CPA New Zealand Taxation flashcards
CPA New Zealand Taxation · Build recall with a focused review session.
32 cards. Read the term and the definition here. The deck at the top of this page is optional.
- Residence 183-day rule
- A person becomes a New Zealand tax resident after being present in New Zealand for more than 183 days in any 12-month period, counting part-days as full days.
- Permanent place of abode
- A residence test: if a person has a permanent place of abode in New Zealand, they are a resident even if absent, unless they are a non-resident under the 325-day rule.
- Transitional resident exemption
- A new resident or returning New Zealander can be a transitional resident for up to four years, exempting most foreign-source income from New Zealand tax during that period.
- Top marginal tax rate
- From 1 April 2024, the top individual marginal tax rate is 39% on taxable income above $180,000, following the 2024 Budget tax changes.
- Company tax rate
- New Zealand companies pay income tax at a flat rate of 28% on their net income, and imputation credits are attached at the same rate.
- GST registration threshold
- A person must register for GST when taxable supplies exceed $60,000 in any 12-month period, or expect to exceed that threshold.
- GST rate
- The standard GST rate in New Zealand is 15%, applied to the supply of most goods and services by a registered person in New Zealand.
- Deduction general permission
- Section DA 1 allows a deduction for expenditure incurred in deriving assessable income or incurred in carrying on a business for that purpose.
- Capital limitation
- Section DA 2 denies deductions for expenditure of a capital nature, except where a specific provision in the Act allows the deduction.
- Trading stock valuation
- Trading stock is valued at the lower of cost or market value under section EB 2, or at cost using a permitted cost-flow method such as FIFO.
- Provisional tax threshold
- Provisional tax is generally required when residual income tax for the previous year exceeds $5,000, payable in instalments during the year.
- Standard uplift method
- A provisional tax method using 105% of the prior year's residual income tax, or 100% of the year before that, as the basis for instalments.
- Imputation credits
- Credits attached to dividends representing company tax paid, which shareholders use to offset their own tax on the dividend at a rate of 28/72.
- Fringe benefit tax
- A tax on non-cash benefits provided to employees, such as motor vehicles, at rates that reflect the employee's marginal tax rate.
- Motor vehicle FBT
- The motor vehicle benefit is calculated at 5% of the vehicle's cost per quarter, apportioned for days available, or 25% of cost annually.
- Entertainment 50% rule
- Section DD 1 limits deductions for entertainment expenditure to 50%, unless a specific exception applies, such as entertainment provided to staff.
- Low-value asset threshold
- Since 17 March 2021, assets costing $1,000 or less can be expensed immediately rather than depreciated over their useful life.
- Diminishing value depreciation
- A depreciation method applying a constant rate to the asset's diminishing adjusted tax value, giving higher deductions in earlier years.
- Brightline 10-year test
- Residential land acquired on or after 1 July 2024 and sold within 10 years is taxed, subject to the main home exclusion and rollover relief.
- Main home exclusion
- The brightline test does not apply to a person's main home if it was used as their main home for most of the ownership period.
- NRWT on dividends
- Non-resident withholding tax on dividends is 30%, reduced to 15% under many double tax agreements, with a 2% AIL option for interest.
- Approved issuer levy
- A 2% levy paid by an approved issuer on interest paid to non-residents, used instead of non-resident withholding tax on that interest.
- Trustee tax rate
- Trustee income is taxed at 39% from 1 April 2024, while beneficiary income is taxed at the beneficiary's marginal rate.
- Look-through company
- An LTC's income and losses flow through to owners in proportion to their effective look-through interests, with losses limited to the owner's basis.
- Working for Families abatement
- Family tax credits abate at 27% of family income above the threshold, with the in-work tax credit requiring qualifying hours of employment.
- KiwiSaver employer contribution
- Employer contributions to KiwiSaver are taxed as employer superannuation contributions (ESCT) at rates from 10.5% to 39% based on income.
- Use-of-money interest
- Interest charged by Inland Revenue on underpaid tax and paid on overpaid tax, at rates set by the Commissioner; it is not deductible.
- Charitable organisation exemption
- Organisations registered with Charities Services are exempt from income tax and may claim a 15% GST credit on certain donations.
- Fines not deductible
- Section DB 2 denies deductions for fines and penalties, including infringement fees, because they are not incurred in deriving income.
- Home office deduction
- A business-use-of-home deduction is calculated using floor area proportion or the square-metre rate set by Inland Revenue.
- Automatic assessment
- Individuals with only salary or wages and no other income may have their tax automatically assessed, without filing an IR3 return.
- Residual income tax
- The amount of income tax a person is liable to pay for a year, after credits, used to determine provisional tax obligations.