Foreign Superannuation Schemes

Superannuation: decisions, decisions

If you have (or had) funds in foreign superannuation schemes, let us know. Recent changes to legislation and further impending changes may affect you.

I transferred my Australian super to KiwiSaver. Is it taxed here?

Transfers from complying superannuation funds in Australia into KiwiSaver won’t be taxed in New Zealand on transfer. However, future earnings on these transfer funds will be taxed as normal KiwiSaver investments.

This isn’t the case with transfers from other countries – there are New Zealand tax implications on transfers in these cases. However, under the new rules, if you transfer your non-Australian foreign superannuation into KiwiSaver after 1 April 2014, you will be allowed to make a withdrawal from KiwiSaver to pay your tax bill.

I withdrew (or transferred) funds from my foreign super last year. What are the tax implications in New Zealand?

If you withdrew or transferred funds any time between 1 January 2000 and 31 March 2014, and have not previously accounted for New Zealand tax on these funds, you will be able to meet your tax obligations by paying tax on 15% of the amount transferred or withdrawn. The remaining 85% of that sum will not attract income tax. However, it has to be shown in the tax return for either the 2013–14 or 2014–15 income years.

For a limited period of time only, you can choose to calculate your tax liability using this concessionary 15% rate option without penalties or interest, or under existing law (which may involve imposition of penalties and interest). Talk to us to work through the options that are best for your situation.

I’m confused. I’ve been declaring my foreign super under the FIF rules. What happens now?

The current foreign investment fund rules will no longer apply to foreign superannuation schemes from the proposed date of 1 April 2014. However, if you previously declared your foreign superannuation and used the foreign investment fund (FIF) income rules prior to 20 May 2013, you may choose to keep using them in relation to your foreign superannuation interest after 1 April 2014 under the ‘grandparenting’ provisions.

Anything else?

Don’t forget also, superannuation is counted as adjusted taxable income when calculating income for child support, family income for Working for Families tax credits, and parental income for student allowances.

Year End Checklist

When it comes to the end of the financial year, you need to consider a few key factors. Here are some of the most important ones.

Consider pre-paying certain expenses
Some expenses can be prepaid in March and claimed as a tax deduction in the year to 31 March 2014, regardless of their amount. These include stationery, postage and courier charges, vehicle registration and road user charges, rates, subscriptions for papers or journals.

Other expenses have limits on the extent to which they can be claimed if prepaid. These include rent, consumables, insurance premiums, professional or trade subscriptions, travel and accommodation, advertising, periodic charges and other services. The rules surrounding prepayments are quite complex, so if you’re planning this type of expenditure, please contact us.

Don’t forget business expenses paid for privately
If you have paid for any business expenses privately during the year now is a good time to prepare a reimbursement to yourself for these.

Gather up any receipts for business expenses, for example newspaper subscriptions, entertainment, travel, employee smoko supplies. Add them up and prepare a reimbursement from your business bank account to your personal account.

If you are not sure whether an item is business related, please give us a call to check.

Similarly you may have business usage of a personal asset such as a vehicle. Give us a call to discuss your specific circumstances.

Tidy up your General Ledger – Now is a good time to check your cashbook or accounting software matches your actual bank balance. In the process, check for stale/unpresented cheques that may need to be adjusted.

Bank Certificates/Summaries – During the first few weeks of April most banks will issue Loan certificates and RWT summaries. Make sure you keep these in a safe place, or send to our office when you receive them.

Review last year’s fixed asset register
The book value of assets can be written off for tax purposes if the asset is no longer in use by the business, the business has no intention of using that asset in the future and the cost of disposing that asset is expected to be greater than the proceeds from its sale. Actually, it’s simpler than that.

Scan through your asset schedule from last year’s accounts and you’ll probably notice assets that no longer exist (the mobile phone that you dropped in the tide at Christmas time), or simply don’t work.

Maintenance and repairs – If you are planning on carrying out any significant maintenance or repairs, bring this forward to get an early tax deduction. Deciding whether expenditure on an asset is deductible as repairs or maintenance or should be capitalised is not always cut and dried, so please contact us if you aren’t sure.

Bad debts – Always review your debtors. If you have tried to recover the cost of the debt, it’s possible you may be able to write it off. If so, you may be able to claim a deduction.

Stocktake – Trading stock (excluding livestock) must be valued at the lower of cost or realisable value. It’s important therefore to perform a physical stock take at year end and actually dispose of any obsolete lines or alternatively write that stock down to its net realisable value.

Clients with an annual turnover of less than $1.3m can value their closing stock at the opening stock value, but only where closing stock can be reliably estimated to be less than $10,000.

Employee expenses – Any amounts owing to employees at year end (such as holiday pay, bonuses, long service leave, redundancy payments) can be claimed for tax purposes in the current year as long as they are paid within 63 days of balance date.

Dividends and imputation credits – Consider reviewing planned dividend payments to use any imputation credits, the RWT will be payable on these 20th April, so now is the time to make these decisions.

Donations Receipts
Don’t forget to gather up your donation receipts to bring in to us with your records.

You are able to claim back 33% of any donations that have been made to an approved donee organisation as long as your donation was at least $5.00 and you hold a donation receipt. There is a limitation in that the maximum rebate is limited to 33% of your taxable income.

Now is a good time to ask for a yearly receipt for any regular donations you have made and where you have misplaced receipts during the year. School fees as long as they go the general fund and are stated as being donations may also be claimed

Mixed Use Assets – Boats and Planes

We’ve talked a lot about mixed use assets over the last six months so we’ll keep it short. From 1 April 2014 the mixed use assets rules apply to boats and aircraft. This means you now need to keep similar records as for holiday homes.If you use the asset for private use and for earning income, if it’s also unused for 62 days, if it had a cost or market value of $50,000 or more when you bought it, you need to record:

  • The amount of time it was used and who used it (number of days, flying or cruising hours)
  • The amounts received
  • Expenses related to making it available for hire as well as expenses in generally maintaining it

If you make a loss and if your gross income from the asset is less than 2% of its value, you may not be able to claim the loss straightaway. Instead, you’ll have to ‘quarantine’ the excess expenditure and carry it forward to a future tax year to offset against future profits from the asset.

GST input tax deductions are calculated in a similar way to how you calculate expenses allowed as a deduction. If you sell the asset partway through the year, the calculations relating to income, expenditure, apportionment and quarantining can change.

If you’d like a rundown on how this applies in your case, or some tips on easy ways to keep track of it all, please contact us.