KEY
CHANGES IN THE 2010 BUDGET
Key changes in the recently announced Budget were:
- Cuts to personal tax cuts at every threshold level, effective
from 1 October 2010, as illustrated in the following table:.
| Income |
Current rate |
New rate |
| $0 - $14,000 |
12.5% |
10.5% |
| $14,001 - $48,000 |
21.0% |
17.5% |
| $48,001 - $70,000 |
33.0% |
30.0% |
| Over $70,000 |
38.0% |
33.0% |
- A rise in the rate of GST from 12.5% to 15%, with a 2.002%
compensating increase for beneficiaries, pensioners and recipients of
Working for Families tax credits to offset the rise on October 1
- The company tax rate has been decreased from 30% to 28% from the
2011-2012 income year
- An end to depreciation allowances on buildings deemed to have
more than a 50 year life, to net around $1 billion a year in additional
tax, from the 2011-2012 income year.
- Immediate abolition of the 20% automatic depreciation loading
available for newly purchased assets
- A change to the tax treatment of loss attributing qualifying
companies to become "flow through entities", similar to limited
partnerships, expected to raise around $65 million a year.
- A cut in the rate for portfolio investment entities (PIEs) to
28%, to align with the new company tax rate, kicking in from October 1 for
PIEs taxed at investors' marginal tax rates, and 2011/12 for other savings
vehicles.
- GST base-broadening to prevent so-called "phoenix"
scheme frauds, where GST is reclaimed by an entity which liquidates before
paying GST owed
- An end to the redundancy tax credit from October 1.
- The appropriatriation of $120 million over four years to give Inland
Revenue extra resources to focus on audit and compliance activity in
relation to property transactions, debt collection and the hidden economy.
THE SIZE OF
THE HIDDEN ECONOMY
The size of
New Zealand’s hidden economy, an area where IRD are looking at putting
particular emphasis on in their future audit activity as indicated
above, has been estimated by David Giles, in his paper entitled
Modelling the Hidden Economy and Tax-Gap in New Zealand, to be in the order
of 6.8% to 11.3% of our GDP. In turn this is estimated to cost in the order
of 6.4% to 10.2% of New Zealanders’ total tax liability.
DO PAYMENTS
TO VOLUNTEERS NEED TO BE TAXED?
If your organisation has volunteers you reimburse, pay to attend
meetings or make any other kind of payments to, you may need to deduct tax
from these payments. .
A volunteer is someone who freely undertakes an activity in New
Zealand, chosen either by them or a group they belong to that benefits
others without financially benefiting them.
The types of payments volunteers may receive are reimbursements for
expenses and honoraria for services.
Reimbursements
Reimbursements are payments made for actual expenses incurred during
volunteer activities and are tax free. Reimbursement payments may be based
on actual expenditure or a reasonable estimate of an expense likely to be
incurred by a volunteer. It is important to keep the receipts
or a record of the expenses because the organisation may be able to claim
these as an expense.
Honoraria
Honoraria are payments given in return for a service and:
- are less than the market rate if you paid someone to do that job,
and
- no fixed payment is expected for doing the job.
Deducting tax if you make payments
to volunteers
If the payment is made to an employee as part of their normal
employment duties you'll need to deduct tax. You can use our PAYE tables
to help you calculate the correct amount. The IR340 and IR341 PAYE tables
can be found under "Work it out" on www.ird.govt.nz
Before you make a payment to a volunteer they'll need to complete a Tax
code declaration (IR330) and you'll need to deduct tax at 33%. Show the
details on your Employer monthly schedule (IR348) and send your
payments with the Employer deductions (IR345) form the same as you
would for any other employee.
If you're not an employer you'll need to either:
- register as an employer - go to "Get it done online" on www.ird.govt.nz
, or
- complete an Employer registration (IR334) form and post it
to IRD.
Sometimes a person receives both honoraria and reimbursement payments.
When the payment is a combination, and the honoraria and reimbursement
portions are clearly identified and recorded, the honoraria will be taxable
and the reimbursement will be tax free. However, if there's no distinction
between the honoraria and the reimbursement then the entire payment is
treated as an honorarium and needs to have tax deducted.
Example
Miriama is a voluntary regional coordinator for a national
sports organisation, SportCo. Some travel to local centres as well as
attendance at tournaments is involved. Miriama uses her own car.
SportCo pays Miriama an honorarium of $50 per month for six
months of the year. This will be subject to tax at 33% ($16.50 per
month).
SportCo estimates that Miriama travels an average of 250
kilometres per month in the course of her voluntary activities,
including her travel to and from her home.
SportCo decides to reimburse Miriama's travel expenses by
paying her a travel allowance of 70 cents per kilometre. As this is
considered a reasonable estimate of the cost Miriama will incur it's
classed as a reimbursement and is not taxable.
The honorarium and travel allowance are paid together. Miriama
receives a total payment of $225 (250 km at 70c = $175, plus $50) for
each month of the six months.
The amount of $50 is shown on the employer monthly schedule as
a schedular payment and the $16.50 is paid to Inland Revenue with any
other PAYE deductions
for the month with the employer deduction form.
