Hugh's Views
Welcome
New Tax Thresholds Introduced
Who Pays When Swine Flu Strikes
Directorship a Serious Matter
Getting Tough in a Tough Economy
Delegate Well & Lighten Your Load
Tap Employee Potential with 5 Core Principles
Tax Calendar
Am I Due a Tax Refund
Late Payment of Employer Monthly Schedules
Motor Vehicle Mileage Rates
Your Help Much Appreciated
Disclaimer
HUGH’S VIEWS
Doesn’t time fly when you’re enjoying yourself? 2009 is 50% gone but we are only starting to get underway. Financial Statements which started trickling out the door at the end of April have now developed into a steady stream which will gather strength over the next two to three months until we break the back of the peak work load.
Thanks to all those of you who have taken on board our efforts to improve the quality of the information we receive from you. It does make a difference when we get everything the first time and we are hoping this will be reflected in most cases by a quicker turn around of your work.
Our efforts to provide some assistance to those who might have been feeling the downturn a bit were not required. In response to the 80 odd invitations we sent to a presentation on doing business in tough economic times we got a response from only four clients. Seems it’s not as tough out there as were are being told. (Surprised I am not)!
That is not to say that business has not and will not continue to fall away over the next 6 to 12 months. While there are signs that we might be on the way back, it is not going to be a quick process and most of us are going to feel some effects of the slowdown. It is a great time to be looking hard at your operations, checking you’re pricing and ensuring your margins are producing the profit they should be.
There a few simple rules to consider and they are repeated elsewhere in this publication.
Many of you will have noticed a new voice on the telephone when you ring. Christine Oliver has joined us to replace Ellen who after five years with us decided to increase the average level of skills in Australia by moving to Melbourne with her partner Jeff. We will miss Ellen but she needed a change for her own development and was last heard to be working as a Personal Assistant to a Chartered Accountant in Melbourne. We are sure that Chris will fill the gap very nicely.
We had just got over Ellen’s departure and Maxine advised that she was intending to return north back to her home territory of Tauranga. Maxine first started with us as an assistant to Brent at Spicers some 6 years ago and since 2007 has been working with us utilising her Accounting Technician skills fully. We wish her well as she heads home. We have welcomed to the team today Karen Owen who joins us at Maxine’s replacement.
Congratulations to Kathryn Ingram who has just received her Diploma in Accounting this week. All that study is starting to pay off for her. Well done.
I have just returned from a conference where I was viewing the worth of a formal association with a group of like minded accountants who are developing skills and resources to assist in the business development and coaching of their clients. I found this to be a really rewarding exercise and we are in the process of evaluating the organisation and their resources as to the benefits which may be available to ourselves and our clients. Watch this space.
Hugh
WELCOME
ONE of our clients travels a great deal. He says the welcome you get when you walk in to a hotel or motel determines whether you go back to it.
He commented that forgetting the customer’s name is nowhere near as bad as failing to make him feel welcome.
NEW TAX THRESHOLDS INTRODUCED
INLAND REVENUE has introduced new tax thresholds. Below are some of the important ones to be aware of.
- The PAYE threshold for compulsory bi-monthly returns is now $500,000 of PAYE
- You can have a deduction for legal costs of a capital nature. This does not mean all non-deductible legal costs are now deductible. For example, the costs of forming a company will remain non tax deductible, as will any private costs.
- The point at which Use of Money Interest will be charged for individuals has gone up from $35,000 of tax to $50,000. This will help some of our clients. However, the $2500 threshold for companies and trusts has not been changed.
- You can do your GST returns six monthly if your total annual sales do not exceed $500,000
- The provisional tax uplift has been reduced. In future, when we have completed your annual accounts, you will pay the same amount of provisional tax as your tax liability for the previous year. Put simply, there will no longer be an extra 5 per cent.
- However, if your income rises in the ensuing year, you could still be caught for Use of Money Interest by exceeding a UOMI threshold.
- The GST registration threshold has gone up to $60,000. You may deregister for GST if you are below this figure. However, if most of your customers are paying GST, you could be better to stay registered so you can continue to claim GST paid on your expenses.
WHO PAYS WHEN SWINE FLU STRIKES?
Firstly - check your Employment Agreements. But generally:
- If an employer sends an employee home - the employer pays.
- If the employer requires the employee to stay away - the employer pays.
- If an employee phones in and stays home because of illness - sick leave could apply.
- If an employee stays home to look after a sick dependent relative (child) - sick leave could apply
- If an employee imposes self isolation and stays away because of suspected possible infection - sick leave could apply
DIRECTORSHIP A SERIOUS MATTER
COMPANY directors can be sued personally if they have not taken care when the company is borrowing money.
They need to know, at the time they borrow, they could repay the debt, according to the arrangement made. For example, a builder has just had a major customer fail and there is considerable doubt whether he will be paid. If his own business is now shaky and he orders some more materials on credit, he could be personally responsible for the debt.
Company law requires him to know, at the time of placing the order, the goods can be paid for when payment is due and the assets of his business exceed the liabilities. This determines whether his business is solvent.
In the event of trouble, the director could be asked to show why he believed his company was solvent at the time the order was placed.
GETTING TOUGH IN A TOUGH ECONOMY
You don’t have to be beaten because the economy is tough. You just have to get into fighting shape. Here are some exercises that will make you more fit to deal with tough times.
Tighten up your cash flow muscles.
Consider reducing credit periods for customers and if necessary, use all the credit your suppliers give you.
Shed excess inventory.
Excess slow-selling inventory is unwanted fat. Analyse your inventory and put your money in the bank instead of on shelves.
Measure your margins.
If your product is selling fast, you may be under priced. Check to see if you are priced appropriately. Also use this opportunity to negotiate with suppliers for better prices.
Monitor overhead costs
.
See if there are any areas that warrant cutting back and also check your standing orders and direct debits. You may be paying for things you no longer need.
Promote, promote, promote.
It seems the easiest and fastest way to reduce expenses, but cutting your marketing in tough times may not be wise.
Don’t take the easy way out.
The easiest ways to cut costs can end up costing you big time in the long run. Be creative in how you reduce your expenses, such as reducing employees to 4 day work weeks instead of layoffs. Offer employees a percentage of any savings they can create in purchasing and materials etc.
Research shows that people remember those who keep advertising through a recession, even if they don’t patronize the business immediately. And importantly, keep these principles in mind even when trading conditions improve.
DELEGATE WELL & LIGHTEN YOUR LOAD
Four people named Everybody, Somebody, Anybody and Nobody were asked to do an important job. Everybody was sure that Somebody would do it. Anybody could have done it, but Nobody did it. Somebody got angry about that because it was Everybody’s job.
Everybody thought that Anybody could do it, but Nobody realized that Everybody wouldn’t do it. It ended up that Everybody blamed Somebody when Nobody did what Anybody could have done!”
This is a sad but true story of many companies. In business today, it is critical to focus sharply, plan carefully, and assign definite responsibilities.
TAP EMPLOYEE POTENTIAL WITH 5 CORE PRINCIPLES
Motivated employees run great businesses. Consider these principles for empowering your team.
- Permission consider and clearly define the types of decisions your team can make and problems they can resolve.
- Protection welcome an environment where calculated risk is encouraged and mistakes are considered and treated as learning experiences. This increases innovation.
- Purpose knowing and communicating your company’s mission is critical to motivating your team. It guides them through decisions, challenges and problem resolution.
- Proficiency make sure your team members “own” their careers and encourage them to identify areas of interest and needs for training.
- Pat on the back recognition and praise are key to making people want to do more. Do not leave praise for just team meetings or annual events. Pass along positive email and customer feedback. Reward good work with good words.
TAX CALENDAR
July 28 - 3rd instalment 2009 - Provisional Tax - (June balance date)
August 28 - 1st instalment 2010 - Provisional Tax - (March balance date)
AM I DUE A TAX REFUND
Over the last few months we have had a small selection of our clients get caught up in Tax Refund schemes. You all will have seen these advertisements on the television, in shopping malls, newspapers etc.
While the concept is good, for those individuals who were salary/wage earners and who have nothing further to declare, it is not appropriate for our clients for whom we have filed returns.
We have had a client that has gone down this path and had their 2009 Provisional Tax refunded. The tax group concerned wanted to take their commissioned fee out of the refund as well.
If you think you might have a refund then let us know and we can quickly check. It is extremely unlikely if we have filed a return.
LATE PAYMENT OF EMPLOYER MONTHLY SCHEDULE AMOUNTS
A new graduated penalty has been introduced that applies when an employer has filed an employer monthly schedule but not paid the associated tax and replaces the shortfall penalties that might apply in these circumstances.
Inland Revenue will contact the employer and, if payment or an arrangement for payment is not made, a 10 percent penalty will be imposed. This reduces to 5 percent if the employer pays the outstanding amount within one month of the penalty being imposed.
If the payment is not made, the process repeats itself - that is, another 10 percent penalty is imposed, which reduces to 5 percent if payment is made or an installment arrangement is entered into within one month.
The penalty is capped at 150 percent - the rate of the shortfall penalty for evasion.
MOTOR VEHICLE MILEAGE RATES
Inland Revenue recently increased the approved motor vehicle mileage rate to 70¢ per kilometre. The old rate for many years was 62¢ per kilometre.
The new 70¢ rate is available to reimburse employees who use their private vehicles for business running. Self employed and shareholder employees who use their private vehicles for business running, can also be reimbursed using this rate, although there are limitations set by IRD.
Inland Revenue also accept that reputable published mileage rates by NZ Automobile Association and the like can be used for reimbursing private vehicle running.
Contact us if you would like to discuss the best treatment for your business.
YOUR HELP MUCH APPRECIATED.
We are currently getting well through our years compliance work and believe we will have capacity to complete additional work. In order for this to happen we are looking to expand our current client base.
We only want quality clients who have a positive outlook, so we figure the best place to start with is you?our current clients whom we get along well with and have developed good working relationships. For every successful client referral you send our way or put us in touch with, we will take $100 off your next bill and send you a complimentary bottle of wine.
DISCLAIMER
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.