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View Full Version : OT: define "Business"



csinclair83
21-05-2003, 11:25 AM
i wanna know the true meaning of "business" according to IRD and the government...

because well if u make something and sell..does that mean ur in a business? even if its just a stall on the footpath selling lemonade?
and the IRD would come along asking for tax?

i'm asking because a friend want to not really start a business but advertise that if people wnat their photos printed on good quality photo paper at the best quality possible for a cheap price..also framing and that kinda thing...as my mate has over 300ish photoframes of different kinds that his parents work doesnt want...and he wants to make a bit of money for his OE next year....
but wouldnt that be a "business" like..hes promoting..advertising and ppl are paying him 2 work?...and we'd have ird knocking on our door?

and if it is..what can we do to keep IRD away and that kinda thing?
coz it wont be worth it if he gets taxed half of his money away...when hes tryin 2 save for his OE next year...

honeylaser
21-05-2003, 11:44 AM
From ird.govt.nz (http://www.ird.govt.nz/business-info/faqs/) FAQ:

When does my hobby become a business?

You are probably operating a business if you charge other people for the goods/services you produce, you supply your goods/services on a regular basis and you intend to make a profit from supplying your goods/services.

Do I have to pay tax (GST)?

Generally, if you are conducting a taxable activity that will have an annual income of over $40,000 you will have to register.

This is based on the value of your supplies for this month and the last 11 months and/or whether you expect turnover to exceed $40,000 for this month and the next 11 months.

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So basically, it depends how much he is planning on earning. Still a chance IRD will come knocking on his door though.

Pheonix
21-05-2003, 11:51 AM
Business is any activity that produces an income (no matter how small). Basically, if you more than break-even, you should be declearing it. He won't have to register for GST if his turnover (all income without taking out costs) is less than $50,000 a year. But after taking out expenses such as materials, advertising etc.. , then that is taxed.
Best bet, ring a small accountant firm and ask if you could come in and discuss your liabilities with them. Well worth it. Most will do this first conultation for free.

Billy T
21-05-2003, 11:58 AM
> You are probably operating a business if you charge
> other people for the goods/services you produce, you
> supply your goods/services on a regular basis and you
> intend to make a profit from supplying your
> goods/services.

Seems pretty clear to me that the object of the exercise is to earn money. Clearly he doesn't plan to do this as a favour so IMHO it will be a business and although he doesn't have to register for GST, all earnings are taxable. Since he intends to advertise, as honeylaser said, the IRD may come knocking. If he doesn't keep records, IRD will then assess the tax owing on the basis of their estimate of the income derived.

Cheers

Billy 8-{)

honeylaser
21-05-2003, 12:10 PM
> If he
> doesn't keep records, IRD will then assess the tax
> owing on the basis of their estimate of the income
> derived.

Adding to that, what the IRD sees as a fair amount being deducted for tax may not necessarily be the same as what your friend thinks is fair. Much better to declare all income than to have IRD come knocking on your door. From what I hear it isn't a pleasant experience. Not rubber glove bad, but close enough.

Kame
21-05-2003, 02:30 PM
How about if you register yourself as a charity, and then use this business to support your charity? That way you'll be a non-profitable business supporting your own charity. As for knowing the legal ways to do this, I don't know it. Maybe someone can elaborate more on what I'm saying?

Billy T
21-05-2003, 07:15 PM
Nice try Kame, but that screams out loud "device to defeat the provisions of the act".

Strikes me you cannot be both the generator of the income and the benefactor of the charity at the same time.

Where I come from we call that a rort.:D

Cheers

Billy 8-{) :)