You are a tax advisor in the accounting firm Elite Financial Consultants (EFC). You have been asked to advise on the following client situations for the income year ended 31 March 2023. The clients (and their respective situations) are not connected to one another. 

 

 

1. Annie's Deli

Annie is a sole trader and the owner of a deli in the picturesque town of Queenstown, New Zealand. As a diligent businesswoman, Annie carefully manages her trading stock, which includes a variety of fresh and cured meats, breads, specialty condiments and cheeses. However, on her birthday in January 2023, Annie decided to share some of her goods in a celebration with her close friends and family at home.

Annie used meats, breads and cheeses from her deli's trading stock to create the assortment of dishes featuring the finest ingredients available. She carefully recorded what was taken from her deli but is unsure how to treat this stock for tax purposes.

The trading stock used for the party was purchased during the income year.

Required: Explain the income tax consequences of Annie using the trading stock for her birthday celebration during the income year ended 31 March 2023. Provide one (1) relevant legislative reference.

2. Naveed's Gardening Service

Naveed operates as a sole trader under the business name Naveed's Gardening Services, providing landscaping and gardening services. However, he admits to not paying much attention to the financial and tax responsibilities of his business as he considers himself more of a hands-on person than an administrative one. Naveed filed his income tax return for the year ended 31 March 2022 on time, in June 2022. His income tax assessment for the 2022 income year resulted in terminal tax payable of $4,500, with payment due on or before 7 February 2023.

Naveed forgot to pay by the due date but then paid the full amount of $4,500 on 15 February 2023. This was the second year in a row that Naveed failed to pay terminal tax on or before the due date.

Required: Calculate the total late payment penalties in relation to Naveed's terminal tax payment for the year ended 31 March 2022. Show all workings and provide dates where applicable. Ignore the impact of use of money interest, if any

Use Income Tax Act 2007 as reference https://www.legislation.govt.nz/act/public/2007/0097/latest/DLM1512301.html