The income tax implications of providing sponsorship
Inland Revenue recently clarified sponsorship expenditure is generally deductible only where it has a clear connection to a business’s income earning activities, most commonly through advertising or promotion. These deductions may be limited or denied if the expenditure is capital, private, subject to entertainment rules, or partly for non-business purposes. IR has also outlined how sponsorship costs are to be treated where the sponsorship is for mixed purposes, the sponsorship benefits extend beyond one year, and where the sponsorship is provided as goods or services rather than cash.
A compliance reminder about crypto assets
Inland Revenue is urging New Zealand crypto investors to get tax compliant. Crypto assets are treated as property for tax purposes; this means profits from selling, trading, or exchanging crypto-assets are taxable income. With expanded data access and the introduction of the Crypto-Asset Reporting Framework, IR can now identify and match both domestic and overseas crypto transactions to tax returns. Investors are encouraged to review their tax position, file an IR3 return if required, and seek independent tax advice to avoid any expensive surprises in the future.
Inland Revenue consultation open for comment
The latest submission to Inland Revenue’s ‘Questions we’ve been asked’ publication explores whether a member of an unincorporated body who is registered for GST can claim input tax deductions for expenditure incurred by the unincorporated body if the unincorporated body is not itself registered for GST. It also covers whether members can claim input tax deductions for contributions they make to the unincorporated body. IR concludes contributions will usually not be a consideration for a taxable supply, but some exceptions apply.