03 May IRD Update / Engaging Contractors
As Bob Dylan famously sung back in 1964, ‘The times they are a changin’. We are in an era where technology is evolving at an increasing rate. Governments are not immune to this and recently, the IRD has decided to drop a whopping $1.9 billion on a new computer (ok, its not ALL for a new computer, but much of it is). To be fair, it’s about time they updated their systems as what they have been using predates the fall of the Berlin Wall, CD’s and the mobile phone – it’s well and truly obsolete. So, what’s the big deal about a new computer? Well, IRD has always been good at collecting large amounts of data. The issue it’s had is that it’s been terrible at using that data. This trend might be about to come to an abrupt end. Some have suggested that with the enhanced powers and tools, IRD will be benchmarking businesses and individuals and anyone who doesn’t fit within the bell curve will be very quickly in the cross hairs of the IRD. This is an article from the NZ Herald which outlines it in more detail, and this is a good follow up. Scary stuff. What should you do? Well this is one thing that hasn’t changed:
- Keep good records – for any purchase of $50 or more, you need a receipt.
- Use a separate bank account for business activities and try and keep personal and business transactions separate.
- Avoid cashies – seldom do businesses come out ahead when doing ‘deals for cash’ and with IRD’s computers looking even closer at you, the price for doing so might be high!
Since we’re on the subject of scary tax stuff, recently there have been a number of cases going through the courts involving businesses that had come unstuck owing lots of tax – particularly when they had under reported the PAYE and GST that they owed. There have been some hefty penalties handed out, including a couple with prison terms! This is one of them.
Engaging contractors
Last year, the rules changed around engaging contractors. Industries caught include Construction, Agriculture and Entertainment. The effect is that when someone does a job for you, you have to have them complete an IR 330C and then deduct tax from the payment to them. If you are affected by this do get in touch.
Have a great May!
