No doubt you've heard about the major trust law changes coming soon to NZ. What are they, and how will they affect you and your trust? The main changes are:
Now, you might already be doing this, but here are some more changes; the new law lists core documents that all trustees need to retain:
![]() If you are a client of EpsomTax.com Limited, you already do this.* But if you don't have up-to-date financial statements for your trust, you will have a lot of work (and expense possibly) ahead of you (contact us for a quote on 099730706). That might be this lady's problem...? Anyway, another big big change for trustees is that you will need to tell the beneficiaries info such as:
BENEFICIARIES BECOME SETTLORS - HOW?Here is the jargon: Section 67 of the Taxation (Annual Rates for 2019-20, GST Offshore Supplier Registration, and Remedial Matters) Act 2019 enacts an amendment to section HC 27 of the Income Tax Act 2007. That amendment provides that when a beneficiary of a trust is owed an amount by the trust, the beneficiary does not become a settlor of the trust if –
How do you know if one of your beneficiaries is owed more than $25,000 by the trust? The trust will need a balance sheet, at the very least, to track this. What should you do if this is the case?
Yikes! So, some big changes coming. For a more detailed summary, please visit this page at Rainey Collins.^ * See a link to our blog articles on this subject here
^ The information on this page has been kindly reproduced by permission of Rainey Collins. This does not constitute an endorsement of EpsomTax.com Limited by Rainey Collins. EpsomTax.com Limited cannot provide legal advice. Please contact Rainey Collins for more information on what this means for your trust. Tax Treatment of Cryptocurrency![]() IRD is till working out the tax treatment of cryptocurrency. But it has made up its mind on some things. You can read all about it here. The main points so far are:
Cryptocurrency Fraud Warnings![]() NZ Police in association with City of London Police have just released a warning. See below for the PDF. Apparently, fraudulent websites alleging to offer cryptocurrency investments are dishonestly using the image of Martin Lewis, the founder and editor for moneysavingexpert.com, as an endorsement for their companies. However, Martin doesn't do adverts. See his blog post for more info here. These sites are also falsely stating that Dragons Den back their schemes. ![]()
Our advice:
More info is available at NetSafe, especially re scams. And, just for the record, we don't claim any endorsement by Martin Lewis, his website, NZ Police, City of London Police or NetSafe. Any copyrights belong to their legal owners. We are merely making you aware of what is going on out there. Keep safe! SIMPLIFIED VERSIONHere are the main steps involved, and an approx. % showing how far through we are at each point. The chart starts at the bottom, and the top is 100%, tax returns filed and assessed by IRD! DETAILED VERSION![]() Here is a detailed description of each part of the process
Timeframes - How Long Does It Take?As a rough guide, from the date of invoice issuance to you having the draft financial statements in your hands, we aim for 8-9 weeks, subject to this disclaimer: these timeframes are indicative only and at peak times of the year e.g. May-October, it will often take longer. Before Processing Starts
Processing Month We'll advise you in February via email when this is.
We trust this helps take some of the mystery out of the process. Please contact us with any questions! Other FAQs you might have: RENTAL PROPERTY: WHAT RECORDS DO YOU NEED TO KEEP? USING ACCOUNTANCYONLINE.CO.NZ/MY TAX QUESTIONNAIRE HOW DO I DOWNLOAD TRANSACTIONS FROM MY BANK'S ONLINE INTERNET BANKING? WHAT IS XERO.COM? COMMON QUESTIONS ABOUT YOUR TAX RETURNS COMMON QUESTIONS ABOUT YOUR FINANCIAL STATEMENTS According to Wikipedia*, "phishing is the attempt to obtain sensitive information such as usernames, passwords, and credit card details (and money), often for malicious reasons, by disguising as a trustworthy entity in an electronic communication.[1][2]" What Do Phishing Emails Look Like?Quite often they look like a legitimate email from IRD (about a tax refund, or warning of tax owing), or an email from a provider like Office365 or Apple. More info here at netsafe.org.nz*. How Do You Know If It Is A Phishing Email?There are often several clues; please see the copy of example emails below.
What Does a Phishing Email Look Like?Here is one phishing email we received recently. It looks rather convincing, but there are a couple of clues in the email that it is not from a legitimate source
Here is another example of a phishing email. Note again the clues that it is not "legit":
How Can I Keep Myself Safe?
See more tips on this page at netsafe.org.nz What should I do if I need help or advice? You can contact Netsafe:
* We have quoted information from Wikipedia (licence terms) and Netsafe (licence terms). Use of this information does not constitute an endorsement of EpsomTax.com by either organisation. This information is not provided for commercial purposes, but strictly in an attempt to help promote community awareness of fraud and how to prevent it and protect yourself.
![]() Is selling your home taxable?, Or in other words, do you have to pay tax when selling your home? Buying and selling your private or family home typically is not taxable. However some are looking to purchase a family home with the intention of reselling it in time, and a few earn their income this way – buying and selling. If you have established a pattern of purchasing and then selling your “family home,” this could be considered as property speculation or dealing for tax purposes. So, how do you know whether you are considered a property speculator, dealer or investor? Click here for the IRD definition Things to consider in answering the above question:
How do you know if selling your home will be taxable? Think carefully about the answers to these five questions. “Ok, so I just have to hold onto a property for a really long time and then I’m not considered a dealer?” No. The amount of time you hold the property is immaterial. It’s your intention at the time of acquisition.If you bought a property with the intention of reselling it, then any capital gain that you make on the sale taxable. “Right-o. So, is there some sort of level? That is, my first couple of properties are tax-free and then I pay tax after that?” Ahhh… no. Again, it’s intention, patterns and associations – not numbers of properties sold. “Great. It looks like I will have to pay tax then. How do I figure that out?” The IRD have a great resource here – or you can contact us. * For a definition/more info please see this article at the IRD Tax Policy website
![]() Why is a chattels valuation necessary? Typical valuations assign a valuation to chattels of $10-15,000. However, they often miss many depreciable items, such as driveways, fences, decks, paths, hot water cylinder, letterbox, garage door motor etc. When you obtain a chattels-specific valuation, typically the value of the chattels for a new home is $45-50,000+ and for one built in the 1980’s $25-30,000. Even if your chattels valuation comes out at only $30,000 then the value for the tax refund will be around $10,000. The higher the chattels value, the more depreciation can be claimed, which means less tax to pay or larger tax refunds. Are there any exceptions? The only exception to the chattels valuation, is if it was a rental already owned by you or another entity you controlled, and you had already filed a tax return for that property at least once. In that case, we can’t “re-value” the chattels. What will it cost and who does this? We know of only one firm: ValuIt. Visit their website www.valuit.co.nz or call 0508 482 583 to book a valuation. Please note, we receive no financial incentive or otherwise for recommending them. However, we encourage you to do this without delay, as they are very busy and it can often be 2-3 weeks before someone can get to see your property. Further reading Depreciation: Simple Overview (video) 6 Minutes on Depreciation (video) Depreciation Clawback and Your Rental Property Depreciation of Chattels in Your Rental Investment Property Valuation of Chattels - Why Necessary Tax Return Filing DatesQ: When does my tax return have to be in i.e. filed with IRD? A: If you have an Extension of Time to file, the date is 31 March. If you are linked to a Tax Agent or Accountant, then usually you will have this extension. Note that the IRD must receive your tax return by this date i.e. if you post it on this date, it will be late. Q: Cool, so I can send my info to you guys about the middle of March and that will be ok then? That gives 2 weeks to get it sorted, right? A. Sorry, but no. In order to get the figures right, there is a process of many eyes checking your financial statements/tax return/s. So we recommend that you allow 8-9 weeks at least for us to collate, code, compile, check and file your financial statements and tax returns. No Income?Q: I didn't earn any income last year, but I am a shareholder in a Look Through Company. Do I have to file a tax return? A: Yes. You will have income or loss from the LTC and this has to be declared to Inland Revenue via a personal tax return. LTC LossesQ: I don't see any impact of the LTC losses to the final tax figure? A: You'll see your LTC losses (if applicable) shown in box 19E (on the personal tax return, or IR3). How Do The Amounts On The Profit & Loss Relate To My Tax?Here is a typical Profit & Loss report. You can see the Profit hi-lighted in yellow, and the Expenses hi-lighted below (also in yellow). Then at the bottom, you can see that the result is a Loss - which is why it is written in parentheses (brackets). This loss amount (or negative amount) is then put on your tax return. It offsets other income you have received. In this sample, assuming the person is being taxed at 33c in the dollar (ie they earn over $70,000 per year), then they could expect a refund of about $3,500. How is the Tax Calculated?All sources of income are added, e.g. wages, interest, dividends. Next, all sources of loss are added, e.g., LTC losses. Then tax is calculated on the sum of all of these figures. After that, tax that you have already paid is deducted, e.g., RWT, PAYE, provisional tax. The resulting figure is either a debit (tax to pay) or a credit (a tax refund). Dividends - AECT/EntrustQ: Why does the IR3 (personal tax return) you sent me show a dividend of nearly $500 from Entrust (formerly the Auckland Electricity Consumer Trust or AECT)? I only got about $300-something? A: The Entrust dividend is shown on the tax return as follows
Using this formula, we arrive at the $300-something you received. You can see the exact breakdown here RefundsQ: Why does the tax return show this? I wanted the refund to be credited to my bank account? A: That's exactly what this means. It says, in effect: "do you want to receive the refund in cheque format?" The answer is "No." IRD only gives one other option, and that is a refund to your bank account. Q: Does my LTC get a refund as well as me? A: No. If you have an LTC, the refunds go to you. The company is Looked Through at tax time, hence the name Look Through Company. ResultsQ: Is the amount shown as a refund what we're going to get? A: Probably. All returns filed are subject to review by IRD, and sometimes they don't agree with our calculations. There are a number of reasons for this:
However, don't panic. All errors, wherever they are made, can be easily rectified. JargonQ: What's an IR3 form? How long does it take to file a return? A: That is what the personal tax return form is called: an IR3. (If you are not NZ tax resident, the form is an IR3NR). The actual filing online takes about half an hour. Then IRD processes it, which can take anywhere from 1 week to 12 weeks or longer. Once they’ve processed it, you then receive your tax refund. These questions are basd on questions asked by customers. We'll be adding more examples to this page as they occur.
Other FAQs you might have: RENTAL PROPERTY: WHAT RECORDS DO YOU NEED TO KEEP? USING ACCOUNTANCYONLINE.CO.NZ/MY TAX QUESTIONNAIRE HOW DO I DOWNLOAD TRANSACTIONS FROM MY BANK'S ONLINE INTERNET BANKING? WHAT IS XERO.COM? WHAT'S THE PROCESS FOR MY TAX RETURNS? COMMON QUESTIONS ABOUT YOUR FINANCIAL STATEMENTS What does this have to do with your tax? Well, we might have asked you to supply information, clarify a request etc etc. We know you're busy! But we don't hear from you promptly. Instead, it drags on and on. Frankly, that doesn't help you, us, anyone! So, what we ask is this 1. stop for a moment, 2. send through the info, 3. get their tax refund sooner! Moral: Stop and sharpen your axe. Work smarter, not harder! |
Garreth CollardAccounting for your rental residential investment property; specialised property tax advice. Buy me a coffee! Archives
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