Tax Bites
IRD and ‘your cheque is in the mail’
From 1 October this year cheques must reach IRD by the due date for payment.
Posting a cheque on the last day will be too late. IRD will accept post-dated cheques but won’t guarantee to not bank them early.
If there are insufficient funds to pay the tax, that’s the taxpayer’s problem. IRD say they will endeavour to avoid banking early and we believe them. Mistakes are made, however.
To help ensure a post-dated cheque is not banked too soon, highlight the date on the cheque in a bright colour and staple a warning to the cheque that it’s post-dated.
Payment on the next working day after a weekend or holiday is still acceptable. A provincial anniversary day is a working day, NOT a public holiday for the purpose of the tax being received on time.
Westpac will accept cash or eftpos for tax payments, but not cheques.
IRD will not accept cash.
IRD up in arms about ‘donations’
IRD is getting upset about “donations” which are really in the nature of fees for services.
In Revenue Alert 14/01 it lists the criteria for a donation. When you analyse the list it amounts to:
- The gift is made voluntarily
- Nothing is received back in return for the gift either by the giver or anyone else
- The charity doesn’t have to give anything away in return for receiving the gift.
The department is investigating arrangements where private education and child care centres charge nominal fees and then get parents to make substantial donations, for which they issue a donations receipt. They say these are payments, which would not ordinarily be donations, and are fees for services. The purported donations are used to meet running costs, which would otherwise have had to have been charged to parents.
GST is also an issue. These “donations” are really being paid for services. Therefore the education centre must charge GST.
The department says penalties and interest may be applied if it catches anyone transgressing.
What can you do? If this announcement affects you and you have been used to claiming these donations, you may need to forgo these claims, which is, of course, exactly what the IRD wants to achieve.
Tax conference outlines IRD thinking
On 12 and 13 June 2014 a conference in Wellington discussed tax administration for the 21st century.
You may be interested in the direction IRD may be taking us.
Issues discussed included:
More collection of tax at source – withholding payments.
More electronic filing.
More emphasis on collecting data rather than on getting tax returns.
Spread terminal tax over next year’s provisional payments.
Knowing these possible changes, might help you when planning your business systems.
Mileage unchanged
Mileage rates are unchanged. They remain at 77 cents per kilometre. This is the third year at this rate.
Claiming for partner
When can you claim the travel costs for your spouse/partner, accompanying you on a business trip? The IRD says the companion has to support the business person to a reasonably substantial degree, in the business being undertaken. It has issued a document called QB 13/05, which sets out guidelines in some detail. If you want to claim a companion’s travel costs, we will be guided by this IRD pronouncement when advising you on its tax deductibility.