I read somewhere that the secret to a great urban myth is a tiny bit of truth. Well that certainly rang true for me when, midway through a delicious mouthful of Calamari, my dining companion ever so thoughtfully mentioned that I might actually be munching on Pig Rectum as a common replacement for Calamari.
Thankfully, myths about Tax aren’t quite so nauseatingly graphic but they’re guaranteed to have sickening consequences if the tax department catches you believing them. Have you been suckered into believing any of the top ten tax myths?
- You don’t need to keep receipts under $50. Wrong! No matter what the price tag says you absolutely must have an invoice if you want to claim for Income Tax. What’s confusing is that you don’t need receipts for bills under $50 if you want to claim them in your GST Return.
- I haven’t heard anything from the IRD so I did it right. Not so. The IRD doesn’t mark your returns like a school teacher. Your return is only checked if you’re audited and by then you may’ve made some costly mistakes.
- Sign writing the company car stops Fringe Benefit Tax. The sign writing rule doesn’t apply to cars (except Taxis & stationwagons without back seats). To get out of paying Fringe Benefit Tax on your company car it must stored at the business premises and not available for personal use.
- I don’t need to check what my accountant does. Your accountant isn’t an auditor. He, she, it uses the information you give them without checking it so if you get it wrong your accountant probably will too.
- Provisional tax is unfair because it’s paid in advance. This is a total crock. Provisional tax isn’t paid in advance unless you earn all your money in the last few months of your financial year.
- I don’t need to do accounts for my Trust. This is only ever true if you’ve already done the first set of accounts and absolutely nothing has happened since. Trustees are legally required to keep proper financial records.
- I’ve stopped business so I don’t need financial statements & tax returns any more. Wrong again. The Companies Act requires financial statements, albeit a simplified version, even if the company isn’t actively trading. Until the company is removed properly from the Companies Office (liquidation, voluntary removal etc) you’re also legally required to keep on filing tax returns (or non-active declarations).
- Old accountants know best. Yeah right! Age and experience might turn some of them into Super Accountants but it makes the rest of them rusty, out of date and expensive. If only we could tell you about the disasters.
- My accountants great because I get tax refunds. Contrary to common belief, tax refunds aren’t a good thing. It means you earned less than you expected or someone calculated your tax wrong so the IRD had your money when it should’ve been in your bank account earning interest.
- You don’t pay Fringe Benefit Tax on Ute’s. If only it were that simple! There’s a whole list of things you need to tick off before you get out of paying FBT on your Ute (unless it’s an absolute monster weighing over 3500 kilo’s).