Interest Payments, Provisional Tax, and Goals

4 May 2018

 

INTEREST PAYMENTS, PROVISIONAL TAX, AND GOALS


A few important topics for the end of April.

Are you paying interest to family or an investor?

Generally, if you are paying interest to an investor, or a family member who has loaned you money, then you need to deduct Withholding Tax.  If they are a New Zealand resident, then Resident Withholding Tax (RWT), or if they are overseas, Non Resident Withholding Tax (NRWT).   RWT or NRWT is due when the interest is actually paid, and due to IRD on the 20th of the Month following payment of the interest.

Main Exemptions;

  • Under $5,000 interest per year.
  • You are paying interest to someone who holds a valid Certificate of Exemption.  Note: Sometimes these can have expiry dates!
  • Registered banks or building societies.
  • Trustee companies, the Public Trustee, PIE's or the Maori Trustee.
  • Solicitors' Trust Accounts.


If you don't meet the exemptions and need to deduct Withholding Tax, then you can register at IRD website (www.ird.govt.nz) for either RWT and NRWT.

Example:
You are paying interest to your parents' Family Trust.
They advise their tax rate is 21%.
You are paying them $1,000 interest per month.

  • You would deduct 21% or $210 RWT.
  • So, pay your parents' Family Trust $790 net payment
  • Then, on the 20th of the Month following, pay the $210 RWT to IRD.

This also applies if you are paying a related entity interest!  That is, your Trust has loaned $1 million to your Company at 5% interest, paid monthly.  The Company should be registered.




Provisional Tax

If you have got provisional tax due on 7 May 2018, you should have received a notice from our office.  If you have not received a notice, or you are not sure, just This email address is being protected from spambots. You need JavaScript enabled to view it..



Do you have written down goals?

I think everyone should be working towards a debt free personal home and passive income.  Everyone will be different over the "when" and "how much passive income".  Do you have a written down plan on how you will achieve this?

Click here to download a simple example template in Excel that I use to map out my goals.  You can also add Business goals, but generally would have Property and Personal goals. 

Start to the left, then work to the right:  What is your long term goal, or where do you want to be in 10 years' time?  Or, what is your dream in 10 years' time?

  • 3 years is then what would need to happen in the next 3 years for you to achieve your 10 year goals.
  • 1 year is then what would need to happen in the next 12 months for you to achieve the 3 year goals.
  • Short term.  These will change all the time as you tick off small items that lead toward your 1 year goals.

To be honest, this is a pretty simple spreadsheet, but it might give you a good starting point.

Kind regards

Ross

 
 
 
 

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