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It's all about Tax 13 Nov 2013

Claim for interest deduction disallowed

A taxpayer bought a piece of equipment for his company. He arranged finance. The agreement was with him and not with his company, so the interest on the borrowed money was not tax deductible. If you have fallen into this trap, see us. There’s a way out but don’t delay.

Charitable Organisations

If you are involved in the administration of a charitable organisation, you should know the new rules.

If an employee is given vouchers for petrol or groceries etc, the charity can be liable for Fringe Benefits Tax. FBT has to be paid if the benefit, per employee, exceeds 5% of the salary or $300 per quarter or $1200 per annum, which ever is the least. This is subject to the upper limit for fringe benefits for total staff not being exceeded. 

Holiday homes, boats and planes costing $50,000 or more

If you have one of the above, which is used partly for personal use and partly for business, there’s a nasty little problem if your company owns it.

Any money borrowed by the company or a related company is deemed to be first to finance the boat, even if the money can be shown not to have been borrowed for this purpose. This means you might lose a significant tax deduction. There’s a way out, which is available until 31 March 2014. See us for more information.

More on holiday homes, boats etc used for rental

The new laws are likely to add to our clients’ compliance costs. One way out is to limit the time you rent your holiday home etc. If the total rent you get is less than $4000 where you have charged at least 80% of market value, you can opt out. You keep the money tax free but cannot claim expenses. If you charge rent at less than 80% of market value, or  the income is received from a close family member (ask us for a definition), the income is similarly not taxable and does not form part of the $4000 mentioned above.

PAYE and IRD

Never hold back PAYE payments, particularly if you have a company. Recently a taxpayer knowingly failed to pay PAYE. The court held he was personally guilty of tax evasion. Now he not only faced the company PAYE debt as his personal liability but also the resulting penalties.

 

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