Welcome to The Accounting Hub!
New clients often have a range of questions after signing on to use our service. Over time we have noticed some important questions that often come up. The questions and their answers are as follows:
What is provisional tax and should I be paying it?
If you are established in business it is likely that you will already understand the routine of provisional tax payments. For new businesses provisional tax can be a bit confusing!
Provisional tax is a system for paying income tax in the year in which the income is earned. Because a tax return is not filed until after the year is over, it is not possible to know exactly how much tax should be paid at the provisional tax dates which for most taxpayers are the 28th of August,15th of January and the 7th of May (it would be a good idea to put these dates in your calendar). Even though we don’t know how much the final tax will be some companies, trusts and individuals would do well to estimate their tax accurately and make “voluntary” payments of provisional tax on these dates. This is because the IRD charges interest back to these dates when the tax return is filed in some situations.
We will do our best to contact you at each provisional tax date to remind you of the tax payable and discuss the amount to pay. If you feel like we have missed you out and you are not sure why, or you think the amount that we have asked you to pay is too little or too much, let us know.
Using Xero helps to give an accurate picture of profit as the year unfolds.
Can I claim expenses for my house?
If you use your home to conduct business, you are entitled to claim a fair and reasonable portion of the house outgoings.
Usually, the proportion you can claim is based on the area used for business purposes (for example, an office, storage, workshop), as a percentage of the total area of the home.
Outgoings claimable include:
Repairs and Maintenance
We will ask you when we prepare your annual accounts for details of these expenses. You will need to keep all invoices relating to these costs for 7 years.
How is the best way to claim expenses for my car?
Motor vehicle expenses are generally deductible for income tax purposes, if the vehicle is used to help earn income for the business.
If the vehicle is not used exclusively for the business (travelling to and from home is not a business related expense) then you are not able to claim 100% of the vehicle expenses.
Sole traders and partnerships have the option of using a logbook to keep track of their business and private trips that can be used to apportion the vehicle expenses. This option is now available to companies.
Alternatively, if a motor vehicle is made available to an employee of a company (and this includes a shareholder employee), the company has the option to pay fringe benefit tax. This applies whether or not the vehicle is actually used for private purposes.
Another option for either sole traders and partnerships or companies is to claim from the business for business miles travelled at the IRD approved mileage rate, or some other rate if it can be justified for their car.
Please check with us to find the best way of claiming vehicle expenses for you.
What are ACC levies and how do they work?
ACC provides personal injury cover for all New Zealand citizens, residents and temporary visitors to New Zealand. ACC uses a risk-based classification system whereby business activities are grouped so that the costs of work injuries are fairly distributed among similar businesses.
Whether you are a self-employed person or shareholder employee or an employer, you are required to pay ACC levies.
There is an alternative cover for self-employed and shareholder employees. It provides an opportunity for these people to obtain better cover and perhaps make some savings on the levies they pay. This scheme is called ACC CoverPlus Extra. If you would like some advice from an insurance broker let us know and we can pass you on some contact details.
What is the process for preparing my accounts and tax return?
At the beginning of each financial year (1 April to 31 March), we will send you an online questionnaire to complete. It will ask you to create a log in and once you’re logged in you’ll be able to answer our questions and upload the documents required.
Part of our process is to confirm the balances and income/expenses showing in Xero. To do this we often ask for supporting documentation such as bank statements and receipts. It is a good idea to keep these organised throughout the year to make finding them easier.
Once we have received the documentation requested in our questionnaire we will complete the accounts on a first come first served basis. We will let you know once we’ve received the information and, once we’ve started working on the accounts, we will let you know if we require any more information.
Once the accounts are completed we will send you a final copy for your signature. Then we will file the tax return with the IRD.
As one of our clients, you have an extension of time to complete your tax return. For example, the year ended 31 March 2017 is due with the IRD by 31 March 2018.