Okay, we get it. It’s not easy finding the motivation to pay tax. But if you don’t pay, the motivation is definitely going to find you (as seen in the grisly pic below)! Apologies for that Dad joke, but please don’t forget to pay today unless you enjoy a good IRD mauling.
You’ve got to hand it to the tax department … welcoming you back to work by taking a nasty bite out of your bank account. And they’ll be back for even more if you don’t pay on time so please don’t forget to pay your IRD bills today.
If there’s one thing in business that really takes a painful chunk out of your bank account, it’s tax. Yes, it hurts but I can assure you not paying hurts even more. Choose your ‘hurt’ wisely and don’t forget to pay today!
It’s not often angry accountants are newsworthy but they’re certainly het up and hitting the headlines this week! Why do they care so much, you say? Well most accountants work on hourly rates and aim to keep their fees to the absolute minimum so spending forever fighting the IRD computer is the last thing they want their lovely clients paying for. It’s all a bit of a ‘hoot’ really unless you’re the one footing the bill.
“If you liked it, then you should’ve put a ring on it”. Well, it seems, here in New Zealand, the government doesn’t like it and are about to stop it by putting a ring on it. What am I alluding to? I’m talking about the proposed tax changes which, if they go ahead, will mean you’ll no longer be able to use losses from your rental property against your other income such as salaries and wages.
Ring-fencing is simply the technical term, used by chartered accountants and tax-boffins to describe this approach. In practical terms, for many people, it may be the end of receiving tax refunds from some of the tax paid on their wages. Anyone who’s been using these tax refunds to help fund rental property cash-deficits may get a little ‘Antsy’ about all of this but it’s unlikely to be anywhere near the doomsday the media is making it out to be and here’s why:
Some would say the main hit has already been taken because the proposal isn’t entirely dissimilar to the changes which were made to depreciation not so long ago. Prior to that, the depreciation claimed on buildings boosted many a tax refund and when the claim was no longer available, there was a significant downsizing of tax refunds for rental property owners.
Ring-fencing doesn’t mean your losses suddenly go ‘poof’ and disappear, never to be seen again. Generally, the losses will simply accumulate until you’re ready to use them when the rental property becomes cash-positive and profitable. Often, standard tests are required to maintain losses but thankfully losses don’t come with an expiry date. It’s simply a matter of timing.
Finally, don’t forget the big picture. From a commercial perspective, the tax position of capital gains remains unchanged. Ring-fencing is unlikely to have any negative bearing on the capital gains made from selling the rental property. Typically capital gains have been the primary factor in property investment and in many cases, these will still significantly outway any changes brought about by the proposed ring-fencing reforms.
There’s an old Frank Sinatra song that says “if you can make it here, you can make it anywhere”. As a Chartered Accountant, I like to change this up a bit and turn it into “if they do it there, they can do it here”. Something they’re currently doing over there (Denmark, in this case) and which I strongly suspect will soon start happening here, is Airbnb giving the IRD full details of your Airbnb earnings.
The platforms are already in place here and the banks have been doing it for ‘yonks’. Banks readily give the IRD full details of your interest and RWT deductions without you even knowing it. Typically the information sharing goes the other way with the IRD having the ability to give your details to some government agencies including Statistics New Zealand. On top of this, there’s been an incredible amount of activity in the area of overseas reporting obligations lately which is basically a way of sharing your information between countries. America is particularly hot on this right now with the Common Reporting Standard coming into effect and although this may seem like something that couldn’t possibly effect you, you may well get caught if you’re an unsuspecting beneficiary of a family trust (even a discretionary one).
Thankfully, the IRD gives relatively clear direction on how to return your Airbnb income so it shouldn’t hurt too much unless you’ve somehow fallen into something incredibly complex like the GST regime or if you need to ‘fess up’ to the IRD through the Voluntary Disclosure process.
Happy new tax year!
And you know what that means, don’t you? Time to get your books sorted and into us. Thanks to technology, the days of sending us paper are well and truly gone. And what a relief that is because one of the worst jobs of my career was having the most enormous box of paper bank statements dumped on me. It wasn’t the size that frightened me but the smell. It absolutely reeked. I spent the next week locked in my cubicle trying not to breathe in the toxic stench, while the other accountants treated me like I was contagious.
This was twenty-something years ago, in one of the big old prestigious firms and junior accountants were barely permitted to speak, let alone complain. There were more than sixty accountants crammed into my section of the office and I swear every single one of them passed by my desk (keeping a safe distance, mind you) giving their unwanted opinion on the origins of the aroma. To this day it remains a mystery but I suspect a pet (now potty-trained) is out there somewhere laughing at me still.
And on that note, we look forward to receiving your ‘smell-free’ records soon.
You’ll find a checklist, of everything you need to send, by clicking here.
Picture credit with thanks to Interior Design Magazine
Yes, it’s true. The IRD has started giving away free all inclusive holidays with your room, meals, beverages and even some sports activities included. To be eligible, you’ll need to stop filing tax returns and start specialising in cash-jobs. The most recent “winners” were in the building sector but that doesn’t mean they won’t open this up to your industry too.
Okay, so you’re well and truely over all things sweet and delicious right now but we thought just a little nibble of quality chocolate might take the edge off coming to visit your favourite Auckland Accountant this year. You might recall last years smaller bites of Belgium choc but we’ve now upgraded to the bigger Lindt version for you. Enjoy!