Decidedly, Arthur, as one lasting occupant of New Zealand, is apt to register his revenue enhancement to the Inland Revenue if he has concern activities in New Zealand harmonizing to New Zealand ‘s revenue enhancement twelvemonth ( from 1 Apr in one twelvemonth to 31 Mar in following twelvemonth ) ([ 1 ]) . The followers is to discourse the revenue enhancement deductions of Arthur ‘s activities from 1 December 2009 until 31 July 2010 in footings of the income revenue enhancement and the GST.
The revenue enhancement deductions of his activities for the income revenue enhancement
The income revenue enhancement is a revenue enhancement levied on the income of persons or concerns, and it is normally levied yearly harmonizing to the revenue enhancement twelvemonth ([ 2 ]) . Before discoursing the revenue enhancement deductions of Arthur ‘s activities in footings of the income revenue enhancement, the undermentioned footings should be clearly understood.
The nonexempt income for a revenue enhancement twelvemonth: it is determined by the net income deducting any available revenue enhancement loss in a revenue enhancement twelvemonth. After working out the nonexempt income for a revenue enhancement twelvemonth, the one-year income revenue enhancement for the revenue enhancement twelvemonth is equal to the sum of the nonexempt income multiplying the applied income revenue enhancement rate ([ 3 ]) .
The net income and the available revenue enhancement loss. The net income is equal to the sum of the one-year gross income deducting the one-year entire tax write-offs ( if the entire income is more than tax write-offs ) . The available revenue enhancement loss comprises of the loss balances carried frontward, the net loss, and the extra sums that are prescribed in the Income Tax Act 2007 ([ 4 ]) .
The entire one-year income and the one-year entire tax write-off. The one-year gross income for a revenue enhancement twelvemonth comprises of all the assessable income being allocated to the corresponding income twelvemonth, including the gross revenues, income from equity, salary, and others. The one-year entire tax write-off for a revenue enhancement twelvemonth comprises of the entire tax write-offs being allocated to the corresponding income twelvemonth, such as the outgo, costs of purchase, fiscal costs, and others. Subtracting the one-year entire tax write-off from the one-year income is the one-year net income for that revenue enhancement twelvemonth ([ 5 ]) .
Furthermore, harmonizing to the Inland Revenue ‘s probe of the TradeMe minutess, the grosss from the on-line gross revenues belong to the entire one-year income and should be apt to the income revenue enhancement. Logically, Arthur ‘s income actualised through on-line gross revenues should be apt to the income revenue enhancement and he has to register it to the Inland Revenue.
Following these rules, Arthur ‘s activities have the undermentioned revenue enhancement deductions. Arthur should register his one-year income revenue enhancement in two revenue enhancement old ages. One is to register the income revenue enhancement in the revenue enhancement twelvemonth from 1 Apr 2009 to 31 March 2010. During this period, the entire one-year income is $ 45000 and the one-year entire tax write-off is $ 15000 for the cost of goods plus $ 3000 for Sophia. The nonexempt income in this revenue enhancement twelvemonth is $ 27000 ( without sing the revenue enhancement loss ) . Another is to register the income revenue enhancement in the revenue enhancement twelvemonth from 1 Apr 2010 to 31 Mar 2011. The one-year gross income is $ 20000. The one-year entire tax write-off includes $ 7000 for the cost of goods and $ 1800 for the cyberspace entree ( $ 150 per month X 12 months ) . The sum of $ 2500 used for the birthday and Christmas gifts for Kirsty ‘s extended household should be exempted from the income revenue enhancement as it can be viewed as the payments to spouse, civil brotherhood spouses, or de facto spouses. Therefore at the terminal, the nonexempt income in this revenue enhancement twelvemonth from 1 Apr 2010 to 31 Mar 2011 is $ 11200.
The revenue enhancement deductions of his activities for the GST
The followers is to discourse the revenue enhancement deductions of Arthur ‘s activities in footings of the GST. The first is whether his activity is the nonexempt activity. Harmonizing to the Goods and Services Tax Act 1985, a nonexempt activity refers to ‘any activity which is carried on continuously or on a regular basis by any individual, whether or non for a monetary net income, and involves or is intended to affect, in whole or in portion, the supply of goods and services to any other individual for a consideration ; and includes any such activity carried on in the signifier of a concern, trade, industry, profession, career, association, or nine ‘ ([ 6 ]) . Following this definition, Arthur ‘s supply of the football related goods is one nonexempt activity, and should be apt to the Goods and Services Tax Act 1985.
The 2nd is whether he has to register the GST. Harmonizing to the Goods and Services Tax Act 1985, ‘every individual who, on or after the 1st twenty-four hours of October 1986, carries on any nonexempt activity and is non registered, becomes apt to be registered ‘ ([ 7 ]) . Following this rule, because Arthur ‘s activity of selling the football related goods is a nonexempt activity, he becomes apt to be registered to the GST.
The 3rd is how much he should pay for the GST. Subject to the Goods and Services Tax Act 1985, the goods and services revenue enhancement ( GST ) is a revenue enhancement being charged in conformity with the commissariats of this Act at the rate of 12.5 per centum on the supply of the goods and services in New Zealand by a registered individual for his or her nonexempt activity harmonizing to the value of that supply ( the exempt supply is sole ) ([ 8 ]) . Therefore he should foremost work out the value of his supply. Capable to the Goods and Services Tax Act 1985, the value of a supply of goods and services shall be such sum equal to the sum of ‘ ( a ) to the extent that the consideration for the supply is consideration in money, the sum of the money: ( B ) to the extent that the consideration for the supply is non consideration in money, the unfastened market value of that consideration ‘ ([ 9 ]) . For Arthur ‘s activity, the value of supply is equal to the sum of the money received from selling the football related goods. But he is able to subtract the GST paid for the goods and services associated with the nonexempt activity he consumes in New Zealand. Finally, in general, the GST sum he should pay is equal to the sum of one ninth of his gross revenues deducting one ninth of the goods and services consumed by him for the gross revenues, if the gross revenues sum are bigger than the sum of the goods and services consumed by him for the gross revenues. Otherwise, he will acquire refund.
The 4th is the nonexempt period. Harmonizing to the Goods and Services Tax Act 1985, ‘a individual ‘s nonexempt period may be a 6-month period if ( a ) the individual ‘s nonexempt supplies in a 12-month period are no more, and are non likely to be more, than $ 500,000 ‘ ([ 10 ]) . Arthur ‘s nonexempt period should be 6-month period, viz. he should register the GST every half twelvemonth.
The fifth is the deduction of the Inland Revenue ‘s probe of the TradeMe on-line minutess. This implies that the on-line minutess are apt to the GST. Logically, for Arthur, his gross revenues from the on-line platform should be filed for the GST.