BLOG: Seven Ways to Reduce Your Tax

Kirsten Hawke

By Kirsten Hawke - Astill Hawke & Associates Chartered Accountants

BLOG: Seven Ways to Reduce Your Tax

< /br> < /br>< /br>Number One: Make sure that your structure is the most tax effective for you.< /br>< /br>< /br>< /br>Look at forming a Company, Look Through Company or a Trust.   A company is taxed separately from its owners at the corporate rate of 28%- this is currently lower than the highest individual rate of 33%.  There are a large numbers of factors involved, not just tax advantages so seek professional help before making any changes. Contact Astill Hawke & Associates for a free Business Structures Report.< /br>< /br>Number Two: Make sure all deductible expenses are accounted for. < /br>< /br>Apart from a few special rules, any cost necessary to run the business will probably be tax deductible.  If you have "incurred" an expense you can claim it even though you may not yet have paid it.< /br>< /br>Use of home office:< /br>< /br>If you use part of your home for business, IRD will accept a claim for a share of the costs: Rates, Insurance, Interest on Mortgage, Repairs and Maintenance, Power.< /br>< /br> < /br>< /br>If the business uses the garage, include this as part of the area used for business.  Substitute rent for rates etc if you do not own the house.  Keep supplier tax invoices and you can also claim GST on the business share of these costs.  If your business is a company, the bills will not be made out to it.  In this case, claim reimbursement from the company because you are one of its employees.< /br>< /br> < /br>< /br>Where income is only interest and dividends don’t try to claim for use of home to run your investments.  The courts have said ‘no’ to this.< /br>< /br> < /br>< /br>Telephone< /br>< /br>Unless you keep records to show the contrary, IRD allows you to claim half domestic phone rental for business if the phone is used for both private and business, so long as the business element is reasonably significant.  If the phone is registered as a business phone, three quarters can be treated as a business cost.< /br>< /br> < /br>< /br>Farmers can claim 100% of telephone as business.< /br>< /br> < /br>< /br>Entertainment< /br>< /br>This is complicated.  If you want full details, get a FREE report from Astill Hawke & Associates Ltd.< /br>< /br>Roughly, if you supply food and drink plan on only a 50% deduction.< /br>< /br> < /br>< /br>Pay as much as you can through your business bank account.  For other small petty cash items, keep a notebook.  Record date, nature of cost and amount.  Keep supporting receipts where you can.< /br>< /br> < /br>< /br>When the business owes you a reasonable amount, get reimbursed from the business bank account and record this.< /br>< /br>Number Three:  Look at your financing.< /br>< /br>Make sure that your finance is structured to make the most of any interest deductibility.< /br>< /br>Generally interest incurred by a company is automatically deductible,< /br>< /br>provided the statutory exceptions do not apply.< /br>< /br> < /br>< /br>Qualifying companies, natural persons and trusts must establish a connection between the interest and the earning of income from the  raising of the loan.< /br>< /br>< /br>< /br>Number Four: Take advantages of all available tax credits< /br>< /br>These include: Independent Earner Tax credit – If your income is between $24,000 and $44,000 inclusive you’ll receive a tax credit of $520 or $10 per week.< /br>< /br>Tax Credit for income under $9880 – if your income is under $9,880 you can claim this tax credit for every week that you were in paid work for 20 hours or more.< /br>< /br>Parental Tax credit -You can get up to $1,200 a year for each newborn child.< /br>< /br> < /br>< /br>Family Tax credit – Family tax credit is a payment for each dependent child aged 18 or younger.< /br>< /br> In work Tax Credit – In-work tax credit is a payment for families who are in paid work.< /br>< /br>Donations, childcare or housekeeper tax credits-  If you made financial donations to a donee organisation or paid for childcare or a housekeeper (in certain situations) in the last tax year, you may be able to claim part of it back as a tax credit.< /br>< /br>Number Five: Invest in a PIE.< /br>< /br>Portfolio Investment Entities (PIE’s) provide benefits for people who pay tax at more than 30% as the fund pays tax at 28% (if you are in the 30% or 33% tax bracket)< /br>< /br>Number Six: Invest in KiwiSaver< /br>< /br>Not only do you get a  kick-start payment when you enrol, you will also be entitled to an annual member tax credit (if you are over 18)< /br>< /br>Number Seven: Get Expert Help< /br>< /br>Using the services of your accountant can save you a huge amount of tax.< /br>< /br>For a free review on how to legally minimise your tax (valued at $299) please contact:< /br>< /br>Kirsten Hawke            Astill Hawke & Associates Chartered Accountants Ph 09 9859791 Kirsten@astillhawke.co.nz www.astillhawke.co.nz

Kirsten Hawke