Welcome again to the TotalAccounting 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. Cheque Duty Repealed from 1 July 2014

2. Changes re Accommodation and Employee Allowances 

3. International Tax for Individuals

 

CHEQUE DUTY REPEALED FROM 1 JULY 2014

From 1 July 2014, the 5 cents duty per cheque will not be payable on new cheque books. Additionally, from 1 July 2014, cheque duty will not be payable on bills of exchange unless cheque duty has been prepaid. Cheque duty is being repealed because it is an outmoded tax that no longer raises substantial revenue. This is largely due to the decline in popularity of cheques.

Cheques printed or issued after 30 June 2014 may have the words "cheque duty paid" printed on them. These cheques can still be used even though cheque duty will not have been paid on them.

 

CHANGES CLARIFYING WHEN ACCOMMODATION AND EMPLOYEE ALLOWANCES ARE NON-TAXABLE

The Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 enacted on 30 June 2014 has introduced a number of changes to the tax treatment of employee allowances.  These changes clarify the tax treatment of:

• employer-provided accommodation
• accommodation allowances, and
• other payments provided to employees as reimbursement for expenses.

When the New Rules come into Effect

Most of the new rules will take effect from 1 April 2015. However, employers may have the option to apply some of the new rules from 1 January 2011 provided they meet certain criteria.

Key Features of the Changes

The following, provided certain conditions are met, are exempt from tax:

• Accommodation and accommodation payments provided to employees on out-of-town:
  • secondments of up to two years, or
  • capital projects of up to three years.
    These time periods are extended under specific transitional rules for people working on Canterbury earthquake recovery projects.
• Accommodation and accommodation payments provided to employees who are required to work regularly in more than one location.
• Accommodation and meals when employees attend a conference or training course.

When accommodation is taxable, it is generally taxable on its market rental value. Accommodation provided to New Zealand Defence Force personnel, ministers of religion, and people working overseas are treated under the rules that apply specifically to them.

Other Features

Meal costs linked to work-related travel will not be taxed for up to 3 months.

Distinctive clothing, such as uniforms, used for work purposes is tax-exempt in specific circumstances.

 

INTERNATIONAL TAX FOR INDIVIDUALS

International tax compliance can be complex and difficult.  The following list of includes tax facts relating to individuals:

1. New Zealand residents aren't just taxed on the income they earn in New Zealand; they're also taxed on their worldwide income.
2. If you leave the country but maintain a permanent place of abode here, you're still a New Zealand resident for tax purposes.
3. Foreign income including investments (even if deposited in an offshore account or left on a foreign credit card) is taxable in New Zealand even if it's not repatriated to New Zealand.
4. Equally, the fact that withholding tax may have been deducted on foreign income doesn't mean that this income is no longer taxable in New Zealand.
5. A foreign tax credit may be available but only where the tax involved is not subsequently refunded (even in a later income year), it's substantially similar to income tax and can't exceed the tax otherwise payable on the underlying income in New Zealand.
6. Not all overseas pension payments are tax-free, certain ones may be fully taxable in New Zealand.
7. Special taxing regimes (controlled foreign company and foreign investment fund rules) apply to gains on certain foreign shareholdings, retirement schemes and life insurance investments.
8. Additional disclosures are required in respect of controlled foreign companies and foreign investment funds.
9. Allowances that may be treated as tax-free in other countries (for example, living-away-from-home allowances) are generally fully taxable in New Zealand.
10. The temporary tax exemption on foreign income for transitional residents expires after 48 months and there's no entitlement to Working for Families Tax Credits during the period of the exemption.