04 Jul Crossing the halfway point
Can you believe that we’ve crossed the halfway point of the year? 6 months gone in what feels like a blink of an eye. This is a great time to review progress. With less than 6 months until we knock off for summer, how are you progressing against your goals for this year?
Here are a few questions to review:
• What are you most proud of so far this year?
• Where have you succeeded so far?
• Where have you come up short?
• What is most important for you to achieve before the year is complete?
• Is your revenue where it should be? If not, what can you do about it?
• What opportunities have presented themselves so far? Have you capitalised on all of them?
• Are you clear about what you need to do next to move yourself/your business forward?
• Are you on track financially?
Tax changes
There have been numerous changes in the tax system already this year. While the press has recently focused on the shortcomings of IRD’s new computer system (if you tried to login to MYIR over the last few weeks, you’ll understand why), but there have been a number of more important changes that will likely have a bigger implication in the long run. Here are a couple of high profile ones:
The extension of the ‘bright line’ test: As of March 29, the bright line test has been extended from 2 years to 5 years. This means that any residential property acquired from this point on (excluding the main home or a property that changes hands due to inheritance/distribution of a deceased estate) that is subsequently transferred within 5 years of its purchase will be subject to income tax.
This means if you purchase a house as a rental and sell it within 5 years of buying it, there will be tax to pay on any gain made.
Loss ring fencing: While this is yet to come into effect, the government has signalled its intention to ‘ring fence’ any losses made from residential property. At present, it is possible to offset any losses made from the operation of rental property against other forms of income. The proposed ring fencing rules would stop this. The losses could only be applied to income from property, either now or in the future.
There is still an awful lot of detail to work out, but from what we know so far, having the appropriate structures in place will be vital. Contact us if you want to review your structures for rental properties.
Cryptocurrency: Bitcoin has taken another hiding over June, but it has caught the attention of regulators the world over. Australia has taken steps to recognise crypto currency as a form of money, but we seem to be lagging behind here in NZ. IRD have so far decided that cryptocurrency has similar characteristics to gold bullion, and they also see that isn’t a physical good. This important because this interpretation means that there are certain circumstances where GST will be payable on disposal of Cryptocurrency, even though there was none claimed on its acquisition. If you’re dabbling in crypto, get in contact to make sure you don’t get stung.
Anti-Money Laundering
Finally, this month, we move a month closer to Phase 2 of the Anti-Money Laundering & Counter Funding of Terrorism bill. Last month, we mentioned how important it is to upload documents for large transactions directly into Xero, so that there was good record of it. This month, we want to remind you to do the same for any ‘out of the ordinary’ transactions – anything that isn’t ‘run of the mill’. For anyone we do tax work with, you’ll already know that we will ask about anything out of the ordinary, but it is good practice to upload all your invoices to Xero.
If you’re not sure about your record keeping requirements, check out what IRD have to say here.
Have a great July
