PRIVATE BOARDERS TAX TIP
What Are the IRD Rules?
With housing here in Canterbury in short supply, lots of homeowners are thinking about taking in private boarders or renting out a spare room or backyard sleep-out. You may not know that you need to pay tax on any profit that you make.
If you are renting out a room, even flatmates living with you, you must keep records of expenses and rental income and include on your tax return.
If you take in boarders, there are two ways you can work out the amount of income.
Using the standard cost method, the weekly standard cost for one or two boarders is $250 per week for each boarder. Any income that exceeds this will need to be included in your tax return. An easy way to work this out is by using the "Standard cost home-based boarding services calculator" in the "Work it out" section at www.ird.govt.nz.
You might choose to use the actual cost method. This means you will need to keep records and work out any taxable income by deducting a portion of your total household expenses from the total payments received.
For more information on boarders, tenants, flatmates and what expenses you can claim, download a copy of Rental income (IR 264) under "Forms and guides" from Inland Revenue's website,www.ird.govt.nz.
EMPLOYEE'S LOSS OF DRIVER'S LICENCE
How Do You Deal With This?
One of our builders has just come in to work and told us that he was charged with drunk driving on the weekend and that he also lost his driver's licence with immediate effect for a 28 day period, pending his appearance in Court in relation to the charge. This is of serious concern to us because his job includes driving during the working day to and from various building sites we are working on, as well as collecting materials and running other similar errands as required. We have checked his employment agreement and it contains a clause stating that the employee is required to hold a driver's licence and that loss or suspension of the licence is grounds for terminating employment. Can we therefore just give him a letter advising that his employment is terminated?
From what you have said, you would have grounds to consider terminating his employment. However, he would have grounds for an unjustified dismissal claim if you were to just give him a letter telling him is employment is terminated. As part of considering whether termination is justified in this case you have to comply with your good faith obligations and follow a fair and proper process. This includes providing him with a letter containing information about your allegations of serious misconduct and scheduling a disciplinary meeting to allow him the opportunity to respond to those allegations. The employee must be advised of his right to bring a representative to this meeting and that he is facing possible termination of employment. After the meeting you are required to consider his responses as part of making your decision about whether your allegations have been proven and whether dismissal is justified. A further letter is then required. We recommend you seek specific advice about the process and wording of the letters.
-Thanks to Master Builders for this real life example
EMPLOYEE UP-SKILLING TIP
You'll fail if you try to teach a fish to climb a tree
I have seen many instances where well-meaning employers go through the process of training their staff and throwing valuable resources in the hope of a good outcome. You will fail if you try to teach a fish to climb a tree. A ludicrous proposition but we are all guilty of hoping that we'll get an invigorated, motivated and up-skilled employee if we train them.
My advice – carefully evaluate the ability of the employee to positively respond to training before making the commitment. If you're not sure, take the risk. Put your employee through one stage of training and if the response is disappointing, re-evaluate. Have you got a fish? If so, train them for under-water work, not climbing trees.
TIP – WHAT TO WRITE ON PUBLIC NOTICES
And What Not to Write - Bad Examples
ABSOLUTLEY NO CREDIT CARDS! Much better to say "Sorry but we only take cash to keep our prices as low as possible".
NOT RESPONSIBLE FOR LOST OR STOLEN ITEMS! Try saying "Please take care of your personal items. We are very busy and so don't always see the odd thief".
BATHROOMS FOR PATRONS ONLY! It would be very inviting if you could say "Our lovely customers are free to use our spotless restrooms. Visitors should use the public facilities 100 metres west from here"
Yes, polite signage takes more space. But hasn't every business owner got space to be polite and nice to everyone on their premises spending money going into their bank account?
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"the customer channels team within the contact centre environment developed a step by step process for the case management proposition and the ongoing communication strategy to support new Vulnerable criteria enhancements and customer service."
It comes from EQC as a process to look after vulnerable home owners.
A 14 year old student has calculated the US government could save $136million a year by changing font from Times New Roman to Garamond. Why? Because Garamond uses less ink.
And printing ink is the most expensive consumer liquid on earth – or so I'm told.
This is also true of heavily industrialised nations. There are 7.4 million businesses in the USA. Average number of employees is 16. I remember reading similar stats for Germany. The world is full of us! Rejoice!
Click here to ask me any question about business and I'll do my best to answer it. If I don't know the answer, I'm sure I can point you to someone who can.
Try me – there's no cost by the way. Just another complimentary service unique to E3 Business Accountants.