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Published October 2012

 
Trials without tears

Overview of the 90 day trial provision

Since 1 April 2011, an amendment to the Employment Relations Act 2000 allows all businesses to hire new employees on a trial period of up to 90 calendar days. Employers can make an offer of employment that includes a trial period of up to 90 days. Trial periods are voluntary, and must be agreed in writing and negotiated in good faith as part of the employment agreement.

Under the amendment, the employee, if dismissed within the 90 calendar days, is unable to raise a personal grievance for reasons of unjustified dismissal, but still has the right to protections against discrimination, sexual and racial harassment, duress or unjustified action by the employer that disadvantages the employee.

New research by the Department of Labour shows employers are using the 90-day trial periods to reduce the risk of taking on new employees. The research shows that 60 percent of hiring employers are now using the trial periods, and even more intend to use it in the future.


So how can you use it to benefit your business?
  • To check an employee's ability for the job before making a commitment to employ permanently
  • To employ someone with the skills required, but where the business is unsure about the potential employee's 'fit' within the workplace
  • To avoid incurring costs if staff are unsuitable for the job
 
 
 
Standard mileage rate increases

Self employed mileage rate

The IRD standard mileage rate for motor vehicles is now 77 cents per km. You can use this rate for up to a maximum of 5,000 km of work-related travel per year. For distances greater than 5,000 km, you must keep a record of actual vehicle expenses.

The rate applies irrespective of engine size or whether your vehicle is powered by a petrol or diesel engine. The mileage rate does not apply to motor cycles.

Employee reimbursement

To reimburse staff, including shareholder-employees using their own vehicle for work, you can  also use  the current IRD rate of 77 cents per kilometre.

The 5,000 km limit for self-employed people does not apply to employers using the mileage rate to reimburse employees. Employers who reimburse employees for business travel in excess of 5,000 km will need to consider whether the mileage rate is still a reasonable estimate of the employee's costs.

The rate applies irrespective of engine size or whether your vehicle is powered by a petrol or diesel engine. The mileage rate does not apply to motor cycles.
 
 
KiwiSaver matures

On July 1 KiwiSaver turned 5 years old.

Our national KiwiSaver initiative has been a great success, with nearly 2 million New Zealanders enrolled.  Some might say KiwiSaver has contributed to better saving habits for all New Zealanders in a crucial time of fiscal restraint.

The 5 year milestone will be eagerly awaited by baby boomers - many of whom are now eligible to withdraw from their golden nest egg.

Are you eligible to withdraw your funds?

You must fit two criteria:
  1. You must be at least 65 years old, i.e. qualify for NZ Superannuation.
  2. You must have been enrolled in KiwiSaver for 5 years.
If you joined KiwiSaver when you were 63, then you won't be eligible to access your funds until 5 years after, when you'll be 68.

How to withdraw your savings:  First, contact your scheme provider to confirm you're eligible.  If you're unsure who this is, contact IRD (have your IRD number ready). 

Your provider will explain the withdrawal process and timeframes involved.  This will vary, depending on your provider and the funds/assets portfolios your money is invested in.  They can also tell you what your savings are worth.

Note:  You can contact your scheme provider to discuss the withdrawal application process and relevant timeframes ahead of meeting both criteria. 
It might be a good idea to ensure you have the required paperwork ready.
Upon becoming eligible you may wish to leave your account open and continue contributing to it.

Are you an employer with an eligible employee?  Provided you're not required to under an employment agreement, you're no longer liable to pay compulsory employer contributions for employees eligible to withdraw from their KiwiSaver funds.

 
 
 
Employment agreements are a must

A recent ERA ruling further proves how vital employment agreements are.   An employee was awarded $3,000 after the ERA ruled that she had been unjustifiably disadvantaged through lack of an employment agreement. 

Order of events:  In 2008, the employee accepted an advertised role offering 25 hours per week with flexibility and potential for 40 hours during peak times.  A year later, the employee requested more hours and the role expanded.  After 6 months, the extra work was reduced along with the employee's hours.

The employee claimed that she then verbally applied for, and accepted, a vacant full-time position at the company.  One of the employer's three directors later stated there was no offer of a full-time role, no documentation confirming the alleged appointment and no staff announcement. In addition, he said that he lacked the authority to make such an appointment and was only able to adjust hours.

Down the track the amount of work declined and the employer reduced the employee's hours. She resigned and raised a personal grievance.

The verdict:  It was decided that the employer acted without good faith by not providing an employment agreement.  Had it done so, confusion surrounding the employee's hours could have been avoided.  This in turn might have prevented a further finding to the employer's disadvantage relating to reduction in the employee's working hours (for which compensation of another $7,000 was awarded).

Where an employee is not covered by a collective agreement, the law requires an individual employment agreement to be in writing.  This promotes greater certainty and trust - which can only be a good thing.
 
 
 
IRD compliance focus 2012/2013

The IRD recently released their annual Compliance Focus document for 2012-2013 to 'help you get it right'.  It outlines how Inland Revenue will focus its energies to net the correct amount of tax.

This year their focus is on:
  1. Receiving the right information at the right time.   If your circumstances change remember to let us (and the other necessary government agencies) know.  Also make sure you have the right amount of tax deducted at source and if you're an employer that you're deducting the right amount of tax from payments you are making.
  2. Filing and paying on time.  If you think you'll be unable to meet your tax obligations let us know as soon as possible so we can work with the IRD to manage your situation.
  3. Paying and receiving the right amount.  IRD are focusing on individuals who try to reduce their tax liabilities or increase their entitlements to tax credits.
  4. Providing confidence and certainty.  The IRD are trying to clarify what they expect from taxpayers and provide more information - so keep an eye out.
                                               
The IRD has implemented several campaigns to educate the community and minimise accidental tax avoidance.  They're also forging better relationships with external agencies, strengthening reporting systems and encouraging open communication to proactively influence voluntary compliance.

Taxes fund over 80% of government programmes and services, including education, healthcare and policing so it's in everyone's best interests to get it right.

The IRD state that taxpayers 'can have greater confidence that they are paying the right amount of tax when the advice and support their tax agent provides is based on complete information....  Recent research shows a clear correlation between the use of tax agents and increased voluntary compliance, particularly when the tax agent belongs to a professional organisation.'

So if you think this may affect you, give us a call.
 
 
 
International investment tax changes

If you have offshore investments (these may include a pension, insurance policy, or shares) you may be subject to the international tax rules.  A number of complex changes have been introduced.  Briefly these changes:
  • Allow the controlled foreign company (CFC) rules (active income exemption) and the portfolio foreign investment fund (FIF) methods (fair dividend rate and cost methods) to be used by investors with interests of 10% or more in foreign companies that are not CFCs
  • Introduce a zero rate of approved issuer levy for interest paid to non-residents in respect of retail bonds
  • Introduce an alternative thin capitalisation method for firms with high-value intangible assets
The new rules apply to income years beginning on or after 1 July 2011.  The changes are complex and we recommend you contact us to discuss us if you have offshore investments such as pensions, insurance policies and shares.
 
 
 
Tax information resource 
On our Lock and Partners website you can find information on various tax issues such as:







International tax facts 
  1. New Zealand residents are generally taxed on their worldwide income.
  2. If you leave the country but maintain a permanent place of abode here, then you will still be a New Zealand tax resident.
  3. Foreign income (even if deposited in an offshore account or left on a foreign credit card) does not need to be repatriated to New Zealand to be taxed here.
  4. Even if withholding tax has been deducted on foreign income this does not mean that this income is no longer taxable in New Zealand.
  5. Certain overseas pension payments may be fully taxable
    in New Zealand.

 

Some New Zealand facts 
  • New Zealand was the first country to have its three top positions of power held simultaneously by women.
  • There are more golf courses in New Zealand per capita, than any other country in the world (over 400 golf courses).
  •  Auckland has the largest number of boats per capita than any city in the world.
  • Arthur Lydiard invented jogging - the method of building physical fitness by gradually increasing stamina.
  • New Zealand Internet is among the slowest in the developed (and some parts of the developing) world. Most households achieve an average speed between 1 Mbit/s to 10 Mbit/s per line.
Related Pages:

Business & Tax

+ Services for business owners
+ Choosing a trading structure
+ Accounting & Tax returns

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Property Investment

+ Annual accounting & tax returns
+ Set ups & structuring

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Trusts

+ Learn the benefits of trusts
+ Want asset protection?

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