August Update

Posted 5 years, 3 months ago by Maggie Waine    1 comment

OZ RENTAL PROPERTIES - URGENT ATTENTION

(Tacks Fax Published by the Small Business Institute Limited - Issue 1205)

In the Australian Government's 2012-13 budget it says "The Government will remove the 50 per cent capital gains tax (CGT) discount for non-residents on capital gains accrued after 7:30pm (AEST) on 8 May 2012. The CGT discount will remain available for capital gains accrued prior to this time where non-residents choose to obtain a market valuation of assets as at 8 May 2012".

Any NZ resident clients who own property in Australia, need to get their property valued as at 8 May 2012.

 

COMMERCIAL PROPERTY DEPRECIATION

(Tacks Fax Published by The Small Business Institute Limited - Issue 1203)

The rules for depreciation of commercial rental property are different from residential. Where there is a building involved, you will need to go carefully through the depreciation schedule to determine which assets form part of the building and are therefore subject to depreciation at zero percent. We remind you even though the 20% laoding is still there it is no longer applicable for new assets.

We also remind you, where fit out was not separately identified for a commercial property at the time of acquisition, you are entitled to take 15% of the book value of the building (at the end of the 2011 income year) and then depreciate this at 2% CP per annum. Where there have been subsequent building alterations, and fit-out has not been separately identified, we believe this should also be subject to the 15% rule.

 

CONVICTIONS FOR TAX OFFENDING QUASHED, 01 AUGUST 2012 - A RECENT TAX CASE WHERE THE IRD LOST!

(CCH - Tax>NZ Tax Tracker>2012>Issue 8, August 2012>Convictions for tax offending quashed)

The Court of Appeal has allowed a taxpayer's appeal against conviction on four counts under ss 143A and 143B of the Tax Administration Act 1004 and quashed the convictions.

Background

At material times, the taxpayer's husband (Mr N) operated a business as a forestry contractor. He did so inititally using two companies, Forest Tech 2000 Ltd (Forest Tech) and Forestech Contractors Ltd (FCL). He later traded under the name "Forestech Waikator Contractors". The taxpayer was a director of FCL but was not an officer or employee of either of the other two entities. The companies employed gangs of forestry workers who were paid wages. Mr N was responsible for the day-to-day operation of the business in the field.

Initially, the taxpayer assisted her husband with the administration of the business. In June 2002, she accepted a position as an investigator employed by the Inland Revenue Department (IRD). When her manager issued a directive that IRD employees were not permitted to be involved in businesses owned or operated by their relatives, the taxpayer resigned as director of FCL.

FCL failed to account to the Commissioner for PAYE deducted during the month ending 31 March 2002. The Crown alleged under count 1 of the indictment that the taxpayer knowingly applied or permitted PAYE deductions to be applied for a purpose other than in payment to the Commissioner in breach of s 143A(1)(d) of the Tax Administration Act. Count 2 alleged that the taxpayer had knowingly failed to pay tax deductions to the Commissioner by due date in breach of s 143A(1)(d) of the Tax Administration Act. Count 3 of the charge alleged that the taxpayer and Mr N had knowingly failed to file GST returns between 1 April 2004 and 1 June 2005 in breach of s 143B(1)(b) and (f) of the Tax Administration Act and count 4 alleged that the taxpayer and Mr N had knowingly file false GST returns during the period between 1 June 2005 and 31 March 200 in breach of s 143B(1)(c) and (f) of the Tax Administration Act.

The taxpayer was found guilty by jury in the District Court on four charges alleging breaches of ss 143A and 143B of the Tax Administration Act 1004, On 10 August 2011, the taxpayer was sentenced to nine months' home detention (R v Nayacak alou DC Hamilton CRI-2009-019-1128, 10 August 2011).

The taxpayer appealed to the Court of Appeal against conviction, She contended that the trial judge had failed to provide the jury with adequate directions regarding the essential elements of each of the charges on which the jury found her guilty. Separately, she contended that a miscarriage of justice had occurred because of errors in the manner in which her trial counsel had conducted her defence at trial.

Counsel for the Crown submitted that the Court of Appeal should direct a retrial on all charges.

Counsel for the taxpayer contended that several factors justified the Court exercising its discretion not to order a new trial. In particular, it was submitted that even if the Crown amended the indictment and proceeded under ss 147 and 148 of the Tax Administration Act, the prospect of the taxpayer being convicted was not great.

The Court of Appeal

The Court of Appeal upheld the taxpayer's appeal on the first ground and therefore found it unnecessary to deal with the alternative ground based on trial counsel error.

The Court of Appeal accepted that the Crown could point to sufficient evidence to seek a retrial on counts 1 and 2 but not on counts 3 and 4. The Court found that the following factors were sufficient to persuade the Court that it would not be appropriate to order a retrial on counts 1 and 2:

  • The difficulties that had arisen in this case were largely due to the manner in which the Crown chose to frame the charges. The Court considered that there would be an element of injustice in requiring the taxpayer to be subject to a second trial because the Crown proceeded on the basis of a flawed premise at the first trial.
  • The primary offender in this case was the taxpayer's husband. He was the person with overall responsibility for the operation of his business throughout the periods referred to in the indictment. He had been convicted on a large number of charges and was serving a sentence of imprisonment.
  • The offending had occurred between six and ten years ago. As a result of delays, none of which had been caused by the taxpayer, she had been under the strain of facing an IRD investigation and/or serious charges for nearly five years. She had also served one month of the sentence of home detention imposed on her by the District Court.
  • The taxpayer had lost, or resigned from, her job with the IRD.

The Court allowed the appeal against conviction and quashed the convictions. The Court declined to order a retrial on counts 1 and 2.

 

LOOK-THROUGH COMPANY (LTC) AND ACC LEVIES

(ACC publication received July 2012)

For ACC purposes, the distinction between "active" and "passive" flows from the definition of self-employed earnings contained in section 14 of the Accident Compensation Act 2001. It provides that self-employed earnings consist of net income (other than employee or shareholder-employee earnings) "that is dependent on the person's personal exertions". Case law has refined this definition. If LTC owners contribute any physical or mental effort, including management effort, to the affairs of the company they are liable to paye an ACC levy on their LTC net income. Only the truly passive investor should include LTC income in "other income" in their tax return.

 

DOGS WELCOME

A man wrote a letter to a small hotel in a town he planned to visit on his vacation. He wrote: "I would very much like to bring my dog with me. He is well-groomed and very well behaved. Would you be willing to permit me to keep him in my room with me at night?"

Poppet Waine
Poppet Waine
An immediate reply came from the hotel owner, who wrote: "SIR: I've been operating this hotel for many years. In all that time, I've never had a dog steal towels, bedclothes, silverware or pictures off the walls. I've never had to evict a dog in the middle of the night for being drunk and disorderly. And I've never had a dog run out on a hotel bill. Yes, indeed, your dog is welcome at my hotel. And, if your dog will vouch for you, you're welcome to stay here too."

Heath Waine - July 2012
Heath Waine - July 2012


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