Hugh's Views
MYOB Approved Partner
IRD & ATO Swap Information
Tax Holiday for Returning Kiwis
Paid Parental Leave
Tax Traps - Negotiating with the IRD
IRD Audits
Your Staff are Vital to your Business - Treat them So
Did You Know? - PAYE Tax Tip
What is Important for Customers
Accounting For Family Trusts
Timesaving Tips
The Backbone of the Office - Meet ourAdmin Team
Disclaimer
HUGH'S VIEWS
Spring has sprung, the daffodils are appearing in the garden and the next thing there will be lambs frolicking around the paddocks (if they haven't already arrived).
It doesn’t seem very long since we had our winter edition, and we seem to have survived the busiest period of our working year without any crises. While we haven’t managed to turn all our work around in our “ideal” timeframe, we have had very few, if any, telephone calls from clients looking for their financial statements.
A few things have happened in the last weeks that should be of interest to you:
Kiwi Saver
The Government is in the final throes of sorting this out which has changed at various times since the first introduction of the Bill. While we don’t know for certain until we see the printed Act, it would appear that there may be some opportunities for employers to provide their employees with a tax-free supplement to their voluntary savings should they wish to use the facility. Once we have a clear picture of the proposed Kiwi Saver scheme we will be advising you “what’s in it for you”.
IRD Audits
Unfortunately one of our clients has been subject to a “full audit” over the past few weeks. This is a timely reminder that you must take care when preparing the information, particularly if the responsibility for the coding/analyzing of transactions lies with the client. This is particularly relevant to BankLink clients. Paul Checketts has recently attended a Continuing Education Programme on IRD Audits and has provided a précis of some of the things that you need to take care with.
Succession Planning
A small but we believe successful presentation was completed in July and I have been involved in three significant projects during July/August putting some of our theories into practice. I believe those who have been involved in the process have received significant benefits and we will see more arise as our clients complete their “homework” associated with the process.
Job Costing
Our next client presentation will be by George Flannery and will be on using the MYOB Small Business accounting package for job costing. We have a number of clients for whom this package is ideal and we are going to introduce the “concept” in general before dealing with their individual situation. If you think that job costing may be of assistance to you then let us know promptly so we can add your name to the list of participants.
By the time you get this I will be away on three weeks annual leave. If you need any assistance please contact Paul Checketts - 448 8060 -who will ensure that your requirements are looked after.
Hugh
MYOB APPROVED PARTNER
Here at Business & Accounting Solutions we are an Approved Partner of MYOB. If you require any support we are a certified provider of support in the MYOB software range and can assist you with your needs.
IRD & AUSTRALIAN TAX OFFICE SWAP INFORMATION
Expect the Inland Revenue Department to know everything about your business or investing activities in Australia. The NZ Inland Revenue Department and the Australian Tax Office have full access to each other’s records.
TAX HOLIDAY FOR RETURNING KIWIS
Beware the 10 year rule. Immigrants and New Zealanders who have been away from the country for more than 10 years, may be exempt from income tax on income derived from overseas.
The exemption applies for four years plus the month in which they establish a permanent place of abode here. Anyone claiming this tax break is not entitled to Family Support.
Check with us for full details and conditions.
PAID PARENTAL LEAVE EXTENDS TO SELF EMPLOYED
A recent law change means self-employed people can now apply for a maximum 14 weeks paid parental leave upon the birth of their child or where they adopt a child under the age of six.
Payments will equal the self-employed parent’s average weekly earnings over the last six or twelve months, up to a maximum of $357.50 a week before tax.
Self-employed parents who take up paid parental leave must stop working while they receive payments, but will be able to continue to oversee their business to some degree.
The law change applies to babies born or adopted after 1 July 2006.
Further information and application forms for self-employed parental leave are available from these websites www.ird.govt.nz or www.ers.dol.govt.nz/parentalleave
TAX TRAPS - Negotiating with the IRD
Occassionally clients who have trouble paying their tax try to negotiate their own payment arrangements with IRD instead of discussing it with us. Recently, one of them (figures are fictitious) had income of $100,000 a year and agreed to pay $4000 a month to clear tax arrears. IRD expected him to also maintain normal provisional tax payments, which were about $10,000 every four months, but he did not understand this.
He stuck to his agreement and maintained the payments, while further arrears built up in the form of provisional tax. These payments were not subject to the arrangement. Penalties and interest accrued on them. When asked to relent because the taxpayer had not understood, the IRD merely extended the arrangement and agreed to reduced instalments. The penalties stood.
When negotiating an instalment arrangement, clients must reduce the amount they think they can pay, to allow for their provisional tax as it falls due plus any terminal (wash-up for last year) tax yet to be paid.
IRD will cancel penalties if they accept an arrangement to pay off tax in instalments. Penalties are cancelled from the time the arrangement is accepted so penalties in arrears stand.
The department also charges interest at 13.08 percent on the outstanding balance of tax owing, including penalties. Interest continues to be calculated on the reducing balance until all arrears are fully paid
IRD AUDITS
IRD audits help to keep business taxpayers compliant and generate additional revenue for the government in the form of unpaid taxes, use of money interest, and shortfall penalties imposed.
There were 11,000 IRD audits undertaken in NZ for the year ended 30 June 2006
There has been a change in focus to business wide audits, not one particular tax type.
IRD have become smarter with their audit selection criteria and in their conduct of an audit i.e. IRD staff are becoming well-trained in audit and investigation techniques.
IRD nationally are targeting the following risk areas – real property transactions; tax evasion and income suppression; tax avoidance; technical non-compliance.
In the Central Otago region risk areas identified by the IRD include land transactions and labourers in the horticulture and viticulture industries.
Here are a few tips to help manage the risk an IRD audit could pose to your business:
- Always conduct your business dealings properly and professionally
- File your returns and pay your taxes on time and communicate early if you are unable to meet the IRD deadlines.
- Keep proper records to substantiate all your business transactions
- Analyse/code all payments accurately (check with us if you are unsure).
- Do private use adjustments correctly and fairly
In the event you are faced with an IRD audit, contact us before you do anything else, we can help manage the process to obtain the best possible outcome for you.
YOUR STAFF ARE VITAL TO YOUR BUSINESS - TREAT THEM SO!
Without your staff would you have a business?
If the answer is ‘no’ your staff obviously play a huge role in your business. In fact they are worth their weight in gold. And part-time and casual staff are just as important as full-timers. They need to be treated as part of the team.
There’s a big job involved here. To be effective in business you must be able to properly manage people. Communication, listening to your team, showing them that you care and understand their problems, explaining where the business is and where it’s going – these are essential leadership ingredients.
And bear in mind, managing people takes time. Don’t assume a half-hearted approach by squeezing staff issues into a weekly specified time slot.
Think about what motivates people at work. Numerous surveys indicate salary is not the most important thing from an employee’s point of view. More important are:.
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Full appreciation of a job well done
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Feeling ‘in’ on things (in other words being communicated with and listened to)
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Interesting work
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Job security
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Wages at a proper level
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Sympathetic help on personal problems
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Promotion and growth
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Personal loyalty to the worker
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Good working conditions
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Tactful discipline
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Keeping them informed.
Many of these points, for example, communication, are especially important for part-time workers. They may not be there to attend meetings, or hear the latest news, but that shouldn’t prevent them from being informed.
Good, open communication is critical for a well-run business. If necessary find other ways to communicate with staff who are not at work all the time.
Doing interesting work is another bugbear of part-timers. Rather than being left with the duller aspects of the job, part-timers should feel just as empowered as full-timers to take on more responsibilities. Personal development should be a high priority.
Don’t overlook the valuable work your staff are doing for your business. They deserve your thanks as well as your inspired leadership.
DID YOU KNOW?
A child can be paid up to $43 per week before PAYE is to be taken.
WHAT IS IMPORTANT FOR CUSTOMERS?
According to various surveys it’s not about price. In fact, the price people are prepared to pay is the cost price of the article plus perceived added value, ie, the extra value they feel they are getting from the organisation’s investment in things like staff training, product knowledge and after sales service.
The only time price becomes important is when all the other factors are equal. Here are some other factors which are considered important:
Make yourself covenient - Convenience is hugely important for today’s consumers. Are you in a handy location and is there plenty of car parking nearby? Can you adjust opening hours to better suit customers? Can you put your most highly trained staff on busiest days i.e., weekends?
Be Wecolming & Attentative - Receptionists and retail staff need to greet visitors as soon as they arrive at the business, in a manner that encourages conversation. Don’t give the telephone preference over a waiting customer.
Solve Problems - If you can solve the problem, you’ve saved the customer wasting time looking elsewhere. They’ll pay your price, come back again next time and probably even recommend you to friends. It pays to spend time finding that solution.
What's in it for Me? (WIFFM) - What’s the benefit to a customer of doing business with you? As a small business you may not have the power of a big brand behind you, but you might be unique in other ways. If it’s a benefit to the customer – that’s important. For example, toys to occupy small children can be godsend to harried parents especially when they need time to make a decision.
ACCOUNTING FOR FAMILY TRUSTS
Family Trusts are formed for beneficiaries. Trustees have to account to them. They should never mix their personal transactions with those of the trust.
If you sell a mortgaged family home to your trust, either lend money to it to pay the mortgage or, if you pay it yourself, increase the trust’s debt to you by the amount you have paid. If you do not do this, you will be deemed to have made a gift to the trust of the amount of the mortgage you have paid on its behalf. This gift will be added to your gifting programme, if you have one, and could result in a liability for gift duty.
Most trusts need financial accounts. Accounting for a trust can be time-consuming. Examples include:
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Transfers of money from one investment to another, perhaps through a share broker, without putting the transactions through the trust’s bank account. The trail can be hard to follow.
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A client pays $200 a fortnight into five different trusts, with different amounts apportioned to each and payments varied. The value of the investments has to be confirmed at the end of each year. Often, one of the difficulties is getting clear statements from fund managers.
In the interests of saving accounting fees:
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Keep your trust investments simple.
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At the end of each year, supply us with documents showing the movements in investments during the year and the balance at the end of the year.
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Get your bank to provide up-to-date statements of mortgages
TIMESAVING TIPS
Here are some tips to help you save time:
Write it once - Never rewrite anything. Use the photocopier or your computer, and copy and paste.
Dictating machine - Dictating machines can save a ton of time. Let someone who can type faster than you do the writing for you. Use the machines to delegate jobs to someone whose time costs less than yours. You can send dictation by email so a typist working from home could attend to it.
You seldom make money driving - Unless you drive a taxi, you usually earn a living when you stop driving. Therefore, minimise your travel. Plan your driving and group work into geographical areas. Get people to come to you.
Get rid of pests - Some customers waste your time. An old man was talking to a shop proprietor telling her all sorts of trivia. A customer waited. He turned to the customer and said, “I hope I am not holding you up” and then continued talking. Learn to handle these time wasters.
Interruptions - You have to be accessible. However, you also need to plan your work so there are times when someone will have to take messages for you. Constant interruptions can make your work impossible.
Conclusion - Books have been writtern and seminars are frequently presented on this subject. It's worth learning more. Time saving is an easy way to make more profit.
THE BACKBONE OF THE OFFICE - MEET OUR ADMIN TEAM
From left, Ellen Colligan, Georgie Robertson, Sandra Waitoa
Ellen is our receptionist and is normally the person who will greet you on your arrival at the office. She is responsible for all client maintenance, and the day to day running of the desk, including mail, bankings, company formations, typing, etc. Ellen dabbles in a bit of everything and will get the job done with a smile.
Georgie is our typist, working five mornings a week and she is also there to greet you on arrival at the office. She looks after all our correspondence, forms, questionnaires, mail merges and anything else people require in the word processing department. With 10 years under her belt at the firm, if Georgie doesn’t know how to get it done, no one will.
Sandra is Hugh’s PA, also working five mornings, she looks after Hugh and tells him what he needs to be doing and when. She is also responsible for the creation of our newsletters, administration of our website, invoicing and debtors, and all those “bits and pieces” that need to be done.
DISCLAIMER
Editors note: We don’t claim to know it all, so with that in mind here’s what we’re obliged to say; this newsletter has had input from a variety of sources, people and publications. For all input we are grateful. Grateful and careful. Whenever we can, we do our very best to ensure all the information contained in this newsletter is accurate and timely. If there’s something here you plan to place some considerable reliance on and we haven’t made the implications totally clear to you, get in touch and we’ll clarify it for you.