Articles

Audit Shield Insurance - Master Policy Information

What are random Tax and Government audits?

Audits, reviews and investigations are conducted by the Inland Revenue (IRD) and other government agencies to ensure business and tax payer compliance with various tax and legislative requirements such as Income, PAYE, GST, FBT, Record Keeping, KIWI Saver, Employer Returns, Gift Duty and Computer Tax Audits amongst others.

How likely am I to get a random audit, review or investigation?

The IRD, along with other government agencies continue to announce significant increases in their audit activity. Now more than ever Businesses are at risk of being selected for a random audit or review.

What are the costs to businesses and tax payers in the event of a random audit, review or investigation?

If your business or individual return is subjected to a random audit, review or investigation, you are responsible for the costs (professional fees) involved in providing the required information. Even the simplest enquiry can require hours of work. In multiple years or multiple companies and trusts, thousands of dollars in accounting and legal fees can be incurred. The cost of being properly represented in these matters can be quite considerable depending on the length of time involved.

How can I protect myself from the costs of random audits, reviews and investigations?

We can offer you participation in our Audit Shield Master Policy which can provide you with comprehensive relief from these costs (fees).

The Audit Shield Master Policy provides for the payment of the professional fees incurred as a result of you being selected for an audit, review or investigation by the IRD or other Government body. The Audit Shield Master Policy premium provides a fixed, cost effective solution to guard against these unbudgeted costs.

What are random Tax and Government audits?

Audits, reviews and investigations are conducted by the Inland Revenue (IRD) and other government agencies to ensure business and tax payer compliance with various tax and legislative requirements such as Income, PAYE, GST, FBT, Record Keeping, KIWI Saver, Employer Returns, Gift Duty and Computer Tax Audits amongst others.

What Costs are covered?

The service covers all professional fees up to a prescribed limit (with no excess) when responding to, or representing you in an audit, review or investigation. These include not only our fees, but also legal fees, bookkeeping fees and specialist professional advisor fees (e.g. specialist accountants, lawyers etc).

Who is covered?

All of our clients can take advantage of our Audit Shield Master Policy. Different levels of cover are available for:

  • salary and wage earners;
  • businesses or business groups;

What do I need to do to participate in the Audit Shield Master Policy?

Please contact Phillip Christey on 03 981 4214 and we will send you an information pack including an acceptance form/invoice.



Storing taxpayer electronic records offshore

Inland Revenue advised on 21 October 2013 that the following organisations have been approved under s 22(8)(a) of the Tax Administration Act 1994 to store taxpayers’ electronic records outside of New Zealand:

  • CargoWise NZ Limited
  • MYOB NZ Limited
  • Xero Limited

Taxpayers who store their business records with these approved organisations do not need to obtain approval under s 22(2BA) to store their business records outside of New Zealand.

Although a third party provider may be used to store business records, taxpayers remain responsible for their tax obligations, including retaining business records for the retention period (usually seven years) required under the Tax Administration Act.

Further information is available in standard practice statement SPS 13/01: “Retention of business records in electronic format, application to store records offshore and application to keep records in Maori”. The standard practice statement provides guidelines on the retention of business records in electronic format and sets out the Commissioner’s practice when considering an application to store business records offshore.

Source: www.ird.govt.nz



Important New Zealand Tax Dates

Provisional Tax Payments Due:

  • 28thAugust
  • 15thJanuary
  • 7thMay

Terminal Tax Payments Due:

  • 7thApril

PAYE Due:

  • 20thof each month

GST

Payment and Filing Dates:

Bi-Monthly Filing:

  • 1st of April - 31st of May. Due: 28th June
  • 1st of June - 31st of July. Due: 28th August
  • 1st of August - 30th of September. Due: 28th October
  • 1st of October - 30th of November. Due: 15th January
  • 1st of December - 31st of January. Due: 28th February
  • 1st of February - 31st of March. Due: 28th April

Bi-Annual Filing:

  • 1st of April - 30th of September. Due: 28thOctober
  • 1st of October - 31st of March. Due: 28thApril

Fringe Benefit Tax:

Quarterly Filing and Payment Dates:

  • 1st of April - 30th of June. Due: 20thJuly
  • 1st of July - 30th of September. Due: 20thOctober
  • 1st of October - 31st of December. Due: 20thJanuary
  • 1st of January - 31st of March. Due: 31stMay


Vehicle Mileage Reimbursement Rates

Mileage rates for employee reimbursement and self-employed people can vary depending on the annual kilometres travelled each year. For details of the Inland Revenue’s policy on motor vehicle reimbursement options go to: www.ird.govt.nz/business-income-tax/expenses/mileage-rates/emp-deductions-allowances-mileage.html. Please contact us if you need any help in deciding the best way to structure your motor vehicle ownership or how to deal with motor vehicle reimbursement costs.



Legal Fees Deductible

As of April 1 2009 businesses will be able to claim a full tax deduction for legal expenses up to $10,000.

With effect from 1 April 2009 businesses can generally claim a full tax deduction for legal expenses up to $10,000 in the year those expenses are incurred. For expenses over $10,000 the usual (old) tax rules apply and legal expenses need to be split between those that are fully deductible and those that need to be depreciated because they relate to a capital purchase.

Example: A business purchases capital equipment with bank finance. The total legal expenses are $4,000 for the financing of the purchase and $4,000 for the legal work on the purchase. The full $8,000 will be deductible in this case. Under the usual (old) tax rules only $4,000 for financing would be deductible in the year incurred with the balance depreciated as part of the cost of purchase of the capital equipment.

NOTE:

  1. The amount of $10,000 excludes GST if the business is GST registered;
  2. The deduction is only for businesses where the total legal expenses in one year are $10,000 or less;

The relevant legislation is Section 4 of the Taxation (Business Tax Measures) Act 2009 which inserted a new Section DB 62 into the Income Tax Act.