Facts about tax in New Zealand

The 2010 tax rates and dates

• Tax Penalties & Interest
• Entertainment Expenditure
• Fringe Benefit Tax (FBT)
• Goods & Services Tax (GST)
• Donations & Housekeeper/Childcare Rebate
• Motor Vehicle Reimbursement Allowances
• Depreciation
• Gift Duty
• Non-Resident Withholding Tax Rates
• Income Tax Payment Dates
• PAYE Deductions
• PAYE Electronic Filing
• Research & Development Tax Credit
• Income Tax Rates
• Resident Withholding Tax Rates
• ACC Earner's Levy

 

Tax Penalties & Interest

Tax Shortfall Penalties

The following penalties may apply to tax shortfalls:

• Lack of reasonable care ..................................... 20%
• Unacceptable tax position .................................. 20%
• Gross carelessness ........................................... 40%
• Abusive tax position .........................................100%
• Evasion ...........................................................150%

A penalty may be reduced by up to 100% if disclosure is made to Inland Revenue before an audit,

by 40% if disclosure is made before the first meeting, or by 75% if the shortfall is temporary. 

A 50% good behaviour discount may also apply. A penalty may be increased by 25% for obstruction.

 

Late Payment Penalties

• Initial late payment penalty: 1%, plus 4% of tax unpaid after 7 days
• Monthly incremental penalties: 1%

Compliant tax payers will generally be warned prior to any late payment penalties being imposed.

 

Late Filing Penalties

Late filing penalties will apply to the following returns:

• Income tax returns (from $50 to $500 depending on income)
• Employer monthly schedules ($250)
• ACC reconciliation statements ($250)
• GST returns ($250 invoice/hybrid, $50 payments basis only if filed late after warning for initial breach)

 

Use of Money Interest

Use of money interest is PAID by the Inland Revenue on OVERPAYMENTS of tax and is CHARGED by the Inland Revenue on UNDERPAYMENTS of tax.

The rates effective from 29 June 2009 are:

• 8.91% on underpayments of tax (potentially deductible)
• 1.82% on overpayments of tax (assessable)

 

KiwiSaver - Voluntary Savings Initiative

Employees contribute 2%, 4% or 8% of their gross pay
Members are entitled to:

• A $1,000 “kickstart” contribution
• A Government contribution of up to $20 per week per employee.
• Employers must contribute 1% of employees’ salary/wages
• Compulsory employer contributions are capped at 2%

 

Entertainment Expenditure

Certain categories of entertainment expenditure are only 50% deductible. These include:

1. Corporate boxes
2. Holiday accommodation
3. Yachts and other pleasure craft
4. Food and beverages provided:
   • at any of the above, or
   • off the premises of the taxpayer (e.g. business lunch), or
   • on the premises of the taxpayer at a social function.

There are a number of exemptions from these rules. The 50% add back is subject to an annual GST adjustment.

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Fringe Benefit Tax (FBT)

FBT Rates

Employers normally pay Fringe Benefit Tax if they provide benefits to employees other than salary and wages.

Types of benefits:

• Motor vehicles available for private use
• Free, subsidised or discounted goods and services
• Low-interest loans
• Employer contributions to sick, accident or death benefit funds, superannuation schemes, and specified insurance policies.

Non-attributed basis to 30/09/2010: 61%

Non-attributed basis from 01/10/2010: 49.25%

Attributed basis: between 12.99% and 55.04% depending on the net remuneration of the employee (including benefits).

Return and Payment Dates

Quarter Ending	Due
31 March	31 May
30 June	20 July
30 September	20 October
31 December	20 January
Annual FBT Return	31 May

 NB: The FBT threshold under which an employer can file an annual return, upon application to the Inland Revenue, is $500,000 of annual tax deductions.

Fringe Benefit Value of Motor Vehicles

Quarterly return - 5% of original cost of vehicle (GST inclusive), or 9% of the tax written down value of vehicle (GST inclusive).

Annual return - 20% of cost (GST inclusive) or 36% of the tax written down value (GST inclusive).

Low or Interest Free Loans - Benchmark interest rate from 1 April 2010 is 6.00% p.a. (reviewed quarterly). IRD website for updated and historical rates.

Exemptions - No FBT is payable if:

• the total taxable value of unclassified benefits provided in the quarter to each employee does not exceed $300, or
• the total taxable value in the last four quarters, including the current quarter, of all “unclassified benefits” provided to employees does not exceed $22.500.

Types of benefits to which this exemption may apply include subsidised or free goods and services provided to employees.

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Goods & Services Tax (GST)

• Standard rate to 30/09/2010: 12.5%
• Standard rate from 01/10/2010: 15%
• Exported goods and services: 0%

Supplies exempt from GST include:

• Certain Financial services
• Residential rental accommodation
• Wages/salaries and most directors' fees.

The GST return filing and payment due dates are:

• The 28th day of the month following the end of the taxable period for those months other than March and November
• The 15th day of January for the taxable period that ends in November; and
• The 7th day of May, for the taxable period that ends in March.

If the due date falls on a weekend or a public holiday, Inland Revenue will accept GST payments (as for other tax types) made on the next business day.

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Donations & Housekeeper/Childcare Rebate

• Individual donors can claim 1/3 of charitable donations and voluntary school fees (up to a maximum of their annual net income). Each donation must exceed $5 to qualify.

• The housekeeper/ childcare rebate is limited to the lesser of either $310, 33% of amount paid per family, or 33% of the taxable income.

Companies and Maori Authorities can claim an income tax deduction for donations made, up to their annual net income.

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Motor Vehicle Reimbursement Allowances

Distance	Amount per km
1 to 5,000 km	70c per km

Self-employed people can use the rates up to a maximum of 5,000 km of work related travel, per year. Alternatively, or when in excess of 5,000km, actual expenses can be reimbursed. An individual special rate can also be determined based on cc rating and estimated travel. An alternative reimbursement rate (e.g. AA) is now also permitted which is generally higher than the above.

 

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Depreciation

Depreciation is calculated using Inland Revenue approved rates. An additional depreciation loading of 20% on new assets has now been removed for assets aquired from 21/05/2010. For a complete list of depreciation rates go to: www.ird.govt.nz/calculators/keyword/depreciation Either the straight line or diminishing value method can be used.

Low value assets (costing $500 or less, GST exclusive) can generally be written off in the year acquired.

From the 2011/12 year the depreciation rate for buildings with a useful economic life of 50 years or more will be reduced to 0%.

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Gift Duty

Gift duty is a charge on any dutiable gifts made over $27,000 in any 12 months that one person makes to another person or entity.

The rates vary from 5% for gifts of value between $27,001 and $36,000 to 25% for gifts over $72,000.

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Non-Resident Withholding Tax (NRWT) Rates

Country (Illustration of tax treaty countries)	Dividends %	Interest 1 %	Royalties %
Australia	15 2,3	10	5
United Kingdom	15	10	10
United States	15	10	10
Non-tax treaty country	30 4	15 5	15

1. The rate of NRWT on interest is zero if the Approved Issuer Levy of 2% has been paid.
2. The rate of NRWT is 5% if the beneficial owner of those dividends is a company that holds at least 10% of the voting power in the company paying the dividends.
3. The rate of NRWT is 0% if the beneficial owner of the dividends is an Australian company that has owned directly or indirectly (through one or more residents of New Zealand or Australia) 80% of the voting power of the company paying the dividends for the 12 months to the date the dividend was declared.
4. The rate is 15% if fully imputed dividends are paid.
5. Not a final tax if paid to associates.

Lower NRWT rates are due for the US following the announcement of changes to the double taxation agreement between the US and New Zealand (not yet in force)

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Income Tax Payment Dates

Balance Date		31 December 2010		31 March 2011		30 June 2011
1st Instalment		28 May 2010		28 August 2010		28 Nov 2010
2nd Instalment		28 September 2010		15 January 2011		28 March 2011
3rd Instalment		28 January 2011		7 May 2011		28 July 2011
Terminal Tax*		15 January 2012		7 April 2012		7 April 2012

*The above terminal tax dates only apply to taxpayers linked to a tax agent.

If you are GST registered on a six monthly basis, you will only have 2 provisional tax dates. A GST ratio method is also available for certain taxpayers who elect before the beginning of the tax year. Provisional tax is paid as a percentage of the GST return.

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PAYE Deductions

Type of Employer	Due Date
"Small Employer": Annual PAYE & SSCWT less than $500,000	PAYE deducted in one month due by 20th of the following month
Other Employers	Due Date
Deductions from 1st to 15th of month Deductions from 16th of month to last day	20th day of same month 5th day of following month

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PAYE Electronic Filing

Employers whose annual PAYE deductions are $500,000 or more must file their Employer Monthly Schedule (IR348) electronically. Employers with fewer than 50 employees may apply for an exemption.

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Research & Development Tax Credit

15% of eligible R&D expenditure may be available as a tax credit from the beginning of the 2009 tax year.

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Income Tax Rates

Individual Rates

Taxable Income 2011 Year Annual Tax Rate	01/04/10 - 30/09/10	01/10/10 - 31/03/11	Composite Rates
$0 to $14,000	12.5%	10.5%	11.5%
$14,001 to $48,000	21%	17.5%	19.25%
$48,001 to $70,000	33%	30%	31.5%
Over $70,000	38%	33%	35.5%

As a result composite rates will apply for the 2010/11 tax year.

Companies

• Resident and non-resident company income tax rate for 2010/11: 30%
• Resident and non-resident company income tax rate for 2011/12: 28%

 

Trusts

• Trustee income taxed at 33%
• Beneficiary income taxed at beneficiary’s marginal tax rate, except distributions to a minor over $1,000 per Trust (under 16 at the balance date of the Trust) which are taxed at trustee rate of 33%.

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Resident Withholding Tax Rates

Interest

	Rate
IRD number supplied but no election	19.5%
Election with IRD number	19.5%, 33% or 39%
No IRD number supplied	39%

 

Dividends

33% of gross dividends (reduced by imputation credits).

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ACC Earner's Levy

Period	Rate (GST Incl)	Maximum Leviable Earnings
From 1 April 2010	$2.00 per $100	$110,018

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