Investment Properties – How does the 1st October law change affect you?

You will all have seen the media reports about the Government introducing a ‘Not a Capital Gains Tax, Capital Gains Tax’ on Rental Properties.

John Key announced on Sunday that the Government planned a law change for October 1: that will make residential property bought and sold within two years subject to tax on any profit on sale, unless it was the family home, inherited, or needing to be sold because of a relationship split.

In reality how does this affect you? The answer is that for most people it doesn’t actually make much difference at all.

The law already says that if you buy a property with the intention of selling it for a gain – That gain is taxable. The situation though was that everyone says that isn’t their intention.

Now intention won’t come into it if you sell within 2 years, it’s taxable regardless of your reason for selling. I guess the reverse will also apply. If there’s a crash and you sell at a loss this may be claimable!

Extra funding has already been provided to Inland Revenue to enforce this.

This new law and the policy change requiring overseas buyers to have a New Zealand bank account and tax number, are extra tools to ensure those looking for a quick profit are taxed on any gain.

If you have any queries about your own situation give us a call.

What are your employment obligations?

There’s nothing that say’s you’ve got a business more than employing staff. However, doing so brings with it all sorts of obligations. And they’re the same whether you employ 1 person or 100.

Employee records required

For every employee you must have an employee file to keep their records in, this can be a physical file or an electronic file. The documents you must keep on file include:

  • A completed IR 330 tax declaration from an Employee – if you don’t you must deduct tax at 45%. It’s their job to tell you what their tax rate should be.
  • A written employment contract – failure to do so can result in a $20,000 fine
  • Copies of job descriptions / task lists
  • Any notes from staff appraisals

Employee entitlements and further records required

There are 6 weeks and 1 day that you pay your employee not to even walk in the door.

Every employee is entitled to 4 weeks holiday a year and there are 11 statutory holidays in NZ. Then they’re also entitled to 5 days sick leave per year, which can be accumulated up to 20 days, bereavement leave for certain family members and even a new father is entitled to 2 weeks parental leave, though this is unpaid.

It’s important to keep regular and clear records of all your staff leave taken. Most computerised payroll systems can record this, but if you’re calculating payroll manually you will need to keep separate records.

If you think that your employee records are not complete or need help setting up appropriate records we can help, give us a call.

Payroll records

You need to keep records of what you’ve paid someone and any deductions you’ve made on their behalf each month. It’s your obligation to deduct the tax, any student loan repayments, KiwiSaver and any other deductions set by the IRD. Failure to pay this on to IRD is theft and can result in being sent to prison.

Once again, a computerised payroll system will keep all these records. Talk to us if you think you need to update your payroll system, or even if you find this just all to much to fit in. We could do this for you.