The Tax Administration (Direct Credit of GST Refunds) Order 2016 will make it compulsory for Inland Revenue to provide GST refunds by direct credit to a taxpayer’s identified account, resulting in much faster GST refunds. “Under the current process, a cheque from Inland Revenue takes an average of 10 days until the funds become available to the taxpayer. Direct credit means the funds will be available to the taxpayer in just two days,” Mr Woodhouse says. “This change is the result of extensive public consultation in November 2015, which sought feedback on how digital technology might be used to provide more streamlined PAYE and GST processes for taxpayers. “It is just one of a number of changes that will be introduced next year as part of Inland Revenue’s modernisation programme to make it easier and faster for New Zealanders to manage their tax affairs.” From 7 February 2017 GST refunds will only be made by cheque if Inland Revenue does not have a customer’s bank details or if there are extenuating circumstances, such as hardship.

The basic idea is that an expense is business-related if you spend the money to help your business earn income. Most business-related expenses are fully deductible. If the expense doesn’t help your business earn gross income, it’s private and you can’t claim it as a tax deduction. It becomes a little trickier when there’s an element of private enjoyment. You might think that the firm’s Christmas party for clients is a business related expense and should be fully deductible because it’s promoting your business, products or services. However:

• if your clients or employees have a greater opportunity to enjoy the entertainment than the general public, you can only deduct 50% of the costs
• if anyone associated with the business has a greater opportunity to enjoy the entertainment than the general public, you can only deduct 50% of the costs

Generally speaking, if there’s an element of private enjoyment, the expenses (in addition to the food and drink) associated with events where you entertain clients and/or staff will only be 50% deductible. For instance, this would include the hire of crockery, glasses, waiting staff and music. There are exceptions. Entertainment supplied for charity is 100% deductible. For instance if you throw a Christmas party for the children’s ward at the local hospital, this is fully deductible. Entertainment enjoyed outside New Zealand is 100% deductible. If you take the team to the Gold Coast for Christmas (lucky them) it will be fully deductible. However, if they contribute towards the cost of their airfares (or anything else), you will need to reduce your expense claim by the amount of the contribution. Some entertainment expenses are fully deductible but some are not. Use these examples as a guide. 50% deductible

• Christmas drinks for team members or clients in the office
• Christmas drinks for team members or clients in the pub
• Hire of a launch to entertain clients
• Restaurants providing food and drinks to team members at a social function in their restaurant
• Staff Christmas party on or off the business premises
• Function hosted in a marquee at the races (or in a corporate box at the rugby). Inclused the cost of tickets and any food and drink provided
• A weekend away for the team at holiday accomoodation in New Zealand. Includes any fod and drink provided

  100% deductible

• Donating food to a Christmas party in a children’s hospital
• Providing morning and afternoon tea for your team
• Providing entertainment, including food and drink at your promotional stand for the Cracker Christmas Festival
• Holding the Christmas party in Fiji (woo-hoo!)

  0% deductible

• Taking your family (who don’t work with you in your business) out for dinner to thank them for being patient while you worked long hours and paying for this using the business credit car

  If your Christmas giving includes gifts to clients, remember that some gifts will be fully deductible while others will be only 50% deductible. Use these examples as a guide.

50% deductible

• Bottle of wine or six pack of beer
• Meal Voucher
• Basket of gourmet food
• Box of chocolates/biscuits
• Christmas ham

 

100% deductible

• Calendar
• Book or gift voucher
• Tickets to a rugby game (but not corporate box entertaining)
• Movie tickets
• Presents (not food or drink)

Casuals

Casual employees might be right for your business, for instance if you are covering unexpected absences. But remember that, no matter what you call the employment, if you treat casual staff as if they are permanent — for instance, give them regular hours or work over a sustained period — their employment may be regarded as permanent, with all that that entails. Points to note:

• Casual work is intermittent or irregular, and casual employees don’t have to accept every offer of work you make so it may not fit the situation you have in mind
• Just like other employees, people who work casually for you need an employment agreement
• You can offer casual employees annual holiday pay on a ‘paid as you earn’ basis. You need to discuss this with the people you propose to employ as casuals. If they agree, this must be stated in their employment agreements, and payment must be recorded separately in wage records at a rate of at least 8%.

 

Fixed-term Employees

It might suit your needs better to employ someone on a fixed-term agreement, particularly if working hours are going to be regular and predictable. But the law is very strict about the form of such agreements, and if that is not complied with, you may find yourself with a permanent employee, i.e. someone whose agreement is of indefinite duration. Because a fixed-term agreement is intended to be for a limited time, the agreement must state the means of ending the employment relationship. For instance, this might be a specific date or event (like the last day of the Boxing Day Sales or the final performance of the Christmas pantomime). Or it might be when a specific project is completed, for instance roofing the new hay barn or installing a new cooling system. As an employer you must have genuine reasons for the employment period to be fixed-term and you must advise your prospective employee of when and how the employment term will end and the reasons for it ending in that way. Make sure the employment agreement backs this up clearly. Be aware of the rules around entitlement to holiday pay. Like casual employees, employees on a fixed-term agreement of less than one year can agree that they will receive 8% added to their gross weekly earnings (paid-as-you-earn) instead of taking annual holidays or getting paid out all of the 8% at the end of their term. Again, you must state this clearly in the employment agreement, it can’t be less than 8% of the hourly rate, and it must be shown as a separate item in the employee’s pay slip and in wage and time records. If you would like more information about how to cover these situations in your employment agreements or your wage and time records, please let us know.

Seasonal Workers 

Many businesses are looking for seasonal workers. The hospitality industry want people for their high season. The summerfruit and wine sectors are moving into high gear. If you are keen to employ seasonal workers over the summer and can’t find New Zealand citizens or residents to do the job, it could be an option to employ overseas workers. If you are considering this, make sure you take these simple steps:

• When advertising, state that applicants must be entitled to work here
• When applicants contact you, ask for evidence they are entitled to work here
• Keep this evidence on file
• Check their visa and passport details on Immigration NZ’s online tool VisaView

And remember – like other workers, seasonal workers have rights as employees and are able to seek protection from workplace bullying or exploitation. Make sure you observe their entitlements to holiday pay and breaks, that you pay them at least minimum wage and have written employment agreements with them.

RSE Scheme 

If you are an employer in the horticulture or viticulture industry, and your need for seasonal workers comes up annually, you might consider becoming a Recognised Seasonal Employer (RSE). This scheme can help you recruit overseas workers when there aren’t enough New Zealanders to plant, maintain, harvest and pack your crops. You need to apply for RSE status and it needs to be renewed regularly. Talk to us if you would like to pursue this.