McLEAN AND CO.

EMAIL NEWSLETTER MARCH 2002       

                                

Welcome again to the McLean and Co. Newsletter in which we discuss current taxation and business matters. We trust you find it informative.  Any feedback would be welcomed.

McLean and Co. is a home based chartered accountancy practice based in Clive, Hawkes Bay.    Readers are invited to peruse the practice website www.mcleanandco.co.nz,  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 welcomed.

 

INDEX

  1. Relevant Business and Taxation Articles

  2. Income Tax Year End

  3. Paying your 2001 Terminal Tax

  4. 2001 Income Tax Returns- Late Filing Penalty and Removal of E.O.T.

  5. Changes to Late Filing Penalties

  6. When Does Your Hobby become a Business?

  7. Writing Off Assets no longer used

  8. 2002 Income Tax Returns- When IRD will be sending them out

  9. New Restrictions on Selling Farm and Coastal Land to Foreigners

  10. Ten Ideas to Help your Remember

 

RELEVANT BUSINESS AND TAXATION ARTICLES

The 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:

Pricing Your Product and Service                                                www.mcleanandco.co.nz/page45.htm

Do You Want to be Rich or Poor- Personal Financial Planning   www.mcleanandco.co.nz/Page10.htm

Qualities Required of a Successful Business Person                  www.mcleanandco.co.nz/Page35.htm

Reasons for Business Failures                                                    www.mcleanandco.co.nz/Page34.htm

If You Disagree with an IRD Assessment                                   www.mcleanandco.co.nz/Page51.htm

 

INCOME TAX YEAR END

The vast majority of taxpayers have a March 31 balance date.   Thats pretty close, isnt it?   So now is the  appropriate time to consider what you have to do as business people to enable the year end financial statements to be prepared accurately by the Accountant.   For instance,   if you are a March 31 year end taxpayer and you have trading or manufacturing Stock on hand this should be counted and valued as at 31 March ,   and  Accounts Payable and Accounts Receivable as at balance date have to be listed.   You can access the document the McLean and Co. sends to its clients that highlights information required as follows:    www.mcleanandco.co.nz/Documentationrequired.htm

 

PAYING YOUR TERMINAL TAX

March 31 taxpayers represented by a tax agent, if they are liable to pay terminal tax for the 2001 income year , are due to pay this on April 7, 2002.   What are the options if you cant pay this?.   What if youre unable to pay in full by the due date?

Phone IRD on the numbers below to discuss making a pre-emptive instalment arrangement.   By contacting IRD early, you will minimise the amount of penalties and interest that will be charged:

Personal Income Tax, Family Assistance and General Enquiries           0800 162 684

Business Income Tax, Student Loan and General Enquiries                  0800 162 685

If you'd like to know more about any of these options, you can order a copy of Debt Options Information Sheet at IRD by phoning INFOexpress on 0800 257 773   (remember to have your IRD Number handy)

The article www.mcleanandco.co.nz/page47.htm  discusses this subject.

 
2001 INCOME TAX RETURNS- LATE FILING PENALTY AND REMOVAL OF E.O.T.
 
Taxpayers who have appointed accountants registered as tax agents with IRD derive certain benefits, including the ability to file tax returns up to a year following balance date and an extra 2 months to pay Terminal Tax and ACC Levies to the IRD.      McLean and Co. is a registered tax agent.
 
Under the compliance and penalties legislation, a late filing penalty may be applied to taxpayers whose 2001 income tax returns are still outstanding 30 days after a reminder letter issued by IRD, from late  April 2002
 
For income tax purposes, IRD's current practice is to limit late filing penalties to the IR3 and IR4 returns.   If the return outstanding is an IR3 or IR4, and a late filing fee is imposed, the extension of time for the 2001-2002 tax return will be withdrawn so that:
any IR3 or IR4 return will be due by 7 July 2002.   If the balance date falls in April to September, the due date will be the 7th of the month, four months after their balance date.
their end of year payment date will revert to 7 February.   If their balance date falls in October to February, the due date will be 7th of the month, 11 months after the balance date.
In accordance with Section 139(5) of the Tax Administration Act the Commissioner is required to give not less than 30 days notice of his intention to impose the late filing penalty.   IRD will be sending out, in April 2002, a letter to all taxpayers whose return is outstanding, and advising them that the 30 day period has commenced.   The late filing penalty will be imposed not less than 30 days from the date of this letter.   The following penalties apply to taxpayer's annual income tax returns:
net income below $100,000-                 $50
net income $100,000- $1,000,000-      $250
net income above $1,000,000-             $500
 
 
CHANGES TO LATE FILING PENALTIES
 
Legislative amendments have been made to Section 139B of the Tax Administration Act 1994.   The new rules for penalties and instalment arrangements will apply from 1 April 2002.   The aim is to reduce penalties imposed on taxpayers who pay just a few days late.
 
The key changes are:
staggered application of the initial late payment penalty-   an initial 1% late penalty will be charged on the day after the due date.   Any amount of unpaid tax (including penalties) outstanding at the end of the seventh day from the due date will be charged a further 4% initial penalty.
no incremental late payment penalties on debt under an instalment arrangement-  the 1% incremental late payment penalty will not be imposed if the taxpayer has met their monthly obligations.
The staggered application of the initial late payment penalty will apply to clients who have taxes due to be paid on or after 1 April 2002, in particular:
Income Tax returns for 31 March 2001, due for payment on 7 April 2002
GST returns for 31 March 2002, due for payment on 30 April 2002 
PAYE returns for 31 March 2002, due for payment on 5 April 2002 for large employers and 22 April 2002 for small employers.
The non-application of incremental late filing penalties will apply to all arrangements entered into or after 1 April 2002.   The authority to cancel late payment penalties under section 183B of the Tax Administration Act 1994 will also be repealed from 1 April 2002.
 
 
WHEN DOES YOUR HOBBY BECOME A BUSINESS?
 
You are probably operating a business if you charge other people for the goods/ services you produce, you supply your goods/ services on a regular basis and you intend to make a profit from supplying your goods/ services.
 
 
WRITING OFF ASSETS NO LONGER USED
 
From the 2002/2003 income year, taxpayers are no longer required to apply to the Commissioner for permission to write off assets that are no longer used but have not been disposed of.
 
A taxpayer may deduct the remaining adjusted tax value of depreciable property if;
the asset is no longer used by the taxpayer in business or to produce assessable income, and
neither the taxpayer nor an associate intends to use the asset in a business or in the future to derive assessable income, and
the cost of disposing the asset would be more than any proceeds from disposing of the asset, and
the asset is neither a building nor an asset being depreciated using the pooling method 
Writeoffs fot the 2001/2002 income year should continue to be processed by using the "Application for a Deduction for an Asset no Longer Used"    (IR220)
 
 
 
2002 INCOME TAX RETURNS-  WHEN IRD WILL BE SENDING THEM OUT
 
IRD have advised that they intend to send 2002 Annual Returns in the following dates:
 
27 March to 5 April 2002
Claims for Personal Tax Rebate  (IR526)
 
9 April to 13 April 2002
Company Income Tax Returns (IR4)
Estate or Trust Income Tax Returns (IR6)
Partnership Income Tax Returns (IR7)
Maori Authority Income Tax Returns (IR8)
Club or Society Income Tax Returns (IR9)
Resident Withholding Tax on Interest Reconciliation Statements (IR15S)
Registered Superannuation Fund Income Tax Returns(IR44)
 
19 April to 3 May 2002
Individual Tax Returns (IR3)
Non-Resident Individual Income Tax Returns (IR3NR)
 
16 May to 22 May 2002
Summary of Earnings (IR544)
 
20 May to 30 June 2002
 Personal Tax Summaries (IR537 and 538)
 
 
NEW RESTRICTIONS ON SELLING LAND TO FOREIGNERS
 
Changes to the law on land acquisition by overseas persons are now in force.   The area of land on the foreshore that can be sold to overseas persons without ministerial approval has been reduced from 0.4 to 0.2 hectares.
 
There are now requirements to offer land on the open market before selling to an overseas person:
the land has to be advertised in local media and a period of at least 20 days must elapse before any sale to an overseas person can proceed.
if there is no local buyer, the overseas buyer must still meet certain criteria
the Treasurer and the Minister of Lands need to be satisfied that the investment is likely to result in substantial benefits to New Zealand
other relevant factors are whether buyers are going to live permanently in New Zealand and farm the land for their own benefit.
 
NINE IDEAS TO HELP YOU TO REMEMBER
 
You are busy and you have tons of things to do.   How can you possibly remember it all?   Having a sharp memory recall can be as simple as finding ways to help jog your memory throughout the day.   Here are 9 quick ideas:
 
  1. Write it Down.    With the amount of things you have to remember in any given day,  why should you try to stuff it all into your memory bank?   When you want to remember something, the very best thing is to write it down.   Then, when you need to recall it, it will be there for you in an instant.
  2. Keep it Together.      When you write things you want to remember, keep them in a consistent place.   Otherwise, you'll spend a lot of time looking for your notes.
  3. Maintain Good Health.     Eat healthy foods,  get enough sleep, and exercise.   These are all important for your memory, staying focused and being alert.
  4. Record your Thoughts.    Sometimes you might want to remember something, but its impossible for you to write it down, such as when you're driving.   A little hand held tape recorder is a wonderful gadget to carry around with you and record your thoughts, or a phone number you see on a billboard etc.
  5. Call Yourself.      If you're at the office, and you want to do something when you arrive home, call your answering machine and leave yourself a message.    When you get home, you'll listen to your message  and remember exactly what you wanted to do.
  6. Believe in Yourself.    If you keep saying you have a bad memory,  you'll probably continue to have a bad memory.   it's important to have a motivated, I CAN remember attitude.
  7. Post Sticky Notes.    Jot what you want to remember on a Post-It Note and stick it on the inside of your door.   You'll be sure to see it as you're ready to walk out.  
  8. Set Timers and Alarms.    Take advantage of alarm clocks and timers throughout the day.   Have to take the clothes out to wash at 3pm?.    Set you alarm clock to remind you.
  9. Use Visual Reminders.    Visual reminders can help you remember and focus.   For example, if your goal is to take a trip on a beautiful island in a few years,   keep a magazine photograph of the island right on your desk.

 

 

If we can assist further, please email McLean and Co as follows:

 CONTACT McLEAN AND CO. BY EMAIL BY CLICKING ON THIS LINK

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