Sterling Accountants Limited : Chartered Accountants, Christchurch, New Zealand

May 2011 – Issue 4

• Managing your tax online
• Gift duty abolishment
• GST on donations

• Trading stock
• Bad debts
• Entertainment
• Sponsorship

Things you can now do online:

• update your bank accounts, phone numbers, addresses and email details immediately
• view payments to or from Inland Revenue
• apply for Working for Families Tax Credits

We are working closely with D’Arcy Thomson from Cherry Kannangara Thomson on legal issues surrounding trust and estates and he has kindly offered a free initial consultation to clients of Sterling Accountants.  D’Arcy is currently located in our offices following the February Earthquake as they are unable to access their premises.

Even if you're registered for GST you cannot claim GST input tax for any donations you make. GST is claimable on supplies purchased as part of your taxable activity.  Donations are not considered a supply.

However, donations made to the New Zealand Red Cross Canterbury Earthquake Appeal are tax deductible when made by companies. The maximum deduction a company can claim will be limited to the amount of the net income, calculated before taking into account the donation deduction.

If your stock on hand at the end of the year was less than $10,000 (previously $5,000) excluding GST then you were not required to do a stock take at year end.

• away from the taxpayer’s business premises, eg, a business lunch at a restaurant
• the taxpayer’s business premises at a party, reception, celebration meal, or other similar social function, eg, a Christmas party for all staff held on the business premises
• at any event or function, on or away from your business premises for the purpose of staff morale or goodwill, eg, Friday night “shout” at the pub

Once a year an adjustment on your GST return is made to pay GST the 50% non-deductible expenses you have claimed previously.

100% deductible entertainment includes:

• cost of meals while travelling on business 
• food and drink at conferences/staff training or business
• meal allowances paid by an employer to an employee working overtime
• morning and afternoon tea for employees on the business premises
• promotions open to the public and trade displays that a business provides to advertise the business
• off-shore entertainment consumed or enjoyed outside New Zealand is fully deductible

Sponsorship

In general sponsorship and advertising are allowed to be deducted as an expense.  However, there are exceptions to the rule as follows:

A tax payer is allowed a deduction for sponsorship if:

• sponsoring a sporting team where the business names are displayed on players tops
• cost of sponsoring a sporting competition named after the sponsor
• cost of reimbursing a sporting team for its purchase, for example a van that displays the sponsor’s name

Sponsorship deductions are not allowed if:

• it is a gift to a school attended by the donors child, where the school is in another district away from where business activities are conducted
• a sporting activity that is a hobby of the business proprietor but which is a completely different activity from the business

Bookworks are now located within the offices of Sterling Accountants and are accredited trainers and users of QuickBooks, Xero, MYOB, CashManager and MoneyWorks. This means that for most accounting packages they can review your file to ensure it is balanced and properly laid out, ready for the team at Sterling Accountants to quickly sort out your end of year accounts and give you the best advice. 

Phone: 379 5338 Mobile: 028 8500179 www.bookworks.co.nz