taverns and Bars.Benchmarks for up to 34 more industries are expected later this year.
IRD assurance manager Tony Morris said the benchmarks were part of a
10-year plan to target the "hidden economy".Cash trade jobs, crimes and wages under the table are thought to cost
the Government more than $7 billion a year in lost tax. Although the IRD
will not put a figure on the hidden economy, it is aiming to collect an
extra $600 million tax over the 10-year period, and last year netted an
extra $120m for its efforts.Morris said the benchmarks would highlight what sort of gross profits
businesses in various industries were expected to earn.Being outside a benchmark did not mean a business was dodging its tax
obligations but could reflect other reasons such as insufficient product
markup or difficult trading circumstances.He hoped business owners would see the benchmarks as a tool."A lot of people in these industries, they think they know what
everyone else is doing in the industry and they think they have to do the
same as them to remain competitive. The benchmarks are one way for IRD to
give some transparency so they can see where they fit in the
industry."
MINIMUM
WAGE RATES FROM 1 APRIL 2012
New
minimum wage rates take effect from 1 April 2012.
The
new adult minimum wage rates (before tax) that
apply
for employees aged 16 or over will be:
$13.50
per hour, which is
$108.00
for an 8-hour day,
$540.00
for a 40-hour week.
The
new entrants’ minimum wage rates and
the
training minimum wage rates (before tax) will
increase
to:
$10.80
an hour, which is
$86.40
for an 8-hour day or
$432.00
for a 40-hour week.
The
new entrants’ minimum wage applies to a person who:
is
16 or 17 years old, and
has
not completed three months or 200 hours of employment, whichever is
shorter, and
is
not supervising or training other workers, and
is
not subject to the training minimum wage.
The
training minimum wage applies to people who are required
by
their employment agreements to undertake recognised
industry
training involving at least 60 credits a year.
There
is no statutory minimum wage for employees under 16
years of age.
SCHOOL
CHILDREN AND DEDUCTIONS FOR PAYE
If you hire a school child and they earn less than $2,340 for the
whole year, they will get
back all the tax they've paid. In these cases you can choose whether to add
the child to your payroll or not. So if it your information (after
discussing it with the child) that they will not earn more than $2340 for
the year, you can pay them wages without the deduction of PAYE. These
wages will still be a deductible expenses for your business.
If you expect them to earn over $2,340, they'll need to complete a Tax
code declaration (IR330) and be included in your payroll.
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
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