NZ Taxation Advisory Blog

Different accounting software uses varying classifications, which businesses must adapt to for consistency and clarity. Xero categorizes expenses into three main types: Cost of Goods Sold (Direct Costs) Overheads Expenses MYOB, on the other hand, uses a simpler classification: Cost of Sales Expenses The classification of certain expenses, such as lease, energy, freight, and warehousing, often varies by business. These costs may sometimes be included in the Cost of Sales or classified differently depending on the company’s accounting policies. Consistency in classification is critical to ensure long-term comparability. Overheads Overheads refer to expenditures that cannot be directly traced to producing a specific product or service. Unlike operating expenses such as raw materials and labor, overheads include: Administrative Overheads: Office supplies, salaries for administrative staff, etc. Manufacturing Overheads: Factory utilities, maintenance, etc. Overheads can be further categoriz...

It’s important to understand the distinctions between contractors and casual employees, as their roles, responsibilities, and entitlements differ significantly. Contractors Contractors are not classified as employees. They operate independently, bringing their own tools and equipment to complete the job. One of the key advantages of hiring a contractor is their autonomy—they decide how to complete the work by the agreed deadline. This flexibility often allows contractors to work from any location and choose hours that suit them best. However, this also means they are responsible for managing their own taxes, insurance, and other business-related expenses. Casual Employees Casual employees, on the other hand, are hired on an as-needed basis. They are not obligated to accept every offer of work, providing flexibility for both the employer and the employee. Despite their irregular work patterns, casual employees are still entitled to certain benefits, such as paid leave. In cases where wo...

As more businesses provide remote services to New Zealand, particularly from overseas, it's essential for both businesses and consumers to understand how Goods and Services Tax (GST) applies in these situations. This is especially true for digital services such as video conferencing platforms like Zoom or software subscriptions. When is GST Charged? Overseas businesses providing remote services to New Zealand are generally required to collect GST only when supplying these services directly to resident consumers . This means that if the service is being supplied to a business (Business to Business, or B2B), GST is not applied. In other words, GST does not apply to transactions between businesses, but it does apply when the service is provided to an individual consumer residing in New Zealand.  Links IRD: GST for Overseas Businesses – Supplying Remote Services into New Zealand GST for Overseas Businesses: A Guide for Suppliers

The New Zealand Inland Revenue Department (IRD) has provided clarity on the deductibility of certain company administration costs through Interpretation Statement IS 14/04. Annual Return Fees (Companies Office) Every year, companies must file an annual return with the New Zealand Companies Office. This return confirms the company’s details, such as directors, shareholders, and registered office address. The filing of this annual return comes with a fee, which is considered a statutory return fee. IRD's Interpretation Statement states the tax-deductibility of statutory return fees. Links Income Tax - Deductibility of Company Administration Costs (IS 14/04)

What Are Schedular Payments? Schedular payments are a type of income subject to withholding tax. They are typically made to contractors or businesses for specific services, such as construction, IT, or consulting work. If your company has received schedular payments, the Inland Revenue Department (IRD) will provide a summary of these payments to help you complete your tax return accurately. Reporting Schedular Payments in the IR4 Form Any such payments your company has received during the tax year needs to be declared in the IR4 form. It's important to note that if your company is a close company (a company with five or fewer shareholders), there are special rules that may apply. In some cases, tax deducted from schedular payments can be transferred (attributed) directly to the company’s shareholder-employees. This can help simplify the tax process for both the company and its shareholders. The Attribution Rule: A Key Anti-Avoidance Measure The attribution rule is designed to preve...

What Are Schedular Payments? Schedular payments are payments made to contractors for specific types of work or activities. These payments are defined under Schedule 4 of the Income Tax Act 2007 and are subject to withholding tax. This means that the payer (the business or individual making the payment) is required to deduct tax from the payment before passing it on to the contractor. The rules governing schedular payments are outlined in Section RD 8 of the Income Tax Act 2007. This section provides the legal framework for how these payments should be treated for tax purposes. Tax Deduction from Schedular Payments The payer is responsible for withholding the correct amount of tax and forwarding it to the Inland Revenue Department (IRD). To determine the appropriate tax rate, payers can refer to the Tax Rate Notification for Contractors (IR330C) form. this form includes a comprehensive list of activities that qualify as schedular payments. Examples of these activities include constructi...

What Are GST Credit and Debit Adjustments? The GST return form  allows businesses to make credit and debit adjustments to reflect changes in GST claims or liabilities. These adjustments are necessary when there’s a difference between the GST initially claimed or paid and the actual GST amount owed or refundable. Credit Adjustments A credit adjustment means you’re making an additional GST claim. This typically happens when you realize you’re entitled to claim more GST than you initially did. For example, if you discover that you missed claiming GST on an eligible expense, you can include this adjustment in your GST return. Debit Adjustments A debit adjustment means you need to repay some of the GST you previously claimed. This often occurs when the actual use of an asset is less than what was initially claimed. For instance, if you claimed GST on a mixed-use asset (like a Charter boat) but used it less for business purposes than expected, you’ll need to make a de bit adjustment in ...