TOTALACCOUNTING Chartered Accountants

Accounting                               Taxation                                   Business Advice and Development Assistance                                        

 P.O. Box 10 , Clive         133 Main Rd, Clive           Tel. (06) 8700952          Fax. (06) 8700955 

Email murray@totalaccounting.co.nz                                  Website www.totalaccounting.co.nz

 
EMAIL NEWSLETTER JUNE 2016
 

Welcome again to the TotalAccounting 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

  1. $521- Yours for the Taking

  2. KiwiSaver Employer Contributions

  3. Beating a Housing Bubble

If you are a KiwiSaver Scheme Member you are reminded that for every $1 you invest you'll receive 50 cents from the Government, up to a maximum of $521.43, as a Member Tax Credit (MTC) but only if you make such a personal contribution to receive this by the end of this month, the month of June being the last month in the KiwiSaver year.

To maximise your full MTC entitlement of $521.43 you need to have personally contributed at least $1042.86 (the equivalent of $20 per week) into your KiwiSaver Account. Many KiwiSaver Scheme members contribute KiwiSave employee contribtions through their wages, and in many cases  these personal contributions made in this fashion in the year July 1- June 30 do not total up to $1042.86.

You are unlikely to get a better return on your money than this 50% return so you should consider making a further lump sum add-on investment to achieve the $1042.86 of personal contributions during the year so as to achieve the full MTC entitlement that the Government will pay out to your Scheme.

You can do this by paying direct to your KiwiSaver Scheme Provider and indicating it relates to your particular Fund.   Many Providers will require this 3-4 days prior to 30 June. 

 

KIWISAVER EMPLOYER CONTRIBUTIONS

Employers are required to contribute to your employee's KiwiSaver account at a minimum 3% of their gross salary or wage. 

KiwiSaver employer contributions need to be paid with your PAYE to IRD.

Eligibility

You need to make contributions if your employee:

  • is having KiwiSaver member contributions deducted from their salary or wages, and
  • is aged 18 and over, and
  • has not reached the age of eligibility for New Zealand Super (currently 65), or has not been a member of a KiwiSaver scheme for five years, whichever date is later, and

How to Calculate Minimum Compulsory Contributions

Your employer compulsory contributions must be on top of your employee’s regular pay. This means that if you have agreed to a total remuneration package with your employee, the compulsory employer contributions must be paid on top of that package. Your employee’s take-home pay should not be reduced because you are making a compulsory contribution.

Through good faith bargaining, a salary package under an employment agreement can be negotiated whereby compulsory employer contributions can be offset against the employee’s gross pay.

Compulsory employer contributions must vest in the employee immediately.

3% is the minimum contribution rate. You can make additional voluntary contributions if you wish.

Calculating Employer Contributions

Here's the formula to use if you're not currently contributing to your employees' superannuation:

Payment of gross salary or wages x compulsory rate = minimum gross employer contribution

Example

If your employee earns $2,600 a month and is a member of, and is contributing to a KiwiSaver scheme,  the minimum gross compulsory employer contribution will be:

$2,600 x 3% = $78.00

You only need to pay the compulsory employer contribution if your employee is a member of and is contributing to a KiwiSaver scheme.

Employer contributions must be made through IRD and be accompanied by an Employer Deductions Form (IR345) form. You must also include payment details on your Employer Monthly Schedule (IR348).    IRD hold employer contributions until payment is cleared by your bank and then pass them on to the provider.

When adding your employer contributions to your Employer Monthly Schedule and your Employer Deductions Form, make sure the amount is net of any tax withheld.

Employer superannuation contribution tax (ESCT) is a tax deducted from the employer cash contributions you pay into the employee’s KiwiSaver account.

The exception to this is if you and your employee have agreed to treat some or all of your employer contribution as salary or wages under the PAYE rules.

Find out more about ESCT.

Stopping and Starting Contributions

For new employees, you start paying contributions from their first pay. For existing employees, you pay contributions from their first pay after either IRD or the employee notifies you that they have joined a KiwiSaver scheme.

You can stop contributions if the employee elects to take a contributions holiday or when we advise you to stop making contributions.

You are no longer legally required to pay compulsory employer contributions for employees who have reached their withdrawal date (for example, age 65).  However, you may have a contractual employment agreement obligation to continue making employer contributions or you may make voluntary employer contributions.

Opt-outs

If a new employee opts out of KiwiSaver, IRD will refund you the employer contributions you've made for the employee automatically. Any tax, withheld on employer contributions, for your employee that has opted out, will be refunded to you on request. You can do this by either:

Interest Effective Date on Employer Contributions

IRD  pay interest on employer contributions from the date they receive payment, and until the date they submit these to the KiwiSaver sceme provider.

Back Pay. Holiday Pay

Employers must make compulsory employer contributions on backdated payments of salary or wages and holiday pay from which member contributions are deducted.

 

BEATING A HOUSING BUBBLE 

How do you recognize signs of a housing bubble? 

That’s the question many prospective homebuyers -- and current homeowners -- may be are asking themselves these days.  As home prices rise at high % annual rates in some areas, many wonder if residential real estate is falling prey to the same kind of wild speculation that has led to the stock market’s spectacular downfall in previous years.

Any time there’s a disconnect between prices and the underlying value of homes, as measured by their market rents, there’s the potential for a bubble.

If home prices are rising much faster than rents, that’s a strong indication a bubble is forming.

If home prices are rising while average rents are falling  the bubble is pretty much unmistakable.

What could trigger a collapse?
Identifying a bubble and actually predicting when it will burst are two very different matters, of course.  The nature of a bubble is to feed on itself, with rising prices convincing more and more investors that prices can only continue to rise.

The current low interest rates are assisting the rises in prices.  Higher interest rates could be enough to knock many of the nation’s real estate markets off their perches. 

How to reduce your risk?
S
o what should you do if you’re thinking of buying a home in a market that seems overvalued?  The possibility of a bubble alone should keep you from becoming a homeowner.   After all, prices could continue to rise for many years, or values could plateau rather than falling.   Even if they do drop, who’s to say you would be willing to buy then?   Falling markets often scare buyers even more than rising ones, and the fear could keep you from buying for years.

If you’re financially ready to buy a home and willing to stay put for awhile, you can reduce your risk from a real estate bubble in the following ways:
  • Look for undervalued properties. Even in the wildest markets, there are ugly ducklings -- flawed homes that others overlook. If the defects are fixable, you might be able to get a relative bargain and be in better shape than your neighbors should prices fall.
  • Buy defensively. Homes in good neighbourhoods with good schools tend to hold their values better. Single-family homes usually fare better than flats, which often are the first to lose value in a real estate recession and the last to regain it during a recovery.
  • Stay put. Find a home you can live with for awhile. The people who get hurt the most during real estate recessions are those who are forced to sell, usually because of a job change or because they couldn’t really afford the home in the first place. If you can hang on to a home for five to 10 years or more, you improve your chances of being able to ride out a downturn and at least break even when you sell.

 

TOTALACCOUNTING KNOWLEDGE CENTRE AND ARTICLES ABOUT TAXATION AND BUSINESS IN GENERAL PRESS HERE FOR BUSINESS STARTUP KNOWLEDGE CENTRE PRESS HERE
FOR INFORMATION ABOUT COMPANY INCORPORATION PRESS HERE FOR PREVIOUS MONTH EMAIL NEWSLETTERS PRESS HERE

FOR PROPERTY INVESTMENT AND TAX INFORMATION PRESS HERE

FOR FRANCHISE INVESTMENT AND TAX INFORMATION PRESS HERE


The information provided in this email newsletter is for informational purposes only.   TotalAccounting accepts 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 circumstances.    The TotalAccounting email newsletter may be copied and distributed subject to the following conditions:
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  • This document must not be distributed for profit.    

 

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