again to the McLean and Co. Newsletter in
which we discuss current taxation and business matters. A special
welcome to new subscribers this month. We trust you find it
informative. Any feedback would be welcomed.
and Co. is a home based chartered accountancy practice based in Clive,
Hawkes Bay. Readers are invited to peruse the practice website
which lists services 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
Parental Leave for Self Employed Persons
Wage Earners- Will You Get A Refund?
Payment Penalties from 1 April 2002
it Capital or Revenue Expenditure?
Changes for Charities
Clothing and Uniforms
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:
PARENTAL LEAVE FOR SELF EMPLOYED PERSONS
the beginning of July 2002, employed people have been eligible for 12 weeks paid
parental leave, at up to $325 a week. It should be noted that
this only applies to employed persons and not self-employed persons.
employees qualify for paid parental leave then it does seem unfair that
self-employed parents should not be entitled to similar support at the time
their babies are born.
For the large majority of self-employed people, their income is dependent on
their ability to get out there and earn it. If they are not working in their
business, their income drops or ceases. Moreover, unlike employees who can
expect their employer still to be there at the end of 12 weeks or even a year,
if an owner-operator shuts up shop for 12 weeks or more there may very well be
no customers to come back to and the business will have to be built up from
scratch, while hiring someone else in the interim may
not be possible or cost-effective.
WAGE EARNERS- WILL YOU GET A REFUND?
are no more tax returns for most salary and wage earners now that the PAYE
system is more accurate. This helps you pay the right amount of tax.
there are some people who are likely to be eligible for a refund. If any of
these situations applied to you in the tax year ended 31 March 2002, you may be
qualify for a rebate as a child or a salary/wage earner who earned less
earned less than $38,000 and were paid dividends
had more than one employer during the year
worked for less than a full income year
can claim expenses against your income, such as income protection
only part of the year
late June of this year IRD have been automatically being sending our
Personal Tax summaries to the people they know will need a catch up at the end
of the tax year, and they do so if you:
Family Assistance from IRD,
Family Assistance from WINZ and earn over $20,000, or
a student loan and are entitled to an interest write-off, or
used a wrong tax code or use a Special Tax Code.
you think you are due a refund and haven't been sent a Personal Tax Summary
you should ring IRD at 0800 227 774 and request one (have your IRD Number
PAYMENT PENALTIES FROM 1 APRIL, 2002
1 April 2002 , for all revenues (except student loans and child support)
the initial late payment penalty is staggered and charged as follows:
initial 1% penalty charged on the day after the due date.
further 4% initial penalty charged if there is still an amount of unpaid
tax (including penalties) at the end of the 7th day from the due date .
The 7th day applies to 7 days after the initial 1% penalty and NOT 7
example, 2002 income tax due on 7 April, 2003
penalty imposed on 8 April 2003
penalty imposed on 15 April 2003
payment is accepted as being received on time if it is mailed and postmarked
on or before the due date. A payment will also be accepted as
being on time if it is physically deposited in an IRD office drop-in box or at
a Westpac Trust branch by the close of business on the due date.
Therefore, the initial 1% penalty will not be charged if the payment is
received, or mailed or postmarked on or before the due date.
the above rules do not apply to the 4% initial late payment penalty. To
avoid this penalty, the payment must be received before the end of the 7th day
from the due date.
a tax bill by the due date is still the best option.
are becoming an important business tool nowadays as well as a fashion accessory. If
you provide cellphones to employees then your staff may have an FBT accessory as
can attract FBT if the employee can use the cellphone to make private calls.
Recently there have been cases of IRD staff going through cellphone accounts.
The key question is: How much does the employee use
the phone? If the cellphone accounts are large, which
they may be for some executives or sales people, then you as an employer may
have an issue.
way to minimise the risk is to put a restriction on private use in the
individual's employment contract or company policy. This has the effect
of reducing the business's liability if they are ever questioned by the IRD
and may save you penalties if you are found to have a FBT liability.
there is no FBT on benefits provided to employees on your premises.
Private calls made by employees from an office phone will not be subject to
IT CAPITAL OR REVENUE EXPENDITURE?
capital/ revenue spending area of asset purchases is a frquent focus for IRD
audits. When accountants work on Annual Financial Statements and Tax
Returns they should vet such "grey' items and ask questions of their
clients to ascertain:
was actually purchased
something new created
the work intended to improve an existing asset or simply restore it to
questions are directed at answering the questioin as to whether the item is
capital, and possibly subject to depreciation, or revenue, and immediately
CHANGES FOR CHARITIES
2001 the government debated the treatment of charities- both from a tax
perspective and a wider administrative view.
changes recommended include:
new Charities Commission to oversee the registration, monitoring and
reporting requirements for charities.
of charities with the Charities Commission to obtain and keep their tax-free
review by the Charities Commission of each registered charity's on-going
qualification for charity status exemption.
to the superannuation schemes run by charities. Historically these
schemes were used to give tax-efficient rewards to employees on below market
tidy up of the rules on GST input credits for charities.
slight increase to the donations rebates for individuals and companies.
CLOTHING AND UNIFORMS
the purchase, replacement or maintenance of conventional clothing is not tax
deductible. However, a deduction may be allowed where the cloting is
necessary and peculiar to your business, or where abnormal expenditure is
incurred on conventional clothing.
clothing is deductible providing the items are purchased for work. This is
likely to include-- hard hats, safety goggles, work gloves, milking aprons,
work boots, leggings, ear muffs, overalls, and rainwear. The
protective clothing costs are not deductible if the items are purchased for a
non- business activity, such as fancy dress or a hobby.
socks, jeans, shirts and jerseys are conventional clothing items.
Only in rare circumstances will these items be regarded as protective clothing