Question 1

Can donations be accounted for business expenses?

Accepted Answer

If you make donations to charities certified by the government, you can apply for tax credits from IRD, and the donations can be accounted for business expenses.

Learn more: Not-for-profit organisation

Question 2

If a project is sold before it is completed, is the expenditure in the development phase of the project as an expense?

Accepted Answer

Normally, if you are working on a project, it will be sold as inventory. The expenditure of developing the project will be included in Cost of Goods Sold, and it is not accounted for an expense.

Question 3

Does Bank Fee have GST?

Accepted Answer

No, it doesn’t. Bank fees are exempt from GST because these fees defined as financial services, financial services are GST exempt.

Question 4

How do I record the cost on business meal with my customer?

Accepted Answer

Regarding the business meal expense, you can only Record 50% of the expense as a deduction because it has a significant private element. Even if you think the private element was more or less than 50% of the expense, you can only claim 50% of the expense.

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Question 5

How to choose GST filing frequency?

Accepted Answer

According to IRD, you need to file regular GST returns, and the filing frequency depends on your sales. You have to register GST if your sales were at least $60,000 in the last 12 months, or you expect it will be at least $60,000 in the next 12 months. If you have sales under $500,000 in any 12-month period, you can file GST six-monthly. If you have sales between $500,000 and $24 million in any 12-month period, you must choose to file GST two-monthly or monthly. And you must file monthly if your sales are over $24 million in any 12-month period. The sales we mentioned here are all GST inclusive.

Question 6

Does the freight cost of export include GST?

Accepted Answer

The easiest way is to look at the invoice provided by the supplier. Generally speaking, exporting freight cost does not include GST, which are zero-rated GST. However, there are several types of exporting freight cost, so some of them might include GST.

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Question 7

Which insurance does not need to pay GST?

Accepted Answer

As far as we know, life insurance premiums are fully exempt from GST.

Question 8

Do I need to pay GST and withholding tax for the cost of designing a house by an overseas online company?

Accepted Answer

From 1 December 2019, GST will apply to sales of goods and services imported into New Zealand, regardless of the value. When purchasing overseas goods and services from online platforms, if the value is less than $1,000, GST will generally be collected by overseas suppliers. If the value is greater than $1,000, GST and customs duties will be collected by New Zealand Customs.

Paying withholding tax depends on whether the service is under the service category that needs to be charged. For example, a loyalty fee must be charged.

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Question 9

I buy a second-hand good from a private person without a receipt, how can I claim GST?

Accepted Answer

You can use the actual purchase value of the second-hand good when file GST.

Question 10

What is GST in New Zealand?

Accepted Answer

GST is a tax added to the price of most goods and services, including imports.

Question 11

What’s the GST rate in New Zealand?

Accepted Answer

The normal GST rate is 15%. This rate is being increased from 12.5% to 15% since 1 October 2010.

Question 12

What is the tax code of WT?

Accepted Answer

WT stands for withholding tax. It is generally applicable to contractors receiving scheduler payments, excluding employees receiving salary or wages. Employers withhold contractors’ personal income tax. Contractors using the tax code of WT need to fill in IR330C. In addition, the contractors will pay ACC levies by themselves rather than by the employers.

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Question 13

When to pay provisional tax?

Accepted Answer

The due dates of the provisional tax payments depend on which option you use and if you’re GST registered. If you use the standard or estimation option, you’ll generally pay 3 instalments of provisional tax., which are 28 August, 15 January, and 7 May. If you use accounting income method, your due dates for paying and filing your statement of activity will line up with your GST due dates. If you use the ratio option you’ll pay your provisional tax in 6 instalments, once every two months. If you pay late, underpay or fail to pay the provisional tax, you will be charged for fines and interest.

For details of provisional tax, see IR316.

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Question 14

Is there a secondary income that pays more taxes than just one income?

Accepted Answer

Yes. With a secondary income, the tax code is S, and the tax rate is relatively high. However, if your total annual income does not increase, the overpaid taxes will be refunded at the end of a tax year.

Question 15

When I need to use the highest income tax rate of 39%?

Accepted Answer

When your income is over $180,000, and only the excess part is taxed on 39% . You can use our Tax Calculator to calculate your income tax.

Question 16

If a child has income from helping neighbors mowing the lawn. Does he/she need to pay tax?

Accepted Answer

According to the interpretation of Children’s exempt income from IR3G, if for the tax year you were 14 or under, or were 15, 16 or 17 and still attending school, or turned 18 on or after 1 January in the previous tax year and continued to attend school.

If you receive income that has not had tax taken out before you receive it eg. worked around the home of a neighbour or family friend, and that work was not part of a business that they carry on,  and your total income from these sources is less than $2,340 for the tax year, this income is exempt from tax and is not included in your return. You are not required to file a return just because you earn this type of income. If you earn $2,340 or more, the exemption does not apply and you will need to file a return and pay tax on all the income, not just the amount that exceeds the exemption.

At the same time, if there is a family business, the expenditure of $2,340/person (children’s wages) can be used as a deduction for business income. However, if this part of the annual income exceeds $2,340, you need to file all income and pay taxes.

Question 17

How much tax do I pay for the second job if I hold a Partner of Open Work Visa?

Accepted Answer

The second job requires to use the Tax Code of S. The specific tax rate will vary according to the frequency and amount of salary payment. The tax can be calculated by using the PAYE calculator provided by IRD.

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Question 18

Can chattels be depreciated? Can the building be depreciated?

Accepted Answer

If it is a residential rental property, the chattel can be depreciated according to the prescribed proportion. If it is a commercial rental property, in addition to the chattel, the building can also be depreciated proportionally from the 2021 fiscal year. The specific depreciation rate can be checked through the Depreciation rate finder provided by IRD.

Question 19

What’s income tax rate for company?

Accepted Answer

From 1 October 2010, the company income tax rate was reduced to 28% till now.

Question 20

What’s income tax rate for trust?

Accepted Answer

The trust income tax rate is 33%

Question 21

How to pay for public holidays for casual employees?

Accepted Answer

As casual employees have no fixed working time, many employers are not sure how to pay public holidays for them. According to Employment NZ, the employer should firstly figure out whether or not the day of public holiday is an otherwise working day for the employee. If it is, the employer will need to use Average Daily Pay, which is a daily average of the employee’s gross earnings over the past 52 weeks. Also, if the employees work on a public holiday, they will get one time and a half of the Average Daily Pay.

Question 22

Does compensations paid to employees need to deduct PAYE?

Accepted Answer

Generally, if there is a clause of compensations in the employment agreement, you need to compensate the employee according to the contract. You need to deduct PAYE for the compensation as same as salary.

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Question 23

Are fixed-term employees and causal employees paid during public holidays?

Accepted Answer

Fixed-term employees have the same public holiday rights as permanent full-time and part-time employees. If they do not work on public holidays, they will be paid according to their normal working salary. If they need to work on public holidays, they will be paid 1.5 times normal salary. Causal employees generally have no wages if they do not work on public holidays, because their working hours are not fixed, so they will be paid 8% of the holiday pay with their wages.

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Question 24

Can I cash up my annual leave?

Accepted Answer

Employees can ask their employer to pay out in cash, up to one week of their four weeks’ minimum entitlement to annual holidays per year for each entitlement year. They can do this all at once, or can make multiple requests to cash-up until the entire one week is cashed up. Some employees do not or rarely take annual leave, so they will negotiate with their employers and require one week of annual leave to be paid directly in the form of wages.

An employer can’t:

pressure an employee into cashing up holidays
raise it in wage or salary negotiations
make cash up a condition of employment
put a cash up request into an employment agreement, but can include the process for making a request.

Question 25

How to deal with unused sick leave?

Accepted Answer

Any unused sick leave at the end of a 12-month period can be carried over and added to their next year’s entitlement. The maximum amount of sick leave that can be accumulated under the Holidays Act 2003 is 20 days. The employer and employee can agree that sick leave can accumulate to more than 20 days through an employment agreement. Unused sick leave can’t be cashed-up or be part of any final payment to the employee when they leave, unless this is in the employment agreement.

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Question 26

How to pay for annual leave?

Accepted Answer

Generally, when employees work for less than one year, their annual leave is accumulated at 8% of the employees’ before-tax earnings, then after one year of work, they are entitled to four weeks’ annual leave each year. If an employee wants to take annual leave before they become entitled to, it depends on if the employer allows the employee to take annual leave in advance, that is, if the ‘annual leave in advance’ item is included in the employment contract signed with the employer.

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Question 27

How to calculate annual leave when employees receive wages subsidy?

Accepted Answer

The calculation is the same as usual, which is calculated based on 8% of the pre-tax salary.

Question 28

How to pay for Holiday Pay to casual workers?

Accepted Answer

For casual workers, the Holiday Pay can be included in each settlement of the salary, and the total amount of the salary and the Holiday Pay is used to calculate the PAYE.

Question 29

What is the difference between Casual worker and Part-time worker in terms of PAYE and contract?

Accepted Answer

PAYE will not be affected. PAYE is calculated based on the employee’s tax code, payment frequency and payment amount. It can be calculated through the PAYE Calculator provided by IRD. However, casual workers are generally paid Holiday Pay together with wages due to uncertain working hours, so they are different from long-term part-time workers.

In terms of the contract, the two are generally different. Because the working hours of casual workers are not fixed, the contract may not specify fixed working hours, but part-time workers generally have fixed working hours per week, and the contract is generally noted.

Question 30

How to calculate PAYE for bonus payments to employees?

Accepted Answer

The one-time bonus payments to employees are calculated according to the method of lump sum payments. The PAYE is calculated on the whole payment.

Question 31

If a employee’s normal salary is less than wage subsidy, how to pay the subsidy?

Accepted Answer

According to explanation of wage subsidies from Work and Income, if your employees’ regular wages are less than the subsidies, you must pay for their normal wages. The difference will be used to pay the wages of other affected employees. If there are no other employees, the remaining wage subsidies should be repaid to the government. The employee’s Holiday pay is calculated at 8% of the normal salary.

Question 32

Do I need to fill in a employee’s date of birth for Payroll?

Accepted Answer

If you’re using software, it is required. If you’re filing on the IRD website, it is not currently required.

Question 33

Is there still a 90-day trial period for hiring new employees?

Accepted Answer

From 6 May 2019, only an employer with 19 or fewer employees (at the beginning of the day on which the employment agreement is entered into) may employ a new employee on a trial period for the first 90 calendar days of their employment. An employee can’t be on a trial period if they’ve worked for that employer before.

A valid trial period must be agreed to in the employment agreement before the employee starts work, or the trial period is invalid, and it must have a valid notice period in the employment contract.

For other conditions, please refer to Employment New Zealand.

Question 34

How can I choose tax code for employee?

Accepted Answer

The employer cannot choose the tax code on behalf of employee. Before the employee’s first wage payment, you need to ask the employee to fill and sign the IR330 Tax code declaration form. According to the form’s instruction, the employee will choose the right tax code by him/herself.

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Question 35

When does employee entitle to have sick leave?

Accepted Answer

Based on the current employment law, the employee is entitled to 5 days’ sick leave if having six months’ current continuous employment with the same employer.

Question 36

Which entity is better for paying taxes for selling investment properties?

Accepted Answer

If you need to pay tax for the sale of residential investment properties, the tax rate is same as the individual tax rate under an individual. Under a company, the tax rate is 28%. Under a trust, the tax rate is 33%. Using which entity depends on your situation and plan. From a tax perspective, there is not much difference. Companies and trusts can also distribute profits to individuals and then pay taxes under individuals.

Question 37

One of two persons satisfies First-home buyer. Can they use kiwiSaver First Home Grant?

Accepted Answer

One of the two persons who satisfies the conditions of First-home buyer can use kiwiSaver First Home Grant without being affected by the other person.

Using the kiwiSaver First Home Grant needs to meet the conditions that the applicant does not currently own any property, use the property as main home, and has been contributing at least the minimum amount to KiwiSaver for 3 years or more, etc.

Question 38

Do I need to follow Bright-line rule when selling my main home under a family trust?

Accepted Answer

Even your main home is under a trust, the sale of it can be exempted. There is no need to follow the Bright-line rule, but it also depends on the historical records of purchasing and selling main homes. If you buy and sell multiple times of main homes frequently, you will be taxed.

Question 39

Does a family trust have to file taxes every year? There is only real estate in the trust.

Accepted Answer

If your family trust only has a main home, you can apply to IRD for special application to cancel the annual tax return. But if you have a rental property, you need to file taxes every year.

Although there is no need to file a tax return if there is only a main home in the trust, it is still recommended that you complete a financial report every year, because the financial report can reflect the details of the assets under the trust, which can reflect the role of the trust in protecting assets.

Question 40

I bought a house as main home in 2017. Do I need to pay tax for selling it?

Accepted Answer

The purchase and sale of main home are exempted, and there is no tax. If it is the first main home bought and sold, there is no problem for taxation, but if it is not, and there are multiple purchases and sales of main homes, there is a possibility of taxation.

Question 41

I have a residential rental property, does the loan repayment can be offset the rent income?

Accepted Answer

You can only deduct the loan interest from the rental income, the principal repayment can not be deductible.

Question 42

Do I have to calculate and pay for GST when I selling my main family home?

Accepted Answer

No, you don’t. As you are not GST Registered, so you don’t need to pay for GST part. But you may need to be aware of capital gain tax which will depend on your situation.

Question 43

Will a company’s profit and loss affect personal benefit?

Accepted Answer

The benefits received by individuals, such as Working for Families, are related to family income. The company is an independent entity, so the company’s profit and loss is not related to the family and the individual, and it will not affect personal benefit.

Question 44

If I have no employee, still need to pay ACC?

Accepted Answer

Yes, although a company may not hire employees, you, as a shareholder and a director, run the company, so you are actually the employee of your company. You also receive shareholder salary, so you need to pay ACC.

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Question 45

What are business name and trading name? Do I need to register them?

Accepted Answer

A business name is the name that a company needs to officially register on the Company Office. A trading name is used for customers when doing business, and does not need to be registered. For avoiding malicious use of the same trading name by other businesses, you can protect it by registering and applying for Trademark.

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Question 46

How to determine if I am a New Zealand tax resident?

Accepted Answer

Regarding the tax residency status for individuals, it uses either the 183-day rule or the determination of whether you have a permanent place of abode in New Zealand.

The factors like having New Zealand nationality, having a bank account in New Zealand and contributing KiwiSaver will be considered when determining whether you have a permanent place of abode in New Zealand, but they are not certain factors. It will consider your other conditions.

Question 47

How to do if Company Annual Return is overdue?

Accepted Answer

If the Company Office displays the “overdue” information, you need to submit the Company Annual Return as soon as possible. If you do nothing, your company will be forced to de-registration. If your company has unresolved tax issues, IRD will punish you.

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Question 48

I travelled in New Zealand and deposited money in the bank, then returned to China. Do I need to pay interest tax?

Accepted Answer

Yes, the bank will charge interest tax. If you are not a New Zealand tax resident, you can apply for NRWT or AIL from the bank, and the interest tax is relatively low. The AIL tax rate is only 2%, which is lower than NRWT. For countries that have signed the DTA, this part of the tax is not tax deductible in the depositor’s tax resident country, but NRWT is tax deductible.

However, if you are a New Zealand tax resident, you must choose a RWT rate based on your annual income.

Question 49

Do foreign people have to pay taxes on their income in New Zealand?

Accepted Answer

It depends on whether foreign people are tax residents of New Zealand or not. If you are a New Zealand tax resident, you need to file not only your income in New Zealand, but also your overseas income. If you are not a New Zealand tax resident, you only need to file your income in New Zealand to IRD.

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Question 50

If a company does not register a address for service, can it be found only by knowing the names of the company’s directors?

Accepted Answer

There is currently no way to search the company’s address for service by the name of the company’s directors.

Question 51

If the registered address of a company, such as a restaurant, is different from the trading address, how can I find the real trading address?

Accepted Answer

Under normal circumstances, the restaurant’s trading address will be displayed in the “Address for service” of Company Office, as shown in the figure below.

If the displayed address is incorrect, it is possible that the registrant has not completed the company information, and there is no other way to check it. However, you can also try to make a search using Google through Trading name (if available) for reference. You can see the trading name of the company as shown in the figure below, but if it is not provided, it is difficult to find it in other ways.

Question 52

Do I need to pay tax for the Guaranteed Childcare Assistance Payment (GCAP)?

Accepted Answer

In general, most benefits in New Zealand will be paid after tax deductions. Moreover, the GCAP is generally paid directly to the early childhood education center, rather than directly to the parents.

Question 53

How to apply for Temporary loss carry-back?

Accepted Answer

Log in to myIR, click “Income Tax”, and select “Opt-in to carry-back loss” in the box of “I want to…” in the upper right corner to enter the application page. There are two years to choose from, which are the 18-19 fiscal year and the 19-20 fiscal year. Assuming that the loss was incurred in 2020, and that it was profitable in 2019 and the income tax has been paid, then the loss in 2020 can be used to deduct the profit of 2019 in this way, and then the income tax that has been paid is refunded. If there will be a loss in 2021, the profit in 2020 can also be deducted in this way and the corresponding income tax will be refunded.

Question 54

I am a New Zealand tax resident, what’s the tax deducted in my bank when I received bank deposit interest income?

Accepted Answer

This is a tax called resident withholding tax that the bank has an obligation to withhold from certain payments of investment income such as interest or dividends. You can choose the RWT rate from the following rates 10.5%, 17.5%, 28%, 30%, 33% which is determined by your annual income.

Question 55

What is annual return? Do I have to do it?

Accepted Answer

Annual return is different thing from a financial report. The Companies Register has general information record that the public can have access to view. If you are running a company, you must update the company’s information each year through an annual return.

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FAQ

Can donations be accounted for business expenses?

Can donations be accounted for business expenses?

If a project is sold before it is completed, is the expenditure in the development phase of the project as an expense?

If a project is sold before it is completed, is the expenditure in the development phase of the project as an expense?

Does Bank Fee have GST?

Does Bank Fee have GST?

How do I record the cost on business meal with my customer?

How do I record the cost on business meal with my customer?

How to choose GST filing frequency?

How to choose GST filing frequency?

Does the freight cost of export include GST?

Does the freight cost of export include GST?

Which insurance does not need to pay GST?

Which insurance does not need to pay GST?

Do I need to pay GST and withholding tax for the cost of designing a house by an overseas online company?

Do I need to pay GST and withholding tax for the cost of designing a house by an overseas online company?

I buy a second-hand good from a private person without a receipt, how can I claim GST?

I buy a second-hand good from a private person without a receipt, how can I claim GST?

What is GST in New Zealand?

What is GST in New Zealand?

What’s the GST rate in New Zealand?

What’s the GST rate in New Zealand?

What is the tax code of WT?

What is the tax code of WT?

When to pay provisional tax?

When to pay provisional tax?

Is there a secondary income that pays more taxes than just one income?

Is there a secondary income that pays more taxes than just one income?

When I need to use the highest income tax rate of 39%?

When I need to use the highest income tax rate of 39%?

If a child has income from helping neighbors mowing the lawn. Does he/she need to pay tax?

If a child has income from helping neighbors mowing the lawn. Does he/she need to pay tax?

How much tax do I pay for the second job if I hold a Partner of Open Work Visa?

How much tax do I pay for the second job if I hold a Partner of Open Work Visa?

Can chattels be depreciated? Can the building be depreciated?

Can chattels be depreciated? Can the building be depreciated?

What’s income tax rate for company?

What’s income tax rate for company?

What’s income tax rate for trust?

What’s income tax rate for trust?

Does compensations paid to employees need to deduct PAYE?

Does compensations paid to employees need to deduct PAYE?

Are fixed-term employees and causal employees paid during public holidays?

Are fixed-term employees and causal employees paid during public holidays?

Can I cash up my annual leave?

Can I cash up my annual leave?

How to deal with unused sick leave?

How to deal with unused sick leave?

How to pay for annual leave?

How to pay for annual leave?

How to pay for Holiday Pay to casual workers?

How to pay for Holiday Pay to casual workers?

What is the difference between Casual worker and Part-time worker in terms of PAYE and contract?

What is the difference between Casual worker and Part-time worker in terms of PAYE and contract?

How to calculate PAYE for bonus payments to employees?

How to calculate PAYE for bonus payments to employees?

Do I need to fill in a employee’s date of birth for Payroll?

Do I need to fill in a employee’s date of birth for Payroll?

Is there still a 90-day trial period for hiring new employees?

Is there still a 90-day trial period for hiring new employees?

How can I choose tax code for employee?

How can I choose tax code for employee?

When does employee entitle to have sick leave?

When does employee entitle to have sick leave?

Which entity is better for paying taxes for selling investment properties?

Which entity is better for paying taxes for selling investment properties?

Can one of two buyers use KiwiSaver if the other buyer is not eligible?

Can one of two buyers use KiwiSaver if the other buyer is not eligible?

Does the bright-line test apply when a family trust sells its main home?

Does the bright-line test apply when a family trust sells its main home?

Does a family trust have to file taxes every year? There is only real estate in the trust.

Does a family trust have to file taxes every year? There is only real estate in the trust.

Do I need to pay tax when I sell my main home?

Do I need to pay tax when I sell my main home?

I have a residential rental property, does the loan repayment can be offset the rent income?

I have a residential rental property, does the loan repayment can be offset the rent income?

Do I have to calculate and pay for GST when I sell my main family home?

Do I have to calculate and pay for GST when I sell my main family home?

Will a company’s profit and loss affect personal benefit?