Tax changes affect all New Zealanders

If you are in business, you should read this column carefully, for a number of changes introduced in Budget 2010 could be of relevance to you as a businessperson or individual. We would also apprise you of our Compliance Focus Programme.

Taxes & Rates

The table below shows the PAYE rates that would be used while calculating the 2010-2011 income year.

You should start using the new rates to calculate the correct amount of PAYE to deduct from your employees’ salaries and wages for pay periods ending on or after October 1, 2010.

We will write to you as to when the updated PAYE tables and the online calculator will be available and provide more information about the other implications of the income tax rate changes.

The secondary tax rate will drop from October 1, 2010 to align with the new personal income tax rates. The new PAYE tables effective from your employee’s first pay period ending on or after October 1, 2010 will include the new secondary tax rates.

The current ACC earner levy is 2% (GST inclusive). It increases to 2.04% on October 1, due to an increase in GST. We have included the increase in the updated PAYE deduction tables and calculators.

The company tax rate is changing from 30% to 28% from the 2011-12 income year.

Depreciation: Until recently, depreciation loading of 20% was available for qualifying items. This loading has now been removed.

The new rule applies to eligible assets for which binding purchase contracts are applicable from May 20, 2010. You can also no longer apply for special depreciation rates for buildings.

GST: The Goods and Services Tax will rise from 12.5% to 15% on October 1, 2010.

You can calculate the GST content of a GST-inclusive amount as follows: (1) For 12.5%, divide by nine for transactions that occur on or before September 30 and (2) For 15%, multiply by three and divide by 23 (for transactions that occur on or after October 1).

GST Returns

GST returns filed monthly, two-monthly or six-monthly for the period ending September 30 will be at 12.5% rate and at 15% rate from October 1.

We will send your GST returns with the 15% rate for periods ending on or after October 1, as usual.

GST returns filed every two or six months may span the date of the GST rate change.

In this case, you will receive a two-part transitional return to account for the 12.5% rate for the period up to and including September 30, and for the 15% rate thereafter, until the end of your return period.

You will also receive one-off transitional return with information on how to complete it before the end of your first return period that ends after October 1.

You will then file normal GST returns at 15% for subsequent periods.

Our website (www.ird.govt.nz/changes) has more information.

Compliance Focus Programme

We recently released our Annual Compliance Focus Programme, Helping you get it right: Inland Revenue’s compliance focus 2010-11.

It gives you a detailed description of our compliance plans for this year.

We believe that raising awareness of the identified compliance issues will give you an opportunity to review your own situation and check that everything is in order.

As a result, overall compliance should improve.

The compliance issues highlighted in this year’s programme fall under five key themes, namely, making sure everyone pays their fair share, targeting businesses operating in the hidden economy, getting it right at source, proactively managing debt and making it easy to do online.

Abdul Rafik is Inland Revenue’s Community Relationships Advisor based in Auckland. He is happy to answer readers’ queries, which should be sent to:

venkat@indiannewslink.co.nz

To attend Free taxation seminars and workshops, visit www.ird.govt.nz (search Seminars).