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Tax Rates and Taxation Liabilities and Obligations

31st March is the end of the tax year for most individuals and entities in New Zealand.  In the UK it is the 6th April, Australia 30 June and the USA 30th September.  The start of the new tax year is generally when new taxation related policies begin.  In New Zealand, this means that the 1st of April is when NZ Superannuation income is adjusted for increased costs, when benefits change and when any changes to KiwiSaver occur.

There are no changes to KiwiSaver on the schedule this year, and the new NZ Superannuation income will be slightly higher than last year.

But we thought it would be a good idea to remind you of all the potential taxation liabilities that you do have, and may have (but not be aware of).

Marginal Tax Rates.  

This is the tax rate that you pay on earned income.  The amount that you pay will depend on how much you earn.  It is your responsibility to let any banks or investment providers know what your marginal tax rate is, and to have it accurate.  This is the current schedule of marginal tax rates.

IncomeCurrent rates
$0 - $14,00010.5%
$14,001 - $48,00017.5%
$48,000 - $70,00030.0%
Over $70,00033.0%

 

2. Provisional Tax obligations.  

If you have income that you have not paid tax on (PAYE, Resident Withholding Tax) during the year, and you have a tax liability that is over $2,500, you come under the provisional tax regime. This means that you have to pay tax in advance in the following year, in three payments.  There are penalties if you do not do this and 'I didn't know' is not a valid excuse.  If you think this might apply to you, please contact an accountant.

3. GST obligations

if your trading income is over $60,000 pa

4. PIR Tax Rates

PIR (Prescribed Investor Rates) apply to your investments that are held in PIE's (Portfolio Investment Entities).  This is a new tax since 2007 and is beneficial to investors earning over $48,000 as the PIR rate is lower than your Marginal Tax Rate.  This tax rate is based on your earnings in the previous two years to this year.  Therefore, when you retire or when your income drops, you will need to leave your PIR rate at the level of the previous years earning.  You need to have a lower income for a year before you can make it a lower tax rate. These are the PIR rates:

IncomePIR Rate
$0 - $14,00010.5%
$14,001 - $48,00017.5%
$48,000 - $70,00028.0%
Over $70,00028.0%

 

IN ADDITION - if your income has been lower in any of the previous two tax years, and this would put you into a different tax bracket and therefore a different PIR Rate, you can take advantage of his and use a lower PIR Rate.  You need to ensure that your KiwiSaver provider, or any other PIE investment provider that you have are aware of your correct PIR and Marginal Tax Rate

5. FIF/FDR Tax

Read this blog post for more information on how this tax works.

6. Brightline Capital Gains Tax on sale of property (not your own home) 

Click on the link to read our November 2016 article about whether it might affect you.

7. Taxation on repatriated Pension/Superannuation funds from overseas

Click on this link to read our article about these tax rules that came into effect in February 2014, and were retrospective to 1st January 2003:  http://www.moneyworks.co.nz/do-you-have-super-in-the-uk-or-usa-or-have-you-brought-it-back-since-1st-january-2000/

8. Capital Gains tax on any 'trading' or 'associated person' activities.

If you actively trade shares, or buy and sell properties and 'do them up' or just landbank and then sell them off, OR if you buy property and you have an 'associated person' activity, you could be liable for taxation on any capital gains that you make.  It is vital that you are aware of your obligations.  Refer to this booklet published in December 2015 as a starting point, but you definitely need to get expert accountancy advice if you think these rules might apply to you. 15 Tax and your property Transactions (IRD).

 

If you think that some of these taxes might apply to you and that they aren't correct, or if you aren't sure, we strongly recommend that you contact an Accountant.  We can refer you to a top quality, cost effective accountant if you would like some assistance.  Email us on contact@moneyworks.co.nz if you would like a referral.

 

By Carey Church



 

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