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Netflix tax: Has Aardvark got GST all wrong?

Long running daily Aardvark questions whether Adobe has misunderstood NZ’s new Netflix tax in this article: http://aardvark.co.nz/daily/2016/0902.shtml#continue

The author says:

“It would appear however, that Adobe seem to think that they ought not be charging GST if a company or individual is GST registered.”

My reading of the legislation suggest it’s Aardvark which has got it all wrong. Adobe is quite correct to conclude it does not have to charge the GST if the customer is a GST registered business. The Netflix tax (consistent with GST principles all over the world) is a business to consumer tax not a business to business tax.

Iain

 

 

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Director personally liable

The High Court recently found a company director liable for over $160,000 of tax and interest owed by the company to the IRD.

The company, a builder of residential houses, racked up nearly $200,000 of unpaid tax, interest and penalties over 3 1/2 years. Eventually liquidators were appointed. The company and liquidators took action against the sole director/shareholder arguing he breached various duties as a director. The director did not defend the claim.

The High Court found the director was liable because:

  • As sole director he knew the company was unable to pay its debts yet allowed it to keep trading.
  • He failed to act in the best interests of the company by not ensuring it met its tax obligations as they fell due.
  • He breached his obligation to avoid reckless trading by allowing the company to keep trading in the face of a growing tax bill.
  • He failed to exercise the care, diligence and skill expected of a reasonable director under the Companies Act 1993.

 

The fact the director had sole responsibility for the management of the company and was its only director created a much clearer link between his failures as a director and the company’s indebtedness.

Full details of the case can be found at MJ Pidgeon Builder Ltd (in liq) v Pidgeon [2016] NZHC 1566, 11 July 2016.

Clearly at the most serious end of the scale but nevertheless a good reminder to directors, particularly those with sole control over the company’s trading, that hiding behind the corporate veil should not be taken for granted when financial difficulties arise.

 

Iain

 

 

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Tax sting in Auckland’s Unitary Plan

There’s a potential tax trap for unwary investors in Auckland’s proposed Unitary Plan. It’s called section CB 14 of the Income Tax Act.

A capital gain from the sale of land is taxed if 20% or more of the gain is the result of the likelihood of a change to the rules of a District Plan or the removal of a condition affecting the land under the Resource Management Act, or a similar occurrence.

We’ve already seen coverage in the media about how values of some properties are going to increase as a result of the proposed zoning changes in the Unitary Plan. Those value increases may have already occurred now the Plan has been publicly notified.

There are exceptions to CB 14 (e.g. it won’t apply if you’ve owned the land more than 10 years) but any investor selling property in Auckland now needs to be especially aware of CB 14.

 

Iain

 

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Buying or selling a piece of Australia?

From today anyone buying or selling direct (and some indirect) interests in Australian real estate has new tax obligations.

The Australian Government has imposed a 10% withholding tax on all purchases of real estate in Australia over AUD2m unless the vendor provides the purchaser with a clearance certificate from the Australian Tax Office which confirms they are Australian resident.

The new measure is aimed at improving the recovery of tax from non-residents who own Australian real estate assets. From 1 July all buyers of Australian real estate assets, whether they are residents or non-residents, should make sure their contracts are up to date and have clauses covering the new documentation requirements.

Significant penalties are imposed on purchasers who do not deduct the required withholding tax.

All property lawyers and agents should be up to speed with the new rules.

cheers

 

Iain

 

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Budget 2016

What will the Budget 2016 mean for small and medium sized businesses?

A significant investment in transforming how IRD works will be better for everyone in the long run. An efficient and easier tax collection system is desirable but SME’s won’t be waking up this morning to a dramatic new world. It’ll be business as usual for a while yet.

The tax simplification measures announced in April focussed on SME’s and will be welcomed by most. Penalty reductions, easier provisional tax payment methods, lower interest costs and greater flexibility around withholding taxes will reduce the costs of collecting and paying tax.

I think the announcements most likely to appeal to small and medium sized businesses are those aimed at fostering entrepreneurship and innovation; 25 initiatives over the next four years in science, skills, tertiary education and regional development.

The Government’s Regional Growth Programme gets a boost, there’s more money for the Marsden Fund and the Health Research Council and another 5,500 apprenticeships by 2020.

Encouraging innovation and entrepreneurship benefits us all with more jobs and improved productivity and sustainability. Equipping workers with the skills needed for those jobs ensures the productivity and sustainability gains can be achieved.

Here’s a full analysis on this year’s Budget announcement http://bit.ly/1RpcNTt

 Iain

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Fat Taxes

Sugar taxes are back in the news with the UK Budget announcement to introduce one: http://www.theguardian.com/uk-news/2016/mar/16/budget-2016-george-osborne-sugar-tax-growth-forecast-falls

There is evidence they work but they need to be significant to have any real impact.

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Keeping the customer first?

ey.com/customergrowth    Linda Hasenfratz, Linamar Corporation CEO tells how. Leading companies who focus on fixing customers issues create a compelling competitive model.

#acceleratinggrowth

@EY_Growth