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AGENTS ANSWERS
Inland Revenue’s tax agents’ update
Issue No 176 • February 2015 • IR 787
Planning for tax filing
Welcome to 2015 and the first issue of Agents Answers. With school
back and the summer holidays over, many of you will be focusing on the
challenges of the year ahead. We know taxes will play a part in that so we
continue to look for smart ideas to help you meet your tax requirements.
Now is a great time to think about business
planning for 2015. What better way to help
you put a work plan in place than to give you
some key dates so you can keep up to date
with our tax events. See the table below.
February 2015
15
Programme that issues L letters is turned off until
August 2015
March 2015
23
24–25
31
The cut-off for requesting PTSs (personal tax
summaries) for the year ending 31 March 2010
IR 526 forms issued to salary and wage (PTS)
customers
End of year for those with a standard balance date
April 2015
1
E-File, PTS requests and IR 3 available
7
Payment of end-of-year tax is due (EOT clients)
14–15
IR 3 returns issued where no summary of earnings
(SOE) is needed
13–14
IR 526 forms issued to IR 3 customers
18–21
Remaining IR 3 returns issued at around the same
time as SOEs
May 2015
June 2015
mid-June
mid-June/early-August
PTS confirmation available
PTSs issued
August 2015
early August
Programme that issues L letters is turned on
End-of-year preparations
It’s also a good time to be thinking about your filing performance with March just
around the corner. If you have clients who have an EOT but you won’t be able to
file the returns by 31 March due to exceptional circumstances, then you should
consider requesting deferred (D) status for them.
(continued on next page)
Welcome to Agents Answers
In this issue: Planning for tax filing,
provisional tax and interest in
transitional years, clients trading
online, speed up IRD number
applications and GST registrations,
from our technical tax area, changes
to income adjustments for student
loan and WfFTC, do you need to
know about FATCA, certificate of
exemption renewals and tax codes,
understanding grace periods, Tool
for Business revamped, child support
is changing, latest Compliance Focus
launched, upcoming changes to
benefit and reimbursing allowances,
updated tax agent application forms,
new email scam targeting Kiwibank
customers.
If you have any suggestions for topics
you’d like covered in this newsletter,
email [email protected]
REMINDERS
7 February: Income tax,
student loan and Working for
Families Tax Credits bills for the
tax year ending 31 March 2014
are due for people who don’t
have a tax agent with a valid
extension of time (EOT).
13 February: This is the third
interim filing date for tax agents
with an EOT when 80% of
returns should be filed for clients
with standard balance dates.
28 February: Instalments of
provisional tax and second
student loan interim payments
(for those with a May balance
date) are due.
Note: If a due date falls on a
weekend, public holiday or
provincial anniversary day, we
can receive your return and
payment on the next working day
without a penalty being applied.
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(continued from previous page)
Remember all applications must be in writing. We
need full details of the reasons and the expected date
the return will be filed. Individual applications may be
made, but bulk applications can be made for groups of
companies or entities through your account manager.
We need to receive your applications by Friday
13 March 2015 to be able to process them by the
last working day of March (Tuesday 31 March 2015).
Provisional tax and interest in transitional years
The year a taxpayer changes their balance date is
referred to as a “transitional year”. Tax law sets the
pattern, number and amount due for provisional tax
instalments in a transitional year, and the provisional
tax for the following year. These rules affect what
payments are due and when. This impacts tax
pooling payments as well.
There may be more or less than the usual three
provisional tax instalments and the amounts at each
instalment may not be equal, depending on factors
such as when the change of balance date was
approved, or when the preceding year’s tax return
was filed.
The rules for calculating interest are different to those
for calculating provisional tax. In a transitional year
there are special rules for the interest start date and
the amount of residual income tax (RIT) due at each
instalment date.
When calculating interest, the RIT for the transitional
year is divided between the provisional instalments for
that year. The amount of RIT on which interest is
calculated for each instalment (excluding the final
instalment) is calculated using the following formula:
(4 or 6)* × RIT
months in transitional year
*Use 4 if not registered for GST, or registered and
using a monthly or two-monthly basis. Use 6 if
registered for GST and using a six-monthly basis.
Example
A person who pays GST on a monthly basis with a
standard March balance date has an August
balance date approved, which results in a
17-month transitional year for 2015 (March 2014
to August 2015).
The 2014 RIT is $52,000. The portion of RIT
payable on the first 4 instalments for the purposes
of calculating interest is:
4
×
52,000
17
= $12,235.30
Note: This amount on which interest is calculated
will likely differ from the amount actually due
under the provisional tax rules.
The final instalment is calculated by subtracting
the previous instalments from the total RIT. In
this case:
Previous instalments = 4 × $12,235.30 =
$48,941.20
Final instalment = $52,000.00 – $48,941.20 =
$3,058.80
The following resources provide more detail on
transitional years:
• Tax Information Bulletin Vol 5, No 11, April 1994
(pages 13–14)
• Tax Information Bulletin Vol 7, No 13, May 1996
(pages 15–19)
• Income Tax Act 2007, sections RC 9(11)
Transitional years and RC 20(3) Formula
• Tax Administration Act 1994, section 120KD.
Clients trading online
Do you have clients who conduct some or all of their
business online? If so, we have a factsheet Online
trading tax implications (IR 1022) designed to help
this business group understand their tax obligations.
Some online traders are unaware of their tax
obligations. The IR 1022 gives pointers on taxes,
paperwork and residency implications. It’s a quick
read aimed at getting online traders on the right track.
Keep a supply on hand for your online trader clients.
You can download copies from www.ird.govt.nz
(search keyword: IR1022) or order copies through
your StationeryXpress account.
Speed up IRD number applications and
GST registrations
When you apply for an IRD number or register for
GST for a client we require confirmation that you have
written authority to act on your client’s behalf. You
can do this by attaching either a client linking form or
a cover letter advising confirmation of written
authority for all tax types.
If you require an urgent IRD number or GST
registration, you must include the reason why.
Anything marked “urgent” without a valid reason will
be treated as standard.
AGENTS ANSWERS • Issue No 176 • February 2015
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From our technical tax area
The following summaries are from recent publications
in the technical tax area of our website
www.ird.govt.nz/technical-tax Full commentaries
are also published in the Tax Information Bulletin.
QB 14/11: Income tax – Scenarios on tax avoidance
This question we’ve been asked (QWBA) is about
applying section BG 1 of the Income Tax Act 2007 to
three scenarios provided at a tax conference. The
scenarios concern interest deductions, look-through
companies and substituting debentures. A fourth
scenario about debt capitalisation was included in a
draft of this item consulted on earlier this year. The
Commissioner is still considering the issues raised by
that scenario.
QB 14/12: Income tax – Foreign tax credits for
amounts withheld from United Kingdom pensions
This QWBA concludes that a person can’t claim a
foreign tax credit in New Zealand for any amounts
withheld by their United Kingdom pension provider
from a United Kingdom pension. This confirms Inland
Revenue’s longstanding view. HM Revenue & Customs
agrees with Inland Revenue’s view and refunds
amounts incorrectly paid to HMRC. The Commissioner
has prepared the Commissioner’s operational position
on foreign tax credits for amounts withheld from
United Kingdom pensions, which can be found at
www.ird.govt.nz (search keywords: foreign uk).
QB 14/13: GST – Lotteries, raffles, sweepstakes
and prize competitions
of interest to non-profit groups who run these events
as part of their fundraising activities. Where a
registered person is running one of these events, GST
needs to be accounted for on any ticket sales less any
cash prizes paid or payable. The item covers similar
content to BR Pub 07/11 “GST – Lottery operators and
promoters”, which expired on 21 December 2012. It
isn’t a change in view by the Commissioner and
doesn’t apply to racing or sports betting.
BR Pub 14/09: Income tax – Meaning of “anything
occurring on liquidation” when a company
requests removal from the register of companies
This public ruling considers the meaning of “anything
occurring on liquidation” in the context of a company
which requests removal from the register of
companies under s 318(1)(d) of the Companies Act
1993. The ruling concludes that liquidation of a
company is a process, and the first step to start that
process will usually be a resolution of shareholders to
cease business, pay all creditors, distribute surplus
assets, and to then request removal from the register.
BR Pub 14/10: FBT – Provision of benefits by third
parties – section CX 2(2)
This public ruling considers when a benefit provided to
an employee by a third party will be considered a
fringe benefit under s CX 2(2) of the Income Tax Act
2007. The ruling provides a list of situations where
the provision of a benefit by a third party will, and will
not, be considered to be a fringe benefit.
This item explains the GST rules for running a raffle,
lottery, sweepstake or prize competition. It might be
Changes to income adjustments for student loan and WfFTC
If you have clients with a student loan or Working for
Families Tax Credits (WfFTC), a number of new
income types and adjustments will be used to
calculate loan repayment obligations and WfFTC
entitlements on income received on or after 1 April
2014.
Student loans only
Most of the income types and adjustments for student
loans are the same as those for WfFTC.
However, we need to know about any distributions
from trusts that are not beneficiary income and/or
foreign-sourced income of any non-resident student
loan borrowers we treat as being physically present in
New Zealand.
Working for Families Tax Credits only
The following are used for WfFTC adjustment
purposes only:
• passive income earned by a dependent child
(or children)
• other payments received
New income types for both
There are two new income types we need to know
about for both WfFTC and student loans:
• salary or wages exchanged for private use of an
employer-provided motor vehicle
• receiving a short-term charge facility (including
vouchers) to purchase goods and services their
employer pays for.
Where to find more information
For the full list of income types and adjustments go to
www.ird.govt.nz (search keywords: adjust income).
Here you can see:
• all the income and adjustment types
• the years they apply to
• how the calculations work
• which social policy they apply to.
There are also handy examples to help you complete
the Adjust your income for Working for Families Tax
Credits (WfFTC) (IR 215).
• income earned by a non-resident spouse/partner.
AGENTS ANSWERS • Issue No 176 • February 2015
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Do you need to know about FATCA?
If you’re a New Zealand
financial institution
(NZFI) or similar
organisation, the United
States (US) Foreign
Accounts Tax Compliance
Act (FATCA) may apply
to you.
Key dates
The table below contains key dates for NZFIs.
Date
Past events
12 June 2014
Intergovernmental Agreement (IGA)
signed between United States and
New Zealand
30 June 2014
Royal Assent for New Zealand
legislation to allow New Zealand
financial institutions to collect and
report data on their United States
customers
1 July 2014
IGA takes effect in New Zealand and
the United States
31 December
2014
Deadline for NZFIs to register with
the IRS.
How FATCA could affect your business
FATCA requires all foreign financial institutions that
are not exempt, including NZFIs, to register with and
report to the US Internal Revenue Service (IRS) each
year on US citizens and US tax residents, who have
specified foreign financial assets that exceed certain
thresholds.
What you need to do
If you’re unsure if this legislation applies to your client
refer to our website www.ird.govt.nz (search
keyword: FATCA). You’ll need to find out as soon as
possible as the first disclosures for the 31 March 2015
year need to be sent to us by 30 June 2015.
If you establish that you need to send annual FATCA
disclosures to us you can send this through our new
FATCA system—the International Data Exchange
Portal (IDEP). The IDEP will be available on our
website to all New Zealand reporting entities.
We’ll act as an intermediary between NZFIs and the
IRS and will provide services to collect and securely
store FATCA-related information from NZFIs,
sponsoring entities and third-party service providers
(where permitted). We′ll then forward this
information to the IRS as required by the
New Zealand/United States Intergovernmental
Agreement.
Beginning in February 2015 you’ll be able to enrol for
this service on our website and check that you can
create a disclosure and upload your XML files using
IDEP. We’ll be offering support for FATCA-related
enquiries, from now until the “go-live” date of 1 April
2015. You’re welcome to email queries and feedback
to [email protected]
Event
If you still need to register with
the IRS you should do this
immediately and find out what
the consequences are for not
having registered by
31 December 2014
Coming events
1 April 2015
NZFIs to start providing FATCA data
to us
30 June 2015
Last day to provide FATCA data to us
for 31 March 2015 year
30 September Last day for us to send
2015
New Zealand’s aggregate FATCA data
to the IRS for the period up to
31 March 2015
Starting 1 April 2015 the system will be live and you’ll
be able to submit your first FATCA disclosures to us.
We′ll provide a dedicated 0800 number for FATCArelated enquiries.
For information on how to enrol and send data using
IDEP refer to our “Foreign Account Tax Compliance Act
(FATCA) Inland Revenue user guide”, on our website
www.ird.govt.nz (search keyword: FATCA).
AGENTS ANSWERS • Issue No 176 • February 2015
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Certificate of exemption renewals and
tax codes
With the tax year
drawing to an end it’s
time to talk about
renewing certificates of
exemption (COEs) and
applying for special tax
codes (STCs).
Renewing a COE from tax on schedular payments
If your client’s COE is about to expire, now’s the time
to apply for a renewal using our online service “Apply
for or renew a certificate of exemption from PAYE on
schedular payments” at www.ird.govt.nz under “Get
it done online”.
To qualify, your client needs to:
• be in business
• receive schedular payments subject to a prescribed
rate of tax under Schedule 4 of the Income Tax Act
2007
• have a good record in New Zealand for filing
returns and paying tax when it’s due.
Note: If your client is a non-resident contractor,
write to us at:
Inland Revenue
PO Box 2198
Wellington 6140
Or call us on 04 890 3056.
Companies operating in the agriculture, horticulture
and viticulture industries can apply for a COE from tax
on schedular payments. If you have any questions
about this, call us on 0800 377 774.
Applying for an STC or a COE from resident
withholding tax
Our online service “Apply for or renew a certificate of
exemption from PAYE on schedular payments” can’t
be used for applications for an STC or an exemption
from resident withholding tax (IPE). This service
can’t accept these applications and they will be
declined.
Instead, you need to download and fill in a Special tax
code application (IR 23BS) form and post it to us.
For an application to be exempt from resident
withholding tax we need a completed Application for
exemption from resident withholdinww tax (RWT) on
interest and dividends (IR 451) form.
Both these forms can be downloaded from
www.ird.govt.nz “Forms and guides”.
Understanding grace periods
Grace periods apply to all tax types registered under
any IRD number or entity, except child support,
student loan repayments, donation tax credits and
any late paid provisional tax instalments. They are
calculated per customer not tax type and cover all
eligible taxes due on the same day.
Grace periods are considered when remission requests
are made but use-of-money interest (UOMI) remains
payable.
If you deal with entities that have several divisions or
branches, ie, multiple IRD numbers, the entity is
eligible for only one grace period across the whole
entity.
Example
Jolly Jacks Jelly Bunnies is a large company with
branches across New Zealand. Each branch has
its own IRD number. The branch in Nightcaps was
late filing their November 2014 GST and the
branch in Eketahuna was late filing their
December 2014 GST. Only one will be given a
grace period. In this case Nightcaps gets the
grace period and Eketahuna will need to pay full
penalties and interest.
During the grace period (about 28 days) you’ll get a
letter on your client’s behalf explaining the grace
period and what action needs to be taken before
penalties are added to their account. Your client will
then get a letter two weeks later. This leaves less
than two weeks for them to organise payment or
make an arrangement. Reminding your client to take
some action before the extended due date can help
minimise any penalties.
Tool for Business revamped
The “Tool for Business” is
an online interactive tool
providing small business
customers with an
easy-to-use resource to
get their tax obligations
sorted quickly.
We’ve recently updated this tool to a mobile-friendly
format so it can be used from a mobile device
wherever you or your clients have access to online
services and a charged portable device.
Check it out at www.ird.govt.nz/tool-for-business/
Please recommend it to your small business clients.
It could save both you and them time.
AGENTS ANSWERS • Issue No 176 • February 2015
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Child support is changing
Updated tax agent application forms
The new way to work out child support assessments
starts on 1 April 2015.
Last June we changed the way you apply to be listed
as a tax agent. As a result of your feedback we’ve
made some changes to the application forms to make
them easier to understand and complete.
We’ll send notices to customers from mid-February
letting them know the new amount of child support
they’ll pay or receive.
In mid-March, we’ll let employers know how much to
deduct from each payday from April onwards.
Starting on 1 April 2016, we’ll be making further
changes to improve child support. These changes
include a new administrative review ground and a
lower maximum age of eligibility. There will also be
new debt and penalty rules if customers fall behind
with payments.
We’ll continue to keep customers and employers
informed of changes throughout the year.
For more information on the changes and notices,
please direct your clients to www.ird.govt.nz/cskey
Latest Compliance Focus launched
Late last year we launched Our Compliance Focus
2014–15. Have you taken a look yet? It includes a
section for businesses with updated information on
our areas of focus and some tax basics for everyone.
Once you’ve downloaded the booklet you can email it
to your clients or share with them in person to show
you’re up to date with the latest issues in the world of
tax. It will help you provide the best possible advice
to ensure they get their taxes right.
What you need to do
If you’re applying to be listed as a tax agent you need
to complete an Application to be listed as a tax agent
or update a tax agent’s details (IR 791) form. If a tax
agent is an entity (not a natural person), each key
office holder needs to complete a separate Statutory
declaration of a key office holder in support of an
application to be a listed tax agent (IR 768) form.
You must attach these to your IR 791 application
form.
You also need to attach an example of your authority
to act letter and a list of at least 10 clients who are
required to file income tax returns (not personal tax
summaries) and for whom you hold signed
authorities.
If you stop being a tax agent you don’t need to
complete these forms, instead you need to contact
your account manager.
For more information and support please go to
www.ird.govt.nz/taxagents
New email scam targeting Kiwibank
customers
Kiwibank customers are
being targeted via email
by scammers notifying
them they have a tax
refund and asking them
to click on a link and
enter their account
information.
Take a look and share today. You can download the
new booklet from
www.ird.govt.nz/taxagents/compliance/
Upcoming changes to benefit and
reimbursing allowances
Changes to the tax
treatment of allowances
that your clients might pay
to their employees take
effect on 1 April 2015.
Allowances are payments
made to an employee in
addition to their salary or wage and can include
payments for accommodation, food or clothing.
A number of emails
reporting this scam have
been forwarded by customers to us at
[email protected]
We’ve notified Kiwibank and the Department of
Internal Affairs′ scam unit.
If you have clients who are customers of Kiwibank
please warn them that this is a scam. Tell them to
ignore and delete the email.
The changes clarify the tax treatment of employerprovided accommodation, accommodation payments
and other allowances or payments made by employers
to cover employee expenditure.
For detailed information about these changes,
including if you can retrospectively apply the new
rules, go to www.ird.govt.nz (search keywords:
benefit allowances).
Agents Answers comments generally on topical tax issues relevant to tax
agents. Every attempt is made to ensure the law is correctly interpreted,
but articles are intended as a brief overview only. The examples
provided are not intended to cover every possible factual situation.
Email: [email protected]
www.ird.govt.nz
AGENTS ANSWERS • Issue No 176 • February 2015
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