Hello and welcome to our June newsletter. It's hard to believe that the year is already half over! We've turned up the heating in our new office and, as always, look forward to seeing any clients who wish to pop in and see us with your information or regarding any queries you may have.
In this newsletter, we will be focusing new tax changes that you need to be aware of.
Our New Office
Many of you have been to visit us in our lovely new office and we've been pleased with your positive comments. Please note that parking is in the driveway and it is wide enough for 2 cars if the first car to arrive parks on one side of the driveway. We generally try to allow enough time between appointments so that only one car needs to be parked at a time: however, there are times when other clients arrive and need to park, so it would be really great if people can try to leave enough space for another car if they can.
Karen is Back!
We were very pleased to welcome Karen back from maternity leave in April – just in time for our busy GST period. Karen has settled back into the swing of things – but is only working mornings at the moment. So, if you need to contact her urgently, please do this before 1pm.
Upcoming tax payments
For those of you who are registered for GST 2 monthly, your GST return for the period ending 31 May is due to be filed with Inland Revenue by 28 June 2017. If you haven't already done so, please send us your information ASAP so that we can get your return filed on time. Please call if you need any help or if you are unable to get your information to us.
On 28 August 2017, both July GST returns and the first instalment of provisional tax for those of you not registered for GST or registered for GST on a 2 monthly basis will be due. As always, we will send reminder notices to pay this provisional tax 3 weeks before the due date. Please ensure that we have your correct email address to which to send these notices.
Those of you registered for GST 6 monthly who pay provisional tax: your first instalment isn't due until 28 October 2017 - so don't panic if you don't receive a notice in August.
Bookabach/AirBNB - are you GST registered?
Renting rooms or houses through Bookabach or AirBNB is becoming increasingly popular.
However please note that this income is deemed to be commercial rent, subject to GST if either of these situations apply:
- The entity or person who owns the property is GST registered
- The Bookabach/AirBNB income, together with other self-employed income exceeds $60,000 per annum.
Should this income be deemed to be subject to GST, you will not only be required to pay GST on the rent you receive, but you may be required to pay GST on the market value of the property when you either sell it or cease renting it: effectively giving IRD 15% of your non-taxable capital gain.
If you are contemplating, or have already started renting rooms or houses on a short-term basis PLEASE GET IN TOUCH WITH US URGENTLY so we can advise you as to the best structure to avoid being caught in the GST net.
New Tax Charges
We are pleased to advise that IRD have finally removed the requirement for us all to have crystal balls when it comes to predicting our income for the year. From the 1st of April 2017, the following changes to the provisional tax regime have been put into place:
These changes will give us the ability to retain profits in your company or trading trust without incurring interest charges and will remove the need for taxpayers to pay top-up provisional tax during the year if they believe their income will be higher than the safe-harbour calculation.
- Use of Money Interest will now only be charged to taxpayers whose Residual Income Tax (RIT) exceeds $60,000. Previously all trusts and companies and individuals with RIT exceeding $50,000 were subject to interest.
- Should you exceed the $60,000 threshold, interest will now only be charged from the final 7 May provisional tax instalment rather than from the first instalment date.
Please note however, if you short pay your tax because you believe your income will be less than the safe-harbour value, you will still be penalized.
Withholding Tax - Contractors
Another major change for this year affects those who contract their time. Until this year, many of you were required to pay withholding tax at the rate determined by "The Schedule". For those of you whose type of work wasn't covered by "The Schedule", you were unable to have tax deducted at source – forcing you into the provisional tax regime.
Now all contractors can have withholding tax deducted at the rate they choose – provided it is at least 10%. For those of you who struggle to put your tax aside for your provisional tax, this could be your opportunity to switch to withholding tax – so you are not tempted to spend your tax money! If you would like to do this, speak to the companies to which you contract to get this underway.
Another less positive change is that, from 1 July 2017 people contracting through companies to labour hire companies will also now be subject to withholding tax. Due to the complications arising from this new legislation, we recommend that all of you in this situation apply for a 0% special tax rate so that you are not affected. Please note that this legislation also applies to people who receive income via talent agents.
As always, we look forward to assisting you with any queries you may have so please don't hesitate to contact us if you need help.
From the team at Tyler Price – Isobel, Abbey, Bryony, Caroline, Karen, Tina, Virginia and Tilly.