TalkTax

In addition to recommending that gift duty be abolished, the report back from the Officials’ Report to the Finance and Expenditure Select Committee on Submissions on the Taxation (Tax Administration and Remedial Matters) Bill highlights some interesting statistics about the use of trusts.

According to the report less than .003% of the 430,000 IRD numbers (that is less than 13 people) who filed gifting statements were bankrupted between 1 July 2001 and 28 May 2010. Presuming the .003% figure is correct, by itself this doesn’t mean an awful lot. However, when you consider that the Ministry of Economic Development records 25,974 bankruptcies during the same period, further consideration is warranted.

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Over recent weeks two announcements have been made with regard to excise arrangements for wine. The excise rate for all alcoholic beverages will increase from 1 July by 4.5%, in line with the annual increase in the CPI to March 2011. The second announcement was a change in the thresholds affecting the timing of excise payments. This meant that the threshold at which wineries would be able to pay their excise liability annually (instead of monthly) would increase from $10,000 per annum to $50,000 per annum. From a practical perspective this was meant to reduce compliance costs and change the cash flow position whereby smaller wineries are often paying excise before they actually receive payment for wine sales. Or at least that was the intention.
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WHAT ARE THE CHANGES?

- From 1 April 2013 the minimum employee and employer contribution rate will rise from 2% to 3%.

- From 1 April 2012 the tax-free status of employer contributions to KiwiSaver and other complying superannuation funds will end. All employer contributions will be subject to Employer Superannuation Contribution Tax (ESCT) paid at the employee’s marginal tax rate.  This means that while the gross amount of employer contributions is increasing by 50% in 2013, it may not result in a significant amount actually being credited to your Kiwisaver account.  If you are a top marginal rate taxpayer there will be no net increase to the overall level of employer contribution.

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From 1 April 2011 new tax legislation introduces the Look-Through Company (LTC). This is the result of tax legislation passed in December 2010. From 1 April 2011, LAQCs, as we know them, will no longer be! This post provides a brief overview of the new entity and attempts to explain the new LTC loss limitation rule. Read more

A business recovery centre has been set up to help small business get back on their feet. It is situated at 21 Opawa Road, Christchurch and will give users access to a boardroom, meeting rooms, telephone conferencing, 8 computer terminals with internet, Free Wifi, Microsoft applications and a kitchen. For further information and advice on what help is available to you and your business visit www.businessrecoverychristchurch.co.nz or call 0800 BEYOND.

Like the rest of the country, we are all shocked and saddened by yesterday’s earthquake and the devastation and loss in Christchurch. That this should happen again, with such force, to a city still recovering from the September quake and the 4,900 or so aftershocks they have had to deal with since, is tragic and our hearts go out to the people of Christchurch. Here at TalkTax and CCH we have a number of Christchurch-based authors, and in particular we would like them and all our Canterbury-based subscribers and customers to know that our thoughts are with them and their families and friends at this time.

http://www.redcross.org.nz/donations

Three recent cases from the Canadian Courts that will be of interest to New Zealand practitioners.

Amounts paid to employees to extinguish employee stock option plan a non-deductible capital outlay
Company made payments for exercise of employee stock options.  Minister refused to permit deductions on the ground that they were non-deductible capital outlays laid out during a corporate reorganisation to rid the taxpayer of its employee stock option plan. Taxpayer argued the amount was deductible as employee compensation paid to satisfy its obligations under its employee stock option plan. Taxpayer’s appeal dismissed. Imperial Tobacco Canada Limited, 2011 DTC 1037

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The tax cut that took effect for most taxpayers from 1 October last year achieved a seismic shift in the burden of taxation (from income to consumption and from high to low thresholds).  While you can quibble with the fairness of raising consumption taxes by 20% to pay for what was essentially a tax cut for the wealthy, there is no denying that the change addressed certain distortions that had crept into our economic system as a result of high marginal rates.

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Labour’s tax policy threatens to make tax interesting again.  Yesterday, Phil Goff announced that, if elected, it would scrap income tax on the first $5,000 of income and introduce a new top rate for the highest earners (the rate of tax and the threshold for that tax are not part of the policy announcement – that is being left up to the voters’ imagination).

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On September 30 the Government announced that it will re-instate the redundancy tax credit and make it available to taxpayers up to 31 March 2011. The extension is intended to assist people affected by the Christchurch earthquake although it appears that it will apply to all employees who are made redundant before April next year.

The tax credit is available to an employee who receives a redundancy payment in compensation for their loss of employment. The employee must apply directly to the IRD for the credit. The tax credit is 6 percent of the amount of the redundancy payment up to a maximum of $3,600. It seems that employers and employees are not well-informed about the benefits of this credit and are not using it to their best advantage. Read more