Miller Johnson – December 2019 Newsletter

Christmas Closure:
Our office will be closed from 1pm on Friday 20th December and will re-open on Monday 6th January 2020.

We wish you a Merry Christmas and a happy New Year!

Tax Letters:
We will be sending out Tax letters shortly.  These are for clients who have provisional tax payments due on 15th January 2020.

Have you budgeted for your upcoming IRD payments?
As a friendly reminder to our clients, there are a few IRD tax payments coming up in the new year!
15th January 2020:
November 2019 GST due
Second provisional tax payment for 2020 due
7th April 2020:
Income / 2019 Terminal Tax due
7th May 2020:
Third provisional tax payment for 2020 due
If your circumstances have changed, please contact us as we may be able to adjust your tax payments.

Changes to IRD Use of Money Interest Rates:
IRD has made changes to the Use of Money Interest rates, effective 29th August 2019.
The UOMI rate has decreased from 1.02% to 0.81% and the debit UOMI has increased from 8.22% to 8.35%.  As a result, we can only recommend that our clients make use of Tax Traders.  By depositing funds into the Tax Traders tax pool, you will gain flexibility and control as well as mitigating UOMI charges by having deposit funds on hand to transfer or transact with later to cover your future tax requirements.   If you would like any more information about using Tax Traders, please contact your usual accountant.

IRD no longer accepting cheques:
From the 1st March 2020, Inland Revenue will no longer accept cheques as a form of payment.  This will also apply to any cheques that are dated after 1 March 2020.  Below are some others ways that you can pay:

  • myIR: Pay by direct debit and make debit and credit card payments securely through myIR.  Visit and login or register for myIR.
  • Online Banking:  Pay through online banking – most banks have a “Pay IR” option.
  • Credit or debit card via the IRD website:  Payments can be made with credit or debit cards through the website
  • In person at Westpac Bank:  The bank will accept EFTPOS or cash payments at the counter or using their Smart ATM.
  • Money transfer:  If you are overseas, you can use a money transfer service.  Searching “make a payment” on the IRD website will give you more information.

IRD have also advised that they have stopped sending GST refund cheques as of the 25th September 2019 to align with this change.

IRD Process Rulings:
Generally, tax rulings from the IRD are long winded and costly.  However, you can now apply for a short process ruling if your annual gross income was $20 million or less in the last year and the application for a ruling involves less than $1 million tax.  You can apply through myIR or on the IRD website and they will get back to you within about six weeks with its initial view of your application.  The cost is also $2000 inc GST.

How are we buying and selling land?:
IRD are keeping a close eye on how we are buying and selling land.  They have released a consultation document following their observations that people are using various entities for purchasing their main home and there is evidence that they are taking advantage of the business premises exclusion.  To avoid detection, people are varying their transactions so that there is no pattern.  The document mentions that there would be a regular pattern where a person or a group of people or entities has a regular pattern of buying, occupying and selling land.  There is also a concern about interpretation.

GST trap for 100% change of use:
Suppose you buy an expensive car for your business and it’s established that it is 75% used as a taxable supply and 25% as non-taxable.  Ten years after the  purchase you decide to take the car over personally.  All the GST claimed has to be returned to the Government.  For example, the GST content of a car when purchased is $50,000 and your initial claim for input tax is therefore $37,500.  The business use of the vehicle remains the same for the full 10 years.  When you perform the change of use adjustment, it has the effect of returning the whole $37,500 as output tax.  Contrast this with selling the car for its market value of $1,150.  You have maintained a consistent 75% business use so there is no wash up adjustment required.  You are $36,350 better off by selling the vehicle than you would be by taking it over personally.  It would work in reverse too, if the car becomes 100% business owned.

IRD no longer contacting our clients direct:
In response to complaints by accountants and our clients, an announcement has been made by IRD that measures are being put in place to limit the level of direct contact that IRD will have our clients.

Child support info sharing:
New Zealand will be taking part in the Hague Convention which relates to child support recovery.  Revenue Minister Stuart Nash announced that this will assist Inland Revenue with finding liable parents overseas.

Landlord updates, prepare for Christmas:
Since the 27th August, new rules were put in place for Landlords and tenants with regard to property damage.
Some of the changes include:
Tenant Liability: Tenants are liable for the cost if they or their guests cause damage to the rental property as a result of careless behaviour.  This can be up to a maximum of four weeks’ rent or the landlord’s insurance excess, whichever is lower.
Insurance Statement: Landlords are now expected to provide a statement in any new tenancy agreement to show whether the property is insured and also what excess is applied to any relevant insurance policies.  The statement also needs to mention that a copy of the policy is available to the tenant upon request.
Contamination of premises: Landlords are now able to test for methamphetamine in their rental properties while the tenants are living there.  They do need to provide 48 hours notice at least, but not more than 14 days notice, to tenants before they may enter the property.  At least 24 hours notice must be given to boarding house tenants, before the landlord may enter the boarding house room.  There will be more details coming regarding the acceptable level of methamphetamine contamination as well as processes for testing and decontamination of rental properties.
Unlawful residential premises:  Landlords who rent out unsuitable premises will now be held to account even more than before with this new law change.  Landlords must meet all the legal requirements when it comes to health and safety and buildings that apply to the premises that they are renting out.  They must also ensure that their property can legally be lived in from the outset of the tenancy.
Tenancy Services has more information about the law changes and updates.

New Partnership Act:
The Partnership Act 1908 has been revised to the Partnership Law Act 2019 to re-enact the older version in an up-to-date and accessible form.  No substantive policy changes were made and it applies to every partnership regardless of when it was formed.  Schedule 4 of the Act contains changes to a few of the enactments, such as the Goods and Services Tax Act 1985 and the Income Tax Act 2007.  “Partnership and Partner” is defined in the Goods and Services Tax Act by replacing “Partnership Act 1908” with “Partnership Law Act 2019”.