This is our last newsletter for the year. We know you are probably busier than ever so we will keep it short.
Are you still tacking up the tinsel while thinking about everything on your to-do list? Do you have all your reindeer in a row or is your sleigh skidding into the silly season? Check your cashflow to make sure the business is in good shape for December and January tax dates.
Wishing you a safe and happy Christmas and a prosperous new year!
Our office will close on the 22nd of December and reopen in the New Year on the 15th of January. For any urgent matters, a skeleton crew will be at the office from Monday 8th January. Thank you for all your support this year.
Provisional tax and GST are due on 15 January.
The timing of these payments isn’t ideal as many of you will be indulging in the delights a summer break offers.
But it’s important that you don’t neglect your tax obligations – especially as Inland Revenue will charge 8.22 percent interest and late payment penalties if you don’t pay the tax you are required to pay on time.
Are you planning a Christmas event for your clients? Is gift-giving on your to-do list?
Take a minute to refresh yourself on what is deductible as a business related expense.
Are you thinking of gifts for clients, business associates or team members?
If gifts consist of food or drink, you can only claim 50% of the expense as a tax deduction. If gift baskets or hampers contain some food or drink and some other goodies, the food or drink items are 50% deductible but the other gift items are 100% deductible.
Note that when you claim the tax deduction, you need to apportion the expense between the 100% deductible items and the 50% deductible items. Let us know the details.
The basics: an expense is business-related if you spend the money to help your business earn income. Business-related expenses are generally fully deductible. If the expense does not help your business earn gross income, it is a private expense, not claimable as a deduction. Purely promotional events put your brand out there and are a marketing expense for the business. But entertainment events such as Christmas parties inhabit a grey area sometimes.
You will need to make a GST adjustment for any entertainment expenses which are 50% deductible. This will be required when your income tax return is filed. We can help you with this.
Are you planning a promotional event open to the general public? Sponsoring the local Santa parade?
The event will be 100% deductible as a business expense. However, if the event is not open to the public, but by invitation to customers, business associates or team members, you can only deduct 50% of the costs.
Are you planning an event for charity? A Christmas party at the local hospital? Serving Christmas dinner at the local homeless shelter? Entertainment supplied for charity is 100% deductible.
Are you celebrating a spectacular year and taking your team to Raro for a weekend?
Entertainment enjoyed outside New Zealand is 100% deductible. However, if your team contributes to costs (for airfares or anything else), make a note to reduce your expense claim by the amount of the contribution.
THINGS TO DO THIS MONTH
When there’s a public holiday on a day your employee usually works, they’re entitled to a paid day off — no matter how long they’ve worked for you.
You can only require employees to work a public holiday if it’s written in their employment agreements. Also, if they agree to work, you must:
When a public holiday falls on a Saturday or Sunday, employees who don’t normally work then get the following Monday as their paid public holiday — this is called Mondayisation.
The public holidays for the upcoming Christmas break, with the day of the week they fall on, are as follows:
An employee is entitled to a full alternative day off if they work on a public holiday — no matter how many hours they worked that day.
But they don’t get an alternative day off — also called a day in lieu — if:
You can claim for lots of daily expenses when you’re travelling for work. If you take a holiday as part of the same trip, you can only claim for the parts of the trip that were work-related.
What you can claim
In general, when you’re away from home you can claim for:
If you’re attending a work-related meeting, conference or training course that requires an overnight stay, you can claim the cost of accommodation, eg hotel, motel or short-term rental.
If an employee is working away from home for an extended period, eg on secondment, you can claim for accommodation, or any accommodation allowance you pay, as long as they won’t be gone for more than two years (or three years for capital projects).
Food and drink
If you or one of your employees buys a meal while travelling on business, the cost is 100% deductible.
But you can only deduct 50% of the cost of food and drink if either:
You or your employees can also claim for snacks and refreshments, eg tea and coffee, while they’re away if you normally provide these refreshments at work
On a work trip, you can claim the cost of entertainment if its purpose was to:
If the entertainment is helping you earn your income, it’s usually deductible when it’s time to work out your tax.
Within New Zealand, entertainment expenses can be either 50% or 100% claimable — check with Inland Revenue.
If you’re travelling overseas, you can claim 100% of work-related entertainment expenses.
Disclaimer – While all care has been taken, Johnston Associates Chartered Accountants Ltd and its staff accept no liability for the content of this newsletter; always see your professional advisor before taking any action that you are unsure about.