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McLEAN AND CO.
Special Tax Codes
Pros and Cons of Buying a Franchise
Budget 2011 introduced changes to the member tax credit (MTC) and the taxation of employer superannuation contributions. Many of these changes come into effect this year.
The following are the key features:
Increases in the default and minimum employee contribution rates and the compulsory employer contribution rate (from 2% to 3%) were also announced in Budget 2011. These higher contribution rates don't take effect until 1 April 2013.
The 2% exemption from employer superannuation contribution tax (ESCT) no longer applies from 1 April 2012. So if an employer is contributing to a KiwiSaver scheme or a complying fund, all their employer cash contributions will be liable for ESCT.
The rate for calculating ESCT will change from 1 April 2012. The 33% flat rate option can only be used if contributions are paid into a defined benefit fund. Otherwise ESCT needs to be calculated at the employee's marginal ESCT rate.
Alternatively, the employer cash contributions can be treated as salary or wages and the employee can be taxed through PAYE (with their agreement).
If the later is the case the PAYE amounts for employees will change. So employers should make sure they apply amended PAYE rates to employees who are KiwiSaver members from 1 April 2012. To ensure that employers are aware of the new rates request a copy of the amended PAYE Tables from that date from IRD, or use the PAYE TAX Tables provided on the www.ird.govt.nz website from 1 April, 2012.
Most business expenses can be deducted to arrive at your taxable net profit. But you can’t claim a full deductions for a number of entertainment expenses – the following are only 50% deductible:
You’ll also need to remember that if you claim a 50% deduction for a business entertainment expense, you’ll have to make a GST adjustment so you're only claiming 50% of the GST.
A special tax code is a tax rate worked out to suit your individual circumstances. A special tax code could help you pay the right amount of tax when you:
If you decide that a special tax code is right for you, you will need to complete a Special tax code application (IR23BS) form. You don't have to wait till the start of a new tax year to apply.
PROS OF BUYING A FRANCHISE
CONS OF BUYING A FRANCHISE
The buying a franchise option works best for individuals who work well in a team environment and have limited business and industry background. For others, the road to "true" entrepreneurship could represent the ideal path to business ownership. Thus it is important that prospective buyers take the time to consider your options, buying a franchise may be right for them
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