Tax Loose Ends – why it is a good idea to tidy these up..

The new financial year is well underway, and we are making good progress with getting your 2019 financial positions and tax affairs in order.  We have come across a few tax loose ends that we would like to bring to your attention to ensure your business and personal tax affairs are as tidy as possible.

• Ensure you are on the correct Prescribed investor Rate (PIR) with your Kiwisaver provider. PIR’s are elected by the Kiwisaver member (yourselves) and now this information is available on the IRD‘s new system we are seeing that many individuals have elected an incorrect rate. Electing an incorrect rate means we must include it in your tax return and if you have elected a rate that is too low then you may end up with a tax bill. To ensure you are on the correct rate check out this link https://www.bnz.co.nz/support/investments/prescribed-investor-rate/working-out-your-pir
• If you are a sole trader, operate as a partnership or have elected to use these rules as a close company, you can claim vehicle running costs as per your logbook. Without completing a logbook, you are limiting your claim to a maximum of 25% of your vehicle operating costs. For this reason alone, you should be completing a logbook for three months to establish the business use percentage of your vehicle. If you have had a significant change in the business use of your vehicle from the last time you completed your three-month logbook or you haven’t completed a logbook for three years, now is a good time to start a new one to ensure you are claiming what you rightfully can.
• Remember to keep and submit your school, charitable and religious donation receipts to us when you send in your yearend financial and tax information – providing they are a registered charity we can claim a third of the total of these back for you as a rebate from the IRD.
• If you use your home and / or garage for business purposes, then we can include a portion of your personal home expenses in your year end expenses for tax purposes. This includes garaging for vehicles (claimable at the same percentage as your logbook), so it is worth putting a bit of time in to measure the areas used for business purposes and to keep an accurate record of your home office expenses – mortgage interest or rent, power, rates, insurance and phone and internet.
• Some income protection insurance can also be claimed in your personal year-end tax return so remember to submit a copy of your annual income protection certificate to us with your year-end information.
• If you provide entertainment for your team, clients or any other business contact, some of your business entertainment expenses are tax deductible – in most cases 50% of the expense is tax deductible. Client gifts that are food or beverage related are also only 50% deductible so you may want to consider another form of gift if you want to get a full tax deduction.
• Finally, if you are unsure about anything then please feel free to contact us at Business Like NZ. We are only too happy to help and point you in the right direction.

Nileshni Prasad