Category: Uncategorized

Charities and Incorporated Societies (only after re-registration)

The External Reporting Board (XRB) has increased the size thresholds of reporting tiers for Public Benefit Entities.   This means reduced reporting requirements for the registered charities that move a lower tier.

Registered charities with financial years ending on 31 March 2024 can apply the new thresholds immediately.  Click here for more information on XRB’s website.

These changes also affect Incorporated Societies under the new Incorporated Societies rules introduced in 2023.  There is information on XRB’s website to help societies with the changes.

The new thresholds are set out in the table below:

Tier	Old criteria	New criteria
Tier 1*	Total expenses greater than $30 million	Total expenses greater than $33 million
Tier 2	Total expenses less than $30 million	Total expenses less than $33 million
Tier 3	Total expenses less than $2 million	Total expenses less than $5 million
Tier 4	Total operating payments $140,000	No change

*Note; an entity is also required to apply Tier 1 if it has “public accountability”.

The changes come into effect for reporting periods ending on or after 28 March 2024.

Source:  Charities Services and External Reporting Board Incorporated Societies » XRB

Disclaimer
Unfortunately, with details changing all the time and at such speed, we need to add that the above content is correct at the time of writing as far as the author is aware and is very much subject to change.  We have, to the best of our ability, acknowledged any shared content.  All related links provided to the corresponding websites are subject to change as they are live links.

From 1 July 2024 it is proposed the three existing bright line tests will be abolished. In their place there will be a two-year bright line test. Bright line will apply if the bright-line end date is within two years of the bright-line start date. The two years will apply retrospectively from 1 July 2024 so that if the bright-line start date is before 30 June 2022 the bright-line end date will be 1 July 2024 at the latest.

Main home exclusion

• Where the bright-line end date is after 1 July 2024 the main home exclusion will be based on the predominant use of the land. If it is being used more than 50% for main home then the exclusion from the bright-line test will apply. Note it is actual use of the property not intended use of the property.
• There is also a time basis. The land must be used most of the time as the main home – more than 50% in total.
• The main home exclusion cannot be applied more than twice in two years or where a person has engaged in a regular pattern of acquiring and disposing of residential land.
• If a house is being constructed on the land, the time involved in the construction is excluded from the bright-line calculation. This change is retrospective to property purchased on or after 29 March 2018. Where a person has already returned bright-line income under the previous rules that would now not be taxable, they can apply for a reassessment.
• Rollover relief will be available for transfers between associated person’s provided they have been associated for at least two years prior to the transfer. Similarly, a transfer to a trust can qualify for rollover relief where the beneficiaries have been associated to the transferor for at least two years prior to the transfer.
• Rollover relief will also be available in certain circumstances to transactions with companies (including look through companies), partnerships and between trusts.

Disclaimer
Unfortunately, with details changing all the time and at such speed, we need to add that the above content is correct at the time of writing as far as the author is aware and is very much subject to change. We have, to the best of our ability, acknowledged any shared content. All related links provided to the corresponding websites are subject to change as they are live links.

Source:  Tax-e-mail Issue No. 2403

Why you should check your Society’s balance dates and AGM dates

All societies are required to hold an Annual General Meeting (AGM) and their committee must present the financial statements for that period to its members at the AGM, before submitting it to the Registrar. Under the new Act, the end of the financial year (balance date) plays an important role in determining other deadlines.  In particular, within six months of the balance date your Society must:

• Prepare its annual financial statements, and
• Hold its Annual General Meeting (AGM), and
• File an annual return with Charities Services, along with the annual financial statements.

IMPORTANT:  You will need to make sure your Society’s financial statements are prepared early enough to be presented at your AGM and be filed with Charities Services all within the six month time frame.

There is an exception to this rule for a society which is newly incorporated – a society does not have to hold its first annual general meeting in the calendar year of its incorporation but must hold that meeting within 18 months after its incorporation. Logically this would only apply to a newly incorporated society, not a society who is reregistering under the new Act. The Incorporated Societies Act 2022 (the “new Act”) recently received Royal Assent resulting in significant changes for the 24,000 incorporated societies in New Zealand.  The new Act replaces the Incorporated Societies Act 1908 (the “old Act”), which has been long overdue for an upgrade. 

Disclaimer
Unfortunately, with details changing all the time and at such speed, we need to add that the above content is correct at the time of writing as far as the author is aware and is very much subject to change. We have, to the best of our ability, acknowledged any shared content. All related links provided to the corresponding websites are subject to change as they are live links.

Set Up a Payment Plan to tackle GST Debt

Paying tax in one lump sum isn’t always easy. Instead you can set up an instalment arrangement to spread your bill over smaller weekly or fortnightly repayments. There is no fee to set this up, and you won’t be charged penalties and interest. You can set up an instalment arrangement in myIR under the Payment section.

Simply head to myIR, click on ‘I want to…’ then ‘Payments’.

Before you start, you’ll need to know:

• how much you can afford to pay towards reducing your debt
• whether you’ll be paying by direct debit or another payment method
• when you want your instalment payments to start.

Source: MBIE & IRD:  Set up a payment plan

Disclaimer
Unfortunately, with details changing all the time and at such speed, we need to add that the above content is correct at the time of writing as far as the author is aware and is very much subject to change. We have, to the best of our ability, acknowledged any shared content. All related links provided to the corresponding websites are subject to change as they are live links.

Square Metre rate for Home Office Calculations 2023

The square metre rate for home office calculations has been set at $51.05 for the 2023 income year (1 April 2022 to 31 March 2023).

Home Office Expenses

If you’re a business owner and use part of your family home for work, you can make a claim for this as a business expense. In order to claim the expenses, there must be a connection between the use of your home and the business income being generated.

You can claim a portion of your household expenses, such as rates, insurance, power and mortgage interest. The portion you can claim relates to the area of your home that you use for business.

Companies Claiming Expenses for the Use of your Home

If your business is a company and does not pay anything towards the home office expenses, it cannot claim an expense.

However, if your company reimburses you for the use of your home, then it may be able to claim an expense. The company needs to be able to prove that there is a link between the money paid for the use of your home and the income the company makes. It also needs to keep accurate records that show how and when it paid for the use of your home, the amounts paid, and how it arrived at the amount to pay.

If you are a shareholder-employee/employee and the amount paid is a fair reimbursement for the use of your home, then it is exempt income and you do not need to pay income tax on the amount.

Splitting your Household Expenses

If part of your home is completely set aside for business use you just need to consider the floor area. If it is not completely set aside, you also need to consider the amount of time that part of your home is used for income-earning activities.

If you are registered for GST, the business expenses you claim will not include GST, when this applies. If you are not registered for GST, these expenses will include GST.

If you have a mortgage you can claim the same proportion of your mortgage interest (but not the principal) paid during the year. There is no GST involved in this.

For GST, you can claim a portion or percentage of the GST on the expenses.

Like you do for any other business expenses you are claiming, you need to keep invoices and other records for these expenses.

IRD Link: https://www.ird.govt.nz/income-tax/income-tax-for-businesses-and-organisations/types-of-business-expenses/using-your-home-for-your-business

Disclaimer
Unfortunately, with details changing all the time and at such speed, we need to add that the above content is correct at the time of writing as far as the author is aware and is very much subject to change. We have, to the best of our ability, acknowledged any shared content. All related links provided to the corresponding websites are subject to change as they are live links.

Landlords and tenants are both responsible for keeping the property in good condition.

Fair wear and tear
A tenant is not responsible for normal wear and tear to the property, or any chattels provided by the landlord when they use them normally. The tenant is responsible for any intentional damage.

Chimneys
Cleaning the chimney is the landlord’s responsibility. The tenant remains responsible for cleaning the ashes from the hearth. The landlord must have the chimney swept and checked at least annually to make sure it’s safe. (A landlord’s insurance policy for the property will often not cover the property if the chimney is not swept at least annually).

Lightbulbs
Both landlords and tenants can be responsible for light bulbs, as they are not covered by the Residential Tenancies Act. However, if the landlord supplies light bulbs and the tenant takes them at the end of the tenancy, or damages them intentionally, the tenant may be responsible for replacing them.

If the light bulbs remain in place but have blown, responsibility is less certain. Standard light bulbs may be seen as consumables and replaceable by the tenant or may be seen as fair wear and tear and replaceable by the landlord.

Non-standard light bulbs – which may be more expensive or are tricky to fit – may be the responsibility of the landlord. If a light bulb of this kind blows, it’s likely to be treated as fair wear and tear.

Maintaining heaters and ventilation systems
Landlords are responsible for maintaining any heaters and ventilation systems but although landlords are responsible for maintenance, tenants are required to keep the rental property reasonably clean and tidy, and this includes cleaning heat pump filters or heaters installed to meet the healthy homes heating standard or supplied as part of the rental property. Landlords may be required to have appliances such as heat pumps or ventilation systems serviced regularly as part of their warranty conditions.

Landlords must agree before tenants make any changes to the property.
Tenants can’t renovate, alter or add major fixtures to the property unless the landlord agrees. Any changes must either:
• be in line with the tenancy agreement, or
• the tenant must have the landlord’s written consent, but it is important to note that the landlord can’t unreasonably withhold consent.

Before the tenancy ends, the tenant can remove any of their fixtures, unless this would cause irreparable damage to the premises or the agreement from the landlord was conditional upon it remaining and becoming the property of the landlord at the end of the tenancy. Fixtures are things that are fixed in position (such as garden sheds, spa pools, heat pumps, security alarms or lights, clothes lines and panel heaters).

Any fixture put up by a tenant and not removed at the end of a tenancy becomes the property of the landlord. But this doesn’t apply if a different agreement exists, or the landlord has led the tenant to believe that the tenant can remove the fixtures after the tenancy ends.

If the tenant causes damage when removing the fixtures, the tenant should tell the landlord. The landlord should then tell the tenant whether they want them to repair the damage or negotiate compensation.

Minor changes to the property include fixtures like:
• curtains replacing corded blinds
• visual fire alarms and doorbells
• baby-proofing, e.g. a baby gate, cord tensioners or cord cleats for corded blinds
• earthquake-proofing, e.g. securing a bookshelf to the wall.

Exterior
Both landlords and tenants are responsible for maintaining the outside of the house.

The landlord is responsible for outside cleaning and maintenance tasks such as house-washing and gutter cleaning. The landlord is also responsible for maintaining trees, shrubs and hedges as they may require special care or knowledge to maintain.

The tenant can do outdoor cleaning tasks like window cleaning (if the windows are easily accessible, not apartment buildings or multi-level houses) and includes mowing the lawns and weeding the gardens as part of their responsibility to keep the property reasonably clean and tidy. It is a good idea to discuss this topic in detail at the start of the tenancy and note what is agreed on the tenancy agreement to avoid misunderstandings.

Source: Ministry of Business Innovation and Employment

For more information visit: MBIE: tenancy.govt.nz maintaining-the-property

Budget 2023 – Trustee Tax Rate Heading North

The headline tax change in Budget 2023 is the raising of the trustee tax rate from 33% to 39% — effectively bringing the Trustee rate in line with the top marginal tax rate. The increased rate takes effect from the 2024–25 income year.

Noting that some taxpayers had taken advantage of the misalignment in tax rates once the top tax was raised in 2021, the Minister of Revenue pointed to the Inland Revenue’s recent High Wealth Individuals research:

“New information from Inland Revenue has shown an almost 50% spike in income subject to the trustee rate, from $11.4 billion in the 2020 tax year to $17.1 billion in the 2021 tax year.” The legislation will contain measures to ensure that deceased estates and Trusts for disabled persons are not subject to the 39% rate.

Tax cuts, and any moves to change the tax thresholds, have been firmly ruled out on the grounds that any relaxation of tax rates would fuel inflation.

Economic outlook
Treasury’s executive summary notes that:

• Treasury no longer anticipates a recession during 2023, although growth remains low and labour market conditions will begin to deteriorate
• the economy is forecast to grow by 3.2% in the year to June 2023 but slows to 1.0% in the June 2024 year, and averaging 2.7% thereafter
• net debt is expected to peak as a percentage of GDP in 2023–24 at 22.0%
• a surplus is forecast for the 2024–25 financial year
• inflation peaked at 7.3% in June 2022 and is forecast to fall to 4.5% by the end of 2023.

Source: Wolters Kluwer Budget Report 2023

Disclaimer
Unfortunately, with details changing all the time and at such speed, we need to add that the above content is correct at the time of writing as far as the author is aware and is very much subject to change. We have, to the best of our ability, acknowledged any shared content. All related links provided to the corresponding websites are subject to change as they are live links.

FROM 9 MAY 2023 THE UOMI RATES ON UNDERPAYMENTS AND OVERPAYMENTS OF TAX WILL CHANGE.

The new rates are:

• Underpayments – 10.39% (up from 9.21%0
• Overpayments – 3.53% (up from 2.31%)

Interest amounts

Interest gets calculated daily on your overpaid or underpaid tax. It does not compound and is not included when calculating penalties.

The interest rates are set by government and are based on market rates, so they vary over time.

When interest rate started	Debit rate	Credit rate
9 May 2023	10.39%	3.53%
17 January 2023	9.21%	2.31%
30 August 2022	7.96%	1.22%
10 May 2022	7.28%	0.00%
8 May 2020	7.00%	0.00%
29 August 2019	8.35%	0.81%
8 May 2017	8.22%	1.02%
8 May 2016	8.27%	1.62%
8 May 2015	9.21%	2.63%

Source: https://www.ird.govt.nz/updates/news-folder/use-of-money-interest-rate-change

Disclaimer
Unfortunately, with details changing all the time and at such speed, we need to add that the above content is correct at the time of writing as far as the author is aware and is very much subject to change. We have, to the best of our ability, acknowledged any shared content. All related links provided to the corresponding websites are subject to change as they are live links.

Tax Toolbox for Tradies

If you’re a tradie, or someone who helps a tradie keep on top of their books, check out Inland Revenue’s tax toolbox.

The toolbox will show you:

• what expenses you can claim and how to keep good records
• what you need to do to stay on top of your income tax and GST
• what your obligations are if you’re an employer.

Source: Inland Revenue – https://www.ird.govt.nz/the-tax-toolbox

Disclaimer
Unfortunately, with details changing all the time and at such speed, we need to add that the above content is correct at the time of writing as far as the author is aware and is very much subject to change. We have, to the best of our ability, acknowledged any shared content. All related links provided to the corresponding websites are subject to change as they are live links.

A new Incorporated Societies Act comes fully into force in October 2023.

From October 2023 your society will be able to apply for reregistration. There are just over 7 months left before societies can apply for reregistration under the Incorporated Societies Act 2022. The reregistration process starts in October this year.  Societies will then have 2½ years to reregister under the 2022 Act.

Key changes for societies

The 2022 Act introduces new features such as a contact person, consent to be member, the requirement for a society to have a committee, duties for officers, dispute resolution processes, the ability for societies to amalgamate and new accounting standards for financial reporting to name a few.  These changes should help officers run societies and provide members with a clear understanding of how their societies should operate.

Your society’s rules — What you need to know about making changes now

A set of rules (referred to as a constitution in the 2022 Act) is the backbone of any society, big or small. Even though law changes are coming, if your society wants to update its rules now those rules must still comply with the current 1908 Act.

When your society wants to reregister (from October 2023), you will need to provide an updated copy of your society’s constitution (called rules in the 1908 Act) that meet the requirements of the 2022 Act.  

You should start thinking about what you might want to include in your society’s constitution now but please be aware that some of the new requirements in the 2022 Act will only become applicable to your society once it has been reregistered under the 2022 Act.

Source: Registrar of Incorporated Societies Key changes | Incorporated Societies (companiesoffice.govt.nz)

Disclaimer
Unfortunately, with details changing all the time and at such speed, we need to add that the above content is correct at the time of writing as far as the author is aware and is very much subject to change. We have, to the best of our ability, acknowledged any shared content. All related links provided to the corresponding websites are subject to change as they are live links.