Frequently Asked Questions
Can I claim gifts made to clients as a business expenses?
If you provide a gift to a client, depending on the type of gift it may be completely deductible or only 50% deductible.
If the gift is “entertainment”, such as food and wine, it will be 50% deductible. Bottles of wine, meal vouchers, chocolates and Christmas hams are 50% deductible.
Calendars, gift vouchers and tickets to the movies are 100% deducible.
Contact us if you want to know more
I’ve withdrawn funds from my foreign superannuation scheme. How will this be taxed?
If you withdraw or transfer a foreign superannuation scheme into:
- A New Zealand or Australian superannuation scheme, or
- A bank account
You are liable for income tax.
If you transfer your foreign superannuation scheme from an overseas country to a foreign superannuation scheme in another country that is not New Zealand or Australia you are not liable for income tax.
If you withdraw or transfer from an Australian superannuation scheme to a New Zealand superannuation scheme you are not liable for income tax.
Contact us if you want to know more.
I am buying a new vehicle - should I buy it or should I lease it?
When making a decision to lease or buy a vehicle you must look at your personal priorities and your financial situation.
- Is having some ownership in your vehicle more important than low upfront costs and no deposit?
- Do you need the use of a new vehicle but lack the funds for a deposit upfront?
- Is it important to you to pay off your vehicle and be debt free for a while, even if it means higher monthly payments for the first few years?
- What will be your likely financial position at the end of the lease or loan period?
- These days there are no risks of major repairs because all new cars have extended warranties of 3 – 5 years and a minimum of 100,000 kilometres on the speedometer.
I conduct plenty of business from home, what expenses can I claim?
Where a self-employed taxpayer uses part of their home to conduct of a business, they are entitled to a partial deduction for the outgoings which relate to the use of the home for the work related activities. These include heating, lighting, rates, insurance, mortgage interest/rent, house and contents insurance, repairs and maintenance and telephone rental. The portion of outgoings deductible is based on the percentage of the total area of the home used for the business.
I have heard that your provisional tax can be calculated based on the GST you are paying. How does this work and should I be doing this with my business?
If your residual tax liability is between $2,500 and $150,000 and you are GST registered (either 1 or 2 monthly) you may be able to use the GST Ratio Method for calculating provisional tax.
Advantages of the GST Ratio Method;
- You will no longer be subject to Use of Money Interest
- Your income may be seasonal. This method matches tax payments to gross income declared hence allows better cash flow management.
Disadvantages of the GST Ratio Method:
- It means making six payments of provisional tax rather than the standard three.
- There’s a potential to overpay if asset sales are not adjusted for in the GST return
Before you make any decisions on whether this option has benefits for you, we recommend that you discuss this with us.
Can I pay my spouse a wage for the work he/she does doing the books?
If you are a sole trader, no deduction is permitted for wages paid to a spouse, unless the Inland Revenue Department consents in writing to that deduction. There are no special rules for payments to spouses if you are trading as a partnership, trust or company.
I’m starting out in business. What business structure should I trade under?
There are four main structures used to operate a small business.
- Sole Trader
The type of business structure you choose will affect your taxation position, your personal legal liability, the life of your business, and the availability of capital to establish and operate your business. It is therefore important to make the right choice.
Contact us to discuss which is the right option for you.
I seem to be paying high ACC levies. How can I lower these?
We recommend all clients should look very closely at their ACC premium invoices. We commonly find that changes should be made and often these will reduce the ACC premium.
Key areas to look at are:
- Is your business classification code correct? ACC uses 539 classification codes. They attempt to rank the risk potential of each business. A “very risky” business e.g. helicopter pilot will have a very high premium.
- Are you classified as part or full time? This will apply to small businesses operating as sole-traders or partnerships.
- The most common ACC premium is called ACC Cover Plus. There is another alternative premium available to the self employed called ACC Cover Plus Extra. This calculates the ACC premium based on an agreed cover rather than your taxable income. Many self employed people can lower their premium if they choose this alternative.
Contact us if you want to know more.