Quick tax facts

The 2011 tax rates and dates from Grant Thornton, the firm that brings you fresh tax ideas...

• Income tax rates
• Goods and services tax (GST)
• Tax penalties and interest
• Fringe benefit tax (FBT)
• Depreciation, gift duty and withholding tax
• PAYE deductions, ACC earners’ levy and KiwiSaver
• Donations, motor vehicle reimbursement and thin capitalization

Income Tax Rates

Individual Rates

*As the tax rate changed half-way through the 2010/2011 tax year, these are the composite rates

Companies

• Resident and non-resident company income tax rate for 2010/11: 30%.
• Resident and non-resident company income tax rate for 2011/12: 28%.

Trusts

• Trustee income is taxed at 33%
• Beneficiary income is taxed at the beneficiary’s marginal tax rate, except for distributions to a minor (under age 16 at the balance date of the trust) over $1,000 per trust, which are taxed at the trustee rate of 33%.

Income tax payment dates

*The terminal tax dates apply to taxpayers linked to a tax agent

If you are GST registered on a six monthly basis, you will only have two provisional tax dates. A GST ratio method is also available for certain taxpayers who elect before the beginning of the tax year - under this method, provisional tax is paid as a percentage of GST taxable supplies.

Redundancy tax credit

A tax credit of 6% (up to $3,600) may be claimed for redundancy payments paid between 1 December 2006 and 30 September 2011.

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Goods & services tax (GST)

• Standard rate to 30 September 2010: 12.5%
• Standard rate from 1 October 2010: 15%
• Exported goods and services: 0%
• Transactions involving land between GST registered persons: 0% (from 1 April 2011)

Supplies exempt from GST include: most financial services, residential rental accommodation, wages/salaries and most directors’ fees. The GST return filing and payment due dates are:

• The 28th of the month following the end of the taxable period for those months other than March and November
• 15 January for the taxable period that ends in November
• 7 May for the taxable period that ends in March

If the due date falls on a weekend or public holiday, IRD will accept GST payments and returns on the next business day.

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Tax penalties and interest

Tax shortfall penalties

The following penalties may apply to tax shortfalls:

A penalty may be reduced by up to 100% if disclosure is made to IRD before an audit, by 40% if disclosure is made before the first meeting with IRD, or by 75% if the shortfall is temporary. A 50% good behaviour discount may also apply. A penalty may be increased by 25% for obstruction.

Late payment penalties

• Initial late payment penalty: 1% of unpaid tax
• After 7 days: 4% of unpaid tax
• Monthly incremental penalties: 1% of unpaid tax

Compliant taxpayers will generally be warned prior to the first time any late payment penalty is imposed.

Late filing penalties

Late filing penalties will apply to the following returns:

• Income tax returns (from $50 to $500 depending on income)
• Employer monthly schedules ($250)
• ACC reconciliation statements ($250)
• GST returns ($250 invoice/hybrid, $50 payments basis, if filed late after warning for initial breach)

Use of money interest

Use of money interest is generally paid by IRD on overpayments of tax and is charged by IRD on underpayments of tax. The rates (from 16 January 2011) are:

• 8.89% on underpayments of tax (deductible)
• 2.18% on overpayments of tax (assessable)

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Fringe benefit tax (FBT)

FBT rates

Employers normally pay FBT if they provide benefits to employees other than salary and wages. Types of benefits:

• Motor vehicles available for private use
• Free, subsidised or discounted goods and services
• Low-interest or interest-free loans
• Employer contributions to sick, accident or death benefit funds, superannuation schemes, and specified insurance policies

Non-attributed basis: 49.25%

Attributed basis: between 11.73% and 49.25% depending on the net remuneration of the employee (including benefits).

NB: The FBT threshold under which an employer can file an annual return, upon application to IRD, is $500,000 of annual tax deductions (PAYE and employer superannuation contribution tax).

Fringe benefit value of motor vehicles

• Quarterly return 5% of original cost (GST inclusive) of vehicle or 9% of the tax written down value of vehicle (GST inclusive)
• Annual return 20% of cost (GST inclusive) or 36% of the tax written down value (GST inclusive)

Low or interest free loans

The prescribed interest rate from 1 October 2010 is 6.24% pa (reviewed quarterly).

Exemptions

No FBT is payable if:

• the total taxable value of unclassified benefits provided in the quarter to each employee does not exceed $300 ($1,200 per annum if filing on an annual basis); or
• the total taxable value in the last four quarters, including the current quarter, of all unclassified benefits provided to all employees does not exceed $22,500 ($22,500 per annum if filing on an annual basis).

Types of benefits to which this exemption may apply including subsidised or free goods and services provided to employees.

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Depreciation, gift duty & withholding tax

Depreciation

Depreciation is calculated using IRD approved rates. The additional depreciation loading of 20% on new assets has been removed for assets acquired from 21 May 2010. For a complete list of depreciation rates go to: www.ird.govt.nz/calculators/keyword/depreciation

Either the straight line or diminishing value method can be used.

Low value assets (costing $500 or less, GST exclusive) can generally be written off in the year acquired.

From the 2011/12 year, no depreciation can be claimed on buildings with a useful economic life of 50 years or more.

Gift duty

• Gift duty is a charge on any dutiable gifts made over $27,000 in any 12 months that one person makes to another person or entity. The rates vary from 5% for gifts of value between $27,001 and $36,000 to 25% for gifts over $72,000.
• Gift duty will be repealed from 1 October 2011.

Non-resident withholding tax (NRWT) rates

1. The rate of NRWT on interest is zero if the Approved Issuer Levy of 2% has been paid
2. The rate of NRWT is 5% if the beneficial owner of the dividends is a company that holds directly at least 10% of the voting power in the payer company
3. Generally, the rate of NRWT is 0% if the beneficial owner of the dividends is an Australian company that has owned directly or indirectly at least 80% of the voting power of the payer company for the 12 months prior to the dividend being declared and certain other criteria are met
4. Generally, the rate of NRWT is 0% if the beneficial owner of the dividends is a USA company that has owned directly or indirectly at least 80% of the voting power of the payer company for the 12 months prior to the dividend entitlement date and certain other criteria are met
5. The rate is 15% if fully imputed dividends are paid
6. Not a final tax if paid to associates

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PAYE deductions, ACC earners’ levy & KiwiSaver

PAYE deductions

PAYE electronic filing

Employers whose annual PAYE deductions are $500,000 or more must file their Employer Monthly Schedule (IR348) electronically. Employers with fewer than 50 employees may apply for an exemption.

ACC earners’ levy

KiwiSaver – voluntary savings scheme

Employees contribute 2%, 4% or 8% of their gross pay. Members are entitled to:

• a $1,000 “kickstart” contribution
• the Government will contribute up to $20 per week per employee
• compulsory employer contributions are capped at 2%.

Changes following Budget 2011:

• employer contributions will be taxed at employee’s marginal tax rate from 1 April 2012
• member tax credit has been halved to a maximum of $10 per week from 1 July 2011

The minimum employee contribution is proposed to increase to 3% from 1 April 2013, matched by an increase in the employer contribution to 3%.

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Donations, motor vehicle reimbursement and thin capitalisation

Donations & housekeeper/childcare rebates

• Individual donors can claim 1/3 of charitable donations and voluntary school fees (up to a maximum of their annual net income). Each donation must exceed $5 to qualify.
• The housekeeper/childcare rebate is limited to the lesser of $310, 33% of amounts paid per family, or 33% of the taxable income.
• Companies and Maori Authorities can claim an income  tax deduction for donations made, up to their annual net income.

Motor vehicle reimbursement allowances

• IRD approved mileage rate for employees: 74c per km
• Self employed people can also use this rate up to a maximum of 5,000 km of work related travel per year. Alternatively or when in excess of 5,000 km, actual expenses can be reimbursed. An alternative reimbursement rate (e.g. AA) is also permitted, which is generally higher than the above

Thin capitalisation

• From the 2011/12 year the safe harbour ratio of interestbearing debt over total assets will reduce from 75% to 60%.
• The 110% worldwide debt threshold and outbound thin capitalisation rules remain unchanged.

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