Hastings Accountants and Business Advisors in Hawkes Bay - Accountancy + Business Advice Centre - Newsletter

Trades, Service and Professionals – Setting Your Charge-out Rates

Tue, 03 May 2016 23:00:00 GMT

In fact it's probably one of the most difficult areas of business. You have to be careful not to underprice as this will reduce profits, but at the same time, overpricing could turn customers away.

Setting charge out rates is just as important as marketing and delivering a fantastic service. You can do these two things excellently and then undo the lot by setting charge out rates too low or too high. This means pricing is a complex strategy that should be carefully undertaken and reviewed.

Save Money - Get Your Rates Back

Mon, 11 Apr 2016 23:00:00 GMT

Finding the money to pay your rates is hard enough as it is, but when you're in business and you have a bad year it's even harder, so did you know you can get a rates rebate if your income drops below a minimum threshold? The threshold level varies depending on your income and situation, but for example, a household with an income of $30,000 and one or two kids could get a $600 rates rebate. And then, even better, you can take the kids to Splash Planet and get in cheaply with a copy of your rates bill!

For further details click here , or email Nick for help if you're not sure what to do next.

ACC Costs and Fatal Benefits

Mon, 04 Apr 2016 23:00:00 GMT

A spouse is entitled to 60% of the 80% ACC entitlement for 5 years whilst children (via the spouse) will receive the benefits until they turn 18 at 20% each up to 40% in total. Take, for example, an earner on $80,000 income who dies an accidental death with a spouse and two children of 4 and 7. Collectively they will receive benefits of $1,049,600. If, on the other hand, the earner had reduced his ACC income to $22,464 the benefits would reduce to $368,410, a very substantial reduction indeed!

So, if you want to reduce your ACC premiums by switching to ACC Cover Plus Extra, you have three options:

Accountancy + Business Advise Centre

7 ways you can use your annual financials to improve your business

Mon, 29 Feb 2016 22:00:00 GMT

The availability of your annual financials is a wonderful opportunity to review your business performance. You can discover how to improve your business as well as refresh your enthusiasm and drive in the business.

Click here to read seven ways you can use your annual financials to improve your business.

Interim accounts - a vital business tool

Mon, 22 Feb 2016 22:00:00 GMT

GST

Find out here what having interim accounts to hand means for you

Can't pay your taxes?

Tue, 09 Feb 2016 22:00:00 GMT

These are the four most common courses of action you can take if you can't pay your tax:

Temporary Bank Facilities
This needs a good track record, sufficient security to secure the borrowings and good systems i.e. to be able to supply up-to-date and interim financials. This works best if you already have a borrowing facility with everything already in place. However, this strategy has a high failure rate because bank managers are not usually impressed by urgent last-minute requests for finance, which normally indicates a lack of planning and forethought!

Arrangements with the IRD
If the arrangements will be for less than two years the IRD are reasonably accommodating in agreeing arrangements to pay in instalments unless you have a very bad track record of tax paid late or failing to adhere to previous arrangements. Even here it's possible to agree to a temporary arrangement which, if you stick to it, can be turned into a permanent one.

The advantage of an arrangement is that the IRD only charge you the late payment interest which isn't too bad (currently 9 percent odd) and not the nasty 1 percent and 4 percent penalties. The downside is that it won't be long until the next tax payment date comes around so that it all concertinas together before you've paid off the instalments for the previous tax bill.

Tax Pooling
Tax pooling is a service allowed by the IRD that allows tax payers to reduce their exposure to interest and penalty costs - what a surprise, considering they're only too keen normally to pile them on!

As the name suggests taxpayers place their provisional tax payments in a pool account held at the IRD. Amounts in this pool are held on trust by an independent trustee and the company that operates the tax pool is called a Tax Pool Intermediary. When it's time to file their tax return, taxpayers who have made payments into the tax pool transfer what they need for themselves from their tax pool deposits and any surplus amounts are then able to be traded with other tax payers for improved interest returns. Other taxpayers acquire those credits because buying someone else's surplus provisional tax extinguishes their liability to the IRD and does this at a lower cost than the IRD's interest rates.

For those who can't pay their tax, tax pooling has two advantages, firstly the interest charged by the tax pool intermediary is less than that charged by the IRD, and secondly no penalties are charged because the tax is treated as being paid on the date it fell due.

So basically, using tax pooling, in return for a very reasonable rate of interest you can pay your tax late without incurring any penalties. How good is that?

Tax Remission

If the amount you owe to the IRD has grown to a level that is out of control and you possess little or no assets, it is possible to get the IRD to write the tax off as uncollectible. It's not easy to get the IRD interested and it's a long process with no guarantee of a successful outcome, but if successful it sure beats bankruptcy and paying off the tax for the rest of your life!

Deeper Issues

Often I find the problem is not being able to pay the tax, it's the fact that the tax wasn't anticipated or that nothing has been saved towards it. This could mean you don't listen to your accountant or perhaps you need a new one!

If you struggle to pay your tax, seek advice, there may be a solution, we are more than happy to discuss your options with you, and share our expert knowledge.

Protecting your business name

Mon, 01 Feb 2016 22:00:00 GMT

o get some advice (we'll be happy to help) and take action today!

How to succeed with cash flow forecasts

Mon, 25 Jan 2016 22:00:00 GMT

Preparing an annual cash flow forecast can tell you a lot about your business. It can warn you with plenty of time to spare that you're not going to have enough cash to survive the next year without getting additional working capital - which is vitally important to know. Or it could be the wake-up call you need to make some changes in your business. You might need to make a tweak or two, like increasing prices or shedding ineffective staff, or you could discover something more serious, such as you're in a twilight business and it's time to move on.

8 Vital Things You Need To Know about Your Business – Each and Every Month

Wed, 09 Dec 2015 22:00:00 GMT

Just how much do you know about your business? No, not about what you sell, or how you make or deliver your products and services, I mean the really important things that determine whether you're going to make it through to retirement or maybe even successfully selling your business.

These are my top eight favourite things each and every one of us business owners should know about our businesses.

Simple Business Systems

Sun, 06 Dec 2015 22:00:00 GMT

Using systems makes a huge difference to the way a business operate, read more here.

Tax Pooling – Improve Your Cash Flow by Paying Your Tax Bill

Mon, 30 Nov 2015 22:00:00 GMT

Now you're probably thinking that the title of this article is a typing error but yes, you most certainly can improve your cash flow by paying your tax, even before it falls due, by using Tax Pooling.

Importance of online security

Mon, 23 Nov 2015 22:00:00 GMT

For some years now we have been told repeatedly that we must get online for just about everything, whether for software, apps, shopping, communication, data storage – you name it – we must do it online! It's worrying then when there are regular headlines about the latest hack into someone's data or whether someone has seen someone else's data online accidentally. I'm still getting emails from scammers using clients' Yahoo email addresses and emails even from someone using my email address which is very puzzling! We read about people who have committed suicide because they have been exposed on dating sites. Apparently Russian submarines have been sniffing around undersea Internet cables practicing cutting them if relations with the West deteriorate further. Think also on the debates about the ownership of data online. With certain accounting software business owners have found they don't own their own data – how crazy is that? Read more here and what you can do about online security.

Deductibility of overseas business travel

Tue, 17 Nov 2015 22:00:00 GMT

A question that is often asked is to what extent can expenses incurred when travelling overseas on "business" be deducted.

Expenditure on entertainment encompasses expenditure on:

If you have recently traveled overseas on business or are looking to travel overseas on business, care should be taken when determining what portion of expenditure will be deductible for tax. Get in touch with the A+BAC team for any questions on the deductibility of overseas business travel.

Saving Money by Avoiding IRD Interest and Penalties

Tue, 17 Nov 2015 22:00:00 GMT

Many business owners are still having difficulty working out when and how to pay the IRD on time. In consequence, the IRD have issued a useful reminder of the rules for the remaining payment types. The changes to the rules have been designed to save the IRD money but don't make it any easier for many business owners to pay what they owe unless of course they have embraced modern technology!

The SPS 14/01 Tax payments - when received in time sets out the rules for payments accepted as being made in time.

These are the following rules for the various payment types:

Payments that fall on a holiday or weekend

The IRD accept a payment to have arrived on time if it arrives or is credited before the close of business the next working day after a holiday or weekend.

If you have any questions about these rules around paying the IRD on time please get in touch.

Avoid tax evasion

Sat, 14 Nov 2015 22:00:00 GMT

Tax avoidance and tax evasion are technical terms, but it helps to know the difference.

Tax avoidance is working out a scheme which reduces the tax you pay. Some schemes are acceptable and others aren't. The IRD uses a test: "Was the scheme something which would have been contemplated by Parliament when it made the law?"

The department issues statements from time to time as a guide and the results of court cases also help.

A couple of examples:

Some people, when moving home, want to keep their old home as a rental. If they borrow money to buy the new house, the interest on the borrowed money is not tax deductible. You can get around this by selling the old home to an LTC (Look-through company), borrowing as much as the value of the house will stand and then using the money left over, after you have paid off your existing mortgage, to buy your new home.

All the interest on the mortgage over your old home becomes tax deductible. If the company makes a loss, you can claim this in your tax return.

What you can't do is get an LTC to buy the home you're going to live in, pay the company a fair rent and claim the loss. If you try it and get found out, you'll not only have to pay back the tax but also you'll face harsh penalties.

Both schemes, however, can be described as "avoidance" and both are legal. But the second scheme is an example of avoidance which can be overturned by the Commissioner. They are avoidance because nothing is being hidden from the IRD.

Tax evasion is hiding income or creating artificial expenditure or similar acts, which are dishonest and therefore illegal. Get caught and you could go to gaol.

What happens if we don't know if a scheme is avoidance and therefore can't advise you?

We can help you weigh up the risks and then you can choose whether you're willing to take them and face the consequences if you're caught. Normally, as long as what you're doing is not evasion, the IRD has between four and five years to challenge you, depending on when you put in your tax return.

As each year goes over this time limit, it becomes what is termed "statute barred". The IRD has to accept your tax return as being correct.

ACC and Rental Income

Wed, 11 Nov 2015 22:00:00 GMT

The ACC have discovered a lucrative way of extracting money from more of us. They have now decided that if you have a rental property you should pay ACC on the income unless you use a rental agent. This would seem crazy because who relies on rental income as a main source of income and therefore would need this replaced by income from ACC? They have issued a very detailed analysis as to whether a property investor is self-employed and has exercised mental or physical effort. The long and short of it is that property investors are receiving ACC bills going back several years which can be quite painful. Looking at the mess some clients get into not having a rental agent this would seem to me to be a clear argument for utilising a decent rental agent!

If you have any questions on ACC and your rental property, get in touch with A+BAC today.

Want to find out more about our specialist ACC and administration service, just click here.

Specialise to succeed

Wed, 11 Nov 2015 22:00:00 GMT

Being a specialist gives you an edge. You'll be offering things few other people do.

You don't have to be a doctor to become a specialist. A cleaning contractor could specialise in getting rid of asbestos. A painter could specialise in textured coatings.

If you want to break out of the rat race, look for a specialty and make sure there's a demand. Look especially for something others don't want to do, or that others are doing poorly. It could be as simple as upping your customer services levels.

If you're an expert, the job might not be hard for you, and you can charge a premium for your expertise.

Don’t be timid – negotiate with your bank

Tue, 10 Nov 2015 22:00:00 GMT

Here's a story about a client who's on a modest salary.

He was paying interest on his mortgage at 6.2% and noticed he could borrow from the same bank at 4.9%. As he had enough equity in his home, he went to the bank and asked if he could get another mortgage at 4.9% so he could repay some of his 6.2% mortgage. He negotiated the following:

He did very well but he could have done even better. When he negotiated the original mortgage he might have been able to get an agreement to be able to repay a bigger lump sum, say 10%. He'll do that next time.

If you would like advice on how you can win with negotiations with your bank, get in touch today.

Making Accounts and Tax Returns Easy

Tue, 10 Nov 2015 22:00:00 GMT

Maximise your tax deductions on interest on borrowed funds

Mon, 09 Nov 2015 22:00:00 GMT

Are you in business? Do you have rental properties? Increasing your business borrowings by restructuring your finances can have its advantages. This video will show you how to maximise your tax deductions on interest on borrowed funds and steps you can take to achieve this.

Watch the maximise your tax deductions on interest on borrowed funds video here.

Beware a sudden surge of income from currency fluctuations

Mon, 09 Nov 2015 22:00:00 GMT

The sudden drop in the New Zealand dollar will increase the value of money held in overseas bank accounts or overseas fixed interest investments.

Most investors are what is termed a "cash basis person". This is someone (including a company or trust) who, roughly speaking, doesn't have more than a million dollars of money owing to them and by them, in total. You add the two together. There are other conditions but I'm are leaving them out to make this article readable.

Cash basis person

A cash basis person pays tax on their income received. It takes in currency gains only when the investment matures or is repaid. Larger investors have to also include income earned but not received by balance date (31 March for most of us) and currency gains made each year regardless of whether the investment has been repaid.

A currency surge affects income and if it is big, like $US, the impact on income can also be big. This can have a significant effect on the amount of provisional tax you should be paying. If your personal year-end tax bill, which is calculated on all your income, and called Residual Income Tax (RIT), climbs over $50,000, you'll be socked for backdated interest at 9.21%. RIT is what's left after deducting tax taken off at source. It's worse for companies and trusts. The interest kicks in if the RIT goes over $2,500. Therefore, if you think you may exceed either of these RIT thresholds, you should pay some more provisional tax, now.

Non cash basis person

There's another rule to catch you.

Look at the sum of money owing to you and by you, again, in total. Calculate income calculated as a non cash basis person and deduct income calculated as a cash basis person. Call this total A. Now take expenditure (like interest expense and bank fees relating to a mortgage) calculated as a cash basis person and deduct expenditure calculated as a non cash basis person. Call this total B. Add A and B together and if the figure exceeds $40,000 you are now a non cash basis person. You have to include in your tax return your income earned but not received and the value of currency gains on your investments. You don't get taxed twice, but you could be paying tax on some of your income a year earlier than expected. If the amount is big enough you could exceed those RIT figures mentioned above and get caught for interest.

Shares in foreign countries

What about shares in foreign countries? This has nothing to do with being a cash basis person or otherwise. A different formula is used to calculate income from foreign shareholdings (except most Australian shares) and this may not be affected by currency fluctuations to the same extent as fixed interest investments. The dividends from most Australian shares, when converted to $NZ may be higher than last year to the extent our exchange rate has fallen relative to the $A.

We recommend monitoring your investments right through to the end of the year in case the $NZ slips further. For any questions on the impact of the $NZ get in touch today.

KiwiSaver Questions in New Zealand Answered

Mon, 26 Oct 2015 22:00:00 GMT

Watch this video on KiwiSaver as we answer some of your more common questions: Why is it important to make my contributions by 30 June each year? Should I have a KiwiSaver account if I have a mortgage to pay? What if I don't start my KiwiSaver until I am older?

Retirement – Relaxing Golden Years or a Frightening Prospect?

Mon, 19 Oct 2015 22:00:00 GMT

Back in the heady days of the booming eighties it was not untypical to hear people talking about retiring in their fifties. What with the global recession, easy credit and uncertainty in the property and share markets it's more a case of whether we can ever retire, especially with us all living longer these days. So how might you survive in retirement?

Avoid penalties by paying your tax with the IRD

Sun, 18 Oct 2015 22:00:00 GMT

Watch this short video on why it is important to pay your IRD bill on time and ways to avoid nasty penalties.

Click below.

Income Tax – Getting it Right

Mon, 05 Oct 2015 22:00:00 GMT

"There are only two certainties in life – death and taxes!". Although it is difficult to tamper with the sand flowing though the hour-glass of life, good habits can slow its pace. Good taxation planning can ensure that taxes can be managed so there are no nasty surprises resulting in urgent phone calls to the bank manager a few days before due date or suffering unpleasant IRD penalties.

Here's a few ideas

How to avoid an IRD audit

Mon, 28 Sep 2015 23:00:00 GMT

These are the most common ways you can be selected for an audit and what you can do about it (or not as the case may be!).

What to do when negativity catches you unawares

Mon, 14 Sep 2015 23:00:00 GMT

We all have an Achilles heel. Sadly, negativity can take us unawares. Negativity is productivity cancer. Heavy words but, in truth, it can hugely hinder success.

It saps your energy and the team's. It's deadweight in all your dealings with customers. And if you never want to have a great idea again, negativity's the way to do it. But by being mindful of negative thoughts, we can change our thinking and prevent the effect it has on how we operate.

Here are some of the biggest hindrances to our thought patterns.

5 benefits of cloud accounting

Mon, 24 Aug 2015 23:00:00 GMT

Cloud accounting has been around for quite a while now, but even still, the idea of taking our data to the cloud can be a little confronting for some. With these technological enhancements, there's never been a better time to understand the opportunities to optimise and grow your business. If you've been meaning to brush up on the great benefits, this one's for you.

1. Access anywhere, any time

With cloud accounting solutions, you don't have to be tied to the one desktop computer (out the back of the store!). For example, MYOB Essentials , our web-browser based accounting solution, you can log in anywhere you've got a web browser. With our hybrid model AccountRight, you can you can get the power of the desktop and convenience of the web; install AccountRight on any desktop and sync up with your data from the web. You can even use your smart phone with MYOB OnTheGo to get the critical information you need on iOS and Android from both Essentials and AccountRight.

Click here to read 4 more tips on cloud accounting

How to cope with business competition

Mon, 17 Aug 2015 23:00:00 GMT

In the area of business competition, there's one thing I've learnt over the 32 years I've been at the coalface of advising SMEs and that is, no matter how many other competitors there are in your line of business, you can still be successful if you get your core business activities working the right way.

The best example for that locally are cafés, which are springing up all over the place. Some are busy all the time, some are deserted. Yes, location and being on the sunny side of the street are both important, but there's a lot more to it than that, especially when the deserted ones are in good locations!

So does that mean that you can ignore the competition and carry on? A lucky, super-successful few can - maybe - but not the majority of us. Not only can we learn many things from our competitors, but in addition, nothing stays the same in business for very long so it's vital to know what's happening out there. Read some great tips here for coping with the competition.

7 tips for keeping your accounting organised

Mon, 10 Aug 2015 23:00:00 GMT

When it comes to running your own business, keeping your accounting in-order must be an achievable goal. That said, there are times where a little lack of discipline can cause some headaches down the track. Rather than getting yourself in a bind later, let's have a look at some simple steps you can take to help keep your accounting organised.

1. Structure your bank accounts

Mixing up business and private transactions in your bank accounts is a recipe for disaster. Always use separate business bank accounts for your business transactions; your private bank accounts should be kept wholly for private transactions. The cost of business bank accounts these days is very low, and there is no excuse for not having a business bank account or accounts. Get in the habit of making regular transfers of drawings from your business to your private bank account.

2. Avoid cash, where possible

It's best not to use cash for your business transactions, but if you use it in an emergency, then reimburse yourself using a suitable expense claim (which analyses the expenses between expense categories) so that again, all business transactions are recorded and the GST is safely captured.

Click here for 5 more tips to get on top of your accounting.

Saving money with vehicle financing

Sun, 09 Aug 2015 23:00:00 GMT

It's tempting to put off replacing your work vehicle but there comes a point when reliability and maintenance become a nuisance and expensive which means the depreciation suffered on a newer model look more palatable. I don't know about you but I think depreciation is downright nasty and more often than not, the most overlooked motoring cost. I recently met a Holden V8 owner who had paid $65K not quite 4 years ago who was complaining that his car was now worth under $20K – the deprecation had cost him 60c per km! Read more here

Can you take a holiday on the IRD?

Sun, 26 Jul 2015 23:00:00 GMT

The key to success here is the purpose and motive for your trip. If the primary purpose of your trip is for business, and any holiday aspect incidental, then you would be able to claim 100% of the cost of the trip (providing you paid for the accommodation, food and any activity costs yourself on the non-business days). If, on the other hand, there are two purposes for the trip, business and a holiday, then you would need to apportion the cost of the airfares/hire car etc.

A couple of examples will help you understand the rules:

Example 1 - Two Purposes
Gertrude owns a transport business. In December last year she went to Europe to visit her parents on their 50th wedding anniversary and to negotiate contracts for her business. She was overseas for 42 days, and spent 11 days on business.

Gertrude would have gone to visit her parents regardless of whether she went over for business. However, Gertrude needed to go overseas at some stage during the year for business. Before she left, Gertrude contacted her business contacts overseas and arranged to meet them.

Gertrude travelled overseas for two different purposes. In her income tax return, Gertrude claimed a deduction of 11/42 of the cost of the airfare, and the cost of accommodation and meals she spent for days while on business.

The IRD would accept the deduction because in the circumstances it is an acceptable method of apportioning the expenditure. It is clear that Gertrude travelled overseas for two reasons.

Example 2 - Business Purpose Only
Fred owns a tin can store. He was running short of stock so he went to Australia to buy some rubbish cans. While he was overseas, Fred took the opportunity to spend a couple of days with his Aussie mate Bruce.

Fred spent a total of three days in Australia, two days on holiday and one day on business. In Fred's tax return he claimed as a deduction the total cost of the airfare, and the cost of the accommodation and meals for the day he spent on business.

In Fred's situation the IRD would allow the entire deduction. The holiday aspect of the trip is incidental to the main purpose of travelling overseas for business. Fred only visited Bruce because he was over there for business and took the opportunity to see him.

There is a third potential purpose , where the primary purpose of the trip is a holiday and the work aspect is incidental. Here, there would be no deduction for the airfares/hire car but you could claim for the accommodation and meal costs on the business days. Whilst I doubt many would wish admit to having a private purpose it may well be that the number of days on business versus holiday days is a little too obvious!

Conferences/Seminars . Prior to the recession, why did so many franchises hold their annual conferences in Australia? There is no reason why a conference cannot coincide with a holiday!

Deductible Weekends/Public Holidays . If your travelling spans a weekend, you can treat Saturday and Sunday as business days for tax purposes without ever working on them!

Travelling Days . Days travelling will be business days if you travel by a reasonably direct route.

Families . Your other half and family are more of a problem (unless your spouse is fully involved in the business) so perhaps you now have the excuse you've been looking for to take a relaxing break by yourself to take stock of your life!

So, get planning for your next trip - perhaps you could go further than you first thought!

Eight ACC Traps

Thu, 23 Jul 2015 23:00:00 GMT

At this point the client lost interest, presumably because he thought I would charge him for looking at the bill. Reflecting upon this later, it always surprises me why clients pay ACC bills without question yet always ask about their Income Tax bills. Many ACC bills are incorrect and as ACC is expensive you can end up paying much more than you should.

Here are some common traps to watch out for:

ACC can make a huge difference to your life and prosperity, so it's best to get it right! At A+BAC we are experts on ACC and can guide you through the complexities.

Child Support Changes

Wed, 22 Jul 2015 23:00:00 GMT

Changes

What makes it worse are the uncertainties resulting from the changes to the Child Support scheme which are currently taking place because the Inland Revenue keep changing their mind on the changes and whether to implement the original proposals. It seems that despite spending tens of millions getting ready for the change and having many, many years to think through the changes and improve the scheme, it is still chaos. Take a look at the articles on Stuff (search on Child Support), not just from those parents both payers and recipients who are worse off under the changes but on the Inland Revenue's blowout overspending and backtracking on potential changes.

One of the most annoying changes to the scheme is the new way of checking the amount of Child Support you have to pay. The new calculator is poor and doesn't seem to give you the right answer despite running the figures through the calculator more than once. The Inland Revenue try and say that it is just an estimate of the Child Support payable but to me that is just frustrating beyond reason. When it's your money it's not unreasonable to want to check that you're paying the correct amount so I can only assume those who have designed the calculator are not payers of Child Support!

Unfair

There are still so many aspects of the scheme which are unfair. For recipients the Inland Revenue is lousy at collecting unpaid Child Support and in consequence, it was recently announced that the Inland Revenue are going to write off 1.7 billion of uncollected Child Support debts. Where is the fairness of that both to parents who have not received a cent of Child Support owed and to those payers who have actually paid what they owe?

The Child Support scheme, despite the changes, does still not adequately take into account the income of the recipients. Take, for example, the client of mine whose ex-partner who has moved in with another man who is the sole earner between the two of them. The Child Support my client is paying does not take into account the income of the recipient's partner which is surely nonsense. Nor does it take into account the expenses like school fees which are paid directly by the paying parent which again is nonsense. There are loads of other examples, like the client of mine paying full Child Support despite his daughter attending university and he having paid half the Hall of Residence fees.

Income Definition

One of the biggest proposed changes dropped by the Inland Revenue is the change to the definition of Child Support income. A couple of years ago the Inland Revenue announced that the definition of income for payers of child support would be extended to take into account business income not directly reported on the payer's tax return. This would bring the definition of income for Child Support into line with that used for Working for Families and student allowances but for some reason the definition of income is to stay the same which is direct taxable income reported on one's tax return.

For payers of child support this of course is good news because it means that other business income, perhaps income retained in trusts, will not be taken into account in setting the amount of Child Support income. However this is not necessarily good news because it means that the honest will suffer at the expense of those who arrange their affairs to avoid paying a reasonable level of Child Support.

For recipients of child support this is of course bad news because for many, the Child Support they were likely to receive would have increased substantially, assuming of course that the Inland Revenue would actually be able to collect the child support they owe. Yes they can ask for an Admin Review but that all takes time and can cause stress and hassle.

What to Do Next

Don't assume that the Child Support you are paying or receiving is correct because often it is not. Seek advice from someone who knows how the scheme works and who will not be bullied by the Inland Revenue officials who work for the Child Support section who can be particularly difficult to deal with, to say the least!

Retiring on NZ Super

Tue, 21 Jul 2015 23:00:00 GMT

And these amounts are before tax! Let's look at some other ways that your superannuation may be reduced:

Click for our article on 'How much to save for retirement' , and here for '7 things that can support your retirement' . Enjoy!

Save Money by Getting Your Rates Back

Mon, 20 Jul 2015 23:00:00 GMT

Do you wonder sometimes why your Council rates are so high and what they do with all the money? Especially when you see Council workers (as hard working and motivated as I'm sure they are) using leaf blowers on the Havelock North to Hastings cycle path. Finding the money to pay your rates is hard enough as it is, but when you're in business and you have a bad year it's even harder, so did you know you can get a rates rebate if your income drops below a minimum threshold? The threshold level varies depending on your income and situation, but for example, a household with an income of $30,000 and one or two kids could get a $600 plus rates rebate. And then, even better, you can take the kids to Splash Planet and get in cheaply with a copy of your rates bill! For further details click here or ask Nick for help if you're not sure what to do next.

How to Avoid Losing Out with Working for Families Tax Credits

Mon, 20 Jul 2015 23:00:00 GMT

For families with children, paying all the bills can be tough so it's important to make sure that your Working for Families Tax Credits are maximised. Here are a few tips so you don't lose out.

So be careful to make sure you include all sources of income when working out your family income as there is nothing worse than having to pay back Working for Families that the IRD decide that you are not entitled to!

Like all things connected with the IRD, Working for Families Tax Credits are complicated so seek help to avoid losing out!

5 reasons accountants make great business owners

Mon, 20 Jul 2015 23:00:00 GMT

I have made a career out of helping accountants run better businesses themselves and then helping their clients run better businesses.

In working with those accountants, I've observed that many of them suffer from confidence and self esteem issues and tend to forget that they themselves are running a business. Strange as it seems, I have heard of accountants who pack up their bags and go home with their tails between their legs when a client challenges them by asking 'what would you know about running a business?' Once we work through those issues, however, there are five very good reasons why accountants make great small business owners and why their clients should listen to them to improve their own businesses.

Click here to read more detail on the five reasons.

By Colin Dunn.

Biggest Accounting Scams

Mon, 20 Jul 2015 23:00:00 GMT

Courtesy of Udemy, content originally from here.

Cut those costs and increase cashflow

Sun, 19 Jul 2015 23:00:00 GMT

Trying to reduce your outgoings can be a daunting prospect when you're stressed by falling turnover and running out of cash. Hindsight being such a wonderful thing, you probably realise by now that you should have put the equivalent of three months overheads aside for that rainy day, arranged for the preparation of monthly financials and prepared a budget and cash flow forecast to predict your current predicament but what can you do now to alleviate the pressure?

Follow these steps to alleviate cashflow pressure

All these measure may not apply to you, but don't give in to your natural resistance to change. Implementing just a few of them will no doubt deliver some very pleasant surprises. So start saving now!

Part 2 - Four Vital Things You Need To Know about Your Business

Mon, 29 Jun 2015 23:00:00 GMT

Last week I shared four of my eight vital things you need to know about business each and every month, here are the final four:

Rolling 12 Months Turnover
It's no good keeping an eye on your monthly or weekly sales and comparing these with last year or the year before, nor your sales for the year to date, you need to monitor your sales over the last 12 months (or 52 weeks if you prefer) and compare with the previous year. Not only does this prevent you getting depressed in your down season when it's easy to forget just how poor trade can be, but in addition, it irons out the seasonal kinks in your turnover and provides you with the real picture of how your business is tracking.

Your Sales Pipeline or the Number of Prospective Customers Thinking About Becoming Customers
No matter how busy you are, you still need to be thinking about next month's, the next quarter's or next year's business and where it's going to come from. Now some of my clients just get one-off jobs and it's vital if you're like them to think at least six months ahead about how you're going to keep your sales pipeline topped-up. To find out more about your sales pipeline click here .

But even if most of your business comes from the same customers or clients you need to be marketing constantly seeking out either new customers or making sure your existing ones come back again and again. Customers move away, go elsewhere, die, lose interest or their job or just stop buying from you.

Consequently, you need to be monitoring either your sales pipeline and/or the number of prospective customers thinking about becoming customers at least monthly. Let's face it, you'd be nuts not to record all enquiries or the details of all prospects in any case so you can follow them up until, as Winston Marsh (that famous Aussie business guru) would say, they buy or die!

The Source of All Your Leads/Prospective and New Customers
This really is a "no-brainer" as it's so obvious, but just in case I'll spell it out for anyone who's new to business. Firstly, you need to be able to thank and recognise or reward the referrer if they've been referred to your business. Referrals are your life blood, they are like water in the desert and not to be taken for granted. A hand-written thank you card and a small personalised gift should be built into your routine.

Secondly, you need to know to determine which areas of your marketing are working and which are not. I meet many business owners who spend 5,000 or more a year on advertising but have absolutely no idea whether it's working or not, using the same old adverts they've used for years. For example, for a client of mine my analysis of their lead sources looked like this:

Armed with this information, where would you focus your marketing efforts?

Prospect Conversion Rate
OK, you've put a lot of time into marketing and it's paid off. You are getting loads and loads of leads and enquiries so now all you have to do is to convert them into customers. Just how successful are you are doing this? Do you use scripts, depending upon whether it's on the telephone or face-to-face? Do you have a template presentation you adapt for different prospects? Is your standard quote boring with just the bare facts and a price or a marketing-focused Action Plan with your USP, benefits, guarantee and testimonials?

To be able to improve you need to know how well you are doing now, so work out in percentage terms your success rate. Mine is consistently over 90% - what's yours?

Get in touch, call 0800 ASK NICK or email for advice on any of the topics discussed above for your business.

Part 1 - Four Vital Things You Need To Know about Your Business

Tue, 23 Jun 2015 23:00:00 GMT

Just how much do you know about your business? No, not about what you sell, or how you make or deliver your products and services, I mean the really important things that determine whether you're going to survive the ongoing recession (just how do they work out those GDP growth figures by the way?) and make it through to retirement or maybe even successfully selling your business.

Here are four of my eight favourite things each and every one of us business owners should know about our businesses:

Whether you're exceeding your Current Break-Even Point
Whilst all the other things listed in this article are very important, knowing whether you're exceeding your current break-even point is just about THE most important thing about your business you need to know. Even if you have a cash reserve stashed away, sooner or later you're heading for trouble if you don't sell enough to cover your outgoings. And I stress the current, not a historical figure based on your costs two years ago or a gross profit margin you haven't achieved since the start of the last recession!

If you'd like to know how to calculate your break-even point click here and to make sure it's the full picture click here .

Current Cash in the Bank and whether you can pay all your bills for the month
Sounds crazy I know, but many business owners have absolutely no idea about what money they have in the bank, let alone whether they can pay their bills for the month. Why else do people persist in sending cheques that bounce? Even an accountant I spoke to recently doesn't have internet banking! Come on now, we're in 2015, not 1915!

As for knowing whether you can pay all your bills for the month, that's pretty important right? Even a couple of years ago, you could safely pay your bills on the 20th knowing that enough of your customers would pay you on the 20th to cover these, but not anymore as people are, bit by bit, slipping behind a few days. An excellent client of mine uses a monthly spreadsheet template to predict whether their business can pay the bills on the 20th. This works well – they had a shortfall in August and couldn't pay their Provisional tax. But because they knew in advance, they consulted me and I arranged Tax Pooling to cover the tax – problem sorted, no last minute panic and stress!

Current Profitability
Year-end financials prepared many months after the year-end are absolutely useless in managing the financial side of a business. You need to know what profit (or otherwise!) you made last month, the last quarter and for the year to date.

Preparing monthly or bi-monthly financials make a huge difference to business success which can be demonstrated in the very strong correlation between the frequency of financial reporting and business survival:

(*) Source: Williams, A.J., A Longitudinal Analysis of the Characteristics and the Performance of Small Business in Australia

With modern, powerful accounting software that is cheaper than a weekend away for two and with so many other benefits (built-in database, timesheets, inventory control, invoicing etc), like it used to be, is no longer an excuse. OK maybe they won't be quite as accurate as your annual financials but they'll be a good enough guide upon which to make decisions and take any necessary corrective action.

Gross Profit Margin
Your gross profit margin is the very key to sustainable life in your business. Turnover is turnover yes, but no good to you if you're not making sufficient gross profit on that turnover to cover all your outgoings. It's also a vital part of working out your break-even point if you sell goods or services where you incur direct or variable costs. It is necessary therefore to track your gross profit margin at least quarterly, if not monthly. Nothing much stands still in business, and change is constant. Fashion, prices, tastes, the competition, and any reason you like. Are you discounting your prices? Clearing out older product lines at knock down prices? Either which way, know your current gross profit margin and monitor this regularly.

Keep an eye out next week for my final four vital thing you need to know about your business.

Four reasons why BankLink is a proven solution for rural clients

Tue, 09 Jun 2015 23:00:00 GMT

"Stressful! Disorganised and time consuming."

That was life for beef and deer farmers Kate and Nathan Stratford before moving to MYOB BankLink.

"We didn't really have a handle on what was happening, we had minimal formal budgets and didn't know if we were moving forwards or backwards with our business".

Fickle internet connections, lack of time, need for reliability, and (for the Stratfords) a need for financial visibility – these are some of the reasons New Zealand's primary producers turn to BankLink as their preferred accounting solution.

Let's take a look at how BankLink has earned its position as leader in rural accounting solutions. Read more here

The 10 Commandments of Staff and Recruitment

Wed, 03 Jun 2015 23:00:00 GMT

Many small business owners struggle with employing staff, even to the point where they remain one-man bands to avoid taking on any employees. This, of course, means that they miss out on the opportunity to build wealth by selling their business, which surely must be one of the great things about going into business!

Getting things right with staff is just like other areas of business; it's about planning in advance, being organised, getting the paperwork right and being consistent and fair. Here are some pointers:

1. Recruit carefully

Make sure you only recruit the right people. Take your time interviewing; always speak verbally to their referees and check out their CVs (for example, ask to see certificates for their qualifications). If they're going to be handling money, get a police check too - there's a lot of dishonest people out there! It always surprises me how bad some employers are at recruitment and checking referees.

2. Get the paperwork right

Not having the paperwork right can make it easy for a bad employee to walk all over you, even when you've done nothing wrong. Make sure they always sign an up-to-date employment agreement before they start working for you, and especially for the 90-day trial period. If you have to discipline, document everything carefully and make sure events and actions are put in writing at the time.

Click here to read more

What’s Good (and Bad) about Cloud Accounting?

Thu, 21 May 2015 23:00:00 GMT

Fashion and clever advertising has a huge influence on our lives, especially where technology is involved. Sometimes this can be positive but often it's bad for us e.g. you see folks out and about who don't look like they have two pennies to rub together with the latest expensive smartphones or 60" surround-sound TV's in houses that are unbelievably tatty. So is cloud accounting a fashion or is it here to stay?

There's no denying there's loads of good stuff about cloud accounting:

You may have noticed that I haven't listed automated bank feeds as an advantage of cloud accounting. This is because there is some fantastic accounting software available with automated bank feeds utilising coding rules which is not cloud based. Not only is this cheaper but it's much easier to use by non-accountants and bookkeepers.

So are there any downsides to cloud accounting?

So don't be swayed by fashion or clever advertising, do some research and ask around before you take the plunge and commit to a particular brand of accounting software. Get advice too from an honest accountant, not one who's been bribed by a cloud accounting provider!

2015 Budget highlights

Thu, 21 May 2015 14:00:00 GMT

The key tax proposals outlined in the 2015 Budget are:

The proposals are outlined briefly below:

Strengthen the tax rules for property
As was announced by the Government over the weekend, a New Zealand IRD number will be required as part of the land transfer process and non-resident buyers and sellers will also need to provide their tax identification number from their home country together with identification details such as a passport. Before a non-resident can obtain an IRD number they will need to have a New Zealand bank account number.

The IRD will also tax the profits on the sale of residential property which is sold within two years of purchase, unless it is the seller's main home, an inherited property or part of a relationship property settlement. This new two-year rule is being referred to as a "bright-line" test.

This is not a 'capital gains tax', rather a measure to strengthen the existing tax rule that taxes gains on the sale of property where that property was purchased with the intention of selling. The tax will be levied at the seller's marginal tax rate and will be captured in the seller's income tax return. Primarily the change is focused on overseas investors as they can be difficult for the IRD to track down and the overseas property investors should be subject to the same tax rules as resident property investors.

The Government is also considering introducing a withholding tax mechanism in mid-2016 for non-residents selling residential property.

These proposals will go through a consultation process and are expected to take effect from 1 October 2015, which means the new bright-line test will apply to properties brought on or after 1 October 2015.

It should be noted that these changes do not apply to the family home, however, existing land taxing rules should still be considered in respect of the family home. The intention behind the proposals is to help IRD to track and identify transactions likely to be taxable and will allow IRD to share information about non-residents with overseas tax authorities.

An Issues Paper on the bright-line test is expected to be released in July, with draft legislation available late August.

Repeal the $1,000 KiwiSaver incentive payment
Due to the considerable cost to taxpayers, the Government has announced that as of 2pm today people enrolling in KiwiSaver will no longer receive the $1,000 kick-start payment.

The change does not affect existing KiwiSaver members. Contributing KiwiSaver members aged 18 or over or under 65 will continue to receive the annual Member Tax Credit from the Government of up to $521. Employers in general are still required to contribute at least 3 per cent of an employee's gross wage or salary and employees will continue to make their own contributions.

The Government expects to save $500m over the next four years from this measure and will redirect that saving into priority public services.

Address child support penalties debt
The following measures have been proposed to encourage parents to pay what they owe:

These measures have been introduced due to liable parents facing paralysing debt from penalties added to their child support bill and hence many are not attempting to pay their outstanding amount, nor their current obligation and in a growing number of cases the parents are leaving the country.

Increase the in-work tax credit and abatement rate
To give more financial support to lower-income working families not on a benefit the Government has proposed to increase the rate of the in-work tax credit and increase the Working for Families tax credits abatement from 1 April 2016. Specifically:

Income Tax Rates
While no proposal has been announced to reduce income tax rates, the Minister's speech does acknowledge that one of the Government's five fiscal priorities is to begin reducing income taxes from 2017. This is predicated on fiscal and economic conditions being favourable come 2017.

ACC levies
The Minister's speech mentioned that the Budget allows for ACC levy cuts of $375m in 2016 and an additional $120m in 2017.

Final decisions on levy reductions will be made after public consultation, but it is anticipated that cuts will be across all levied accounts thereby reducing costs for businesses, workers and motor vehicle owners.

As an example the Minister indicated that the average motor vehicle levy, including the annual licence fee and petrol levy, could fall to around $120 in 2016, around a third of what it is now.

Helping businesses master social media and digital marketing

Wed, 20 May 2015 23:00:00 GMT

"With so many different platforms available businesses can find themselves in one of two boats, they are either totally confused about what to be doing to market their business online, or they have a presence that is not getting them the results that they want, and to top it off, not many have the time or skills to manage their digital marketing themselves", says Kathleen.

Being a relatively new business, Kathleen was unsure about the need for an accountant, but as the months went on and the questions came up she called on Nick for assistance. "Nick has been great, he is only an email or phone call away, and is always available. Being a new business owner, for the first time, I was confused with so many aspects of the financial side, like keeping my business and personal transactions separate, so Nick got me set up on Banklink, and sorted out a business bank account."

"At the end of the tax year I gave Nick a folder full of receipts and invoices and off he went," says Kathleen. "A couple of weeks later I got my summary and everything was done and dusted, I didn't need to do anything. I was really concerned about having a huge tax bill and not having the cash on hand to pay it, Nick explained everything clearly, and now I know what to expect over the next few years in regards to making payments for tax. Nick's advice and assistance has been second to none, because I know he has it all covered I don't need to worry anymore, which has been a huge weight off my mind."

OMG Solutions offers a range of online solutions, from LinkedIn and Facebook training, to website and email marketing management, speaking to companies on implementation and strategy, or website design and building.

To see how OMG Solutions can help your business online visit the website here.

Changes to Director requirements from 1 May 2015

Wed, 20 May 2015 14:00:00 GMT

Unlike many other countries (e.g. Australia), there has historically not been a requirement for a New Zealand company to have a New Zealand resident director.

This has made it fairly easy for non-residents to set a company up in New Zealand and not have to engage a person in New Zealand to act as director for the company.

Some time ago proposals were raised that would significantly change the director requirements in New Zealand. These proposals resulted in the Companies Amendment Act (No 4) 2014 being enacted on 24 June 2014. This legislation has increased the information requirements and strengthened the registration process of New Zealand resident companies.

Effective from 1 May 2015, all New Zealand incorporated companies are required to have at least one director who:

As noted above, this criteria is an "or" therefore having a New Zealand resident director is not critical provided a director satisfies the alternative criteria. At present only Australia qualifies as an enforcement country.

There may be an option for companies to appoint an 'alternate director' who is resident in New Zealand to help satisfy the new requirements.

If a company is found to be in breach of the new resident company requirements, this could result in the company being removed from the register.

In addition to providing the residential address details of each director, companies will also be required to provide the Companies Office with details of the director's date and place of birth at the time of registration. These details will not be made publicly available. Existing companies will be required to provide this information in relation to any changes to directorships or alternate directorships from 1 May 2015.

The board of directors will also be required to advise the Registrar of the name of any ultimate holding company, the country of its registration, the registration number or code (as applicable) and its registered office. This information will need to be provided on registration or within 20 working days of any change. These details will be made publicly available. Existing companies will need to provide the Registrar with this information in the next annual return that is filed after 1 May 2015.

For more information on the changes to the Companies and Limited Partnerships Amendments Act click on the this link.

There's no getting away from tax

Wed, 20 May 2015 14:00:00 GMT

There's no getting away from tax if you're self-employed. As much as I hate clicking on that "Pay Tax" button on my internet banking, it's just got to be done!

It's just not possible to escape tax. Many just ignore it, don't pay it, and let the amount they owe accumulate, in the vain hope it will somehow go away. Another approach is to not to submit any tax returns. This is good for putting off the evil day, but it doesn't help in the longer term and either way, not facing up to tax will, eventually, lead to financial ruin as the amount owed will grow exponentially as the IRD shovel on interest and penalties.

Even if you have a very small or part-time business you're going to end up with a tax bill unless you're making losses. Let's look at the amount of tax you'll end up paying:

What you'll notice is that although the tax percentage is relatively low, the amount of tax payable is high, because in NZ we have to pay tax on every cent of our income, unlike our friends over the ditch (where they can earn A$18,200 without paying tax) or back in the UK where it's about $20,000 with no tax to pay. And that of course is before you even pay any ACC! So as you'll agree, we get a rough deal in NZ from the tax point of view.

Having said that, ignoring the need to pay for the obvious things like roads and the health and education systems, let's look at some of the reasons why paying tax is actually important from a selfish viewpoint that actually benefits us:

So all in all, providing you're claiming all possible expenses and have minimised the tax you're paying in all possible ways, perhaps paying tax is a necessary part of life and part of the grand plan to retire comfortably!

6 Marketing myths that can derail your business

Wed, 20 May 2015 14:00:00 GMT

Marketing is a vital business activity yet generally misunderstood by many business owners. You may be fantastic at what you do but unless you can market yourself or your business you're unlikely to succeed as a business owner.

If your marketing needs a boost, contact nick@abac.co.nz , ring 0800 ASK NICK, for more on marketing, visit our list of services .

Nick Roberts has marketed his way to success by starting the Accountancy + Business Advice Centre from scratch with no clients whatsoever into a thriving busy practice with new clients coming on board every week.

Will the tax man knock on your door?

Wed, 20 May 2015 14:00:00 GMT

The New Zealand tax system is based on 'voluntary compliance'.

This loosely means that taxpayers and their advisors will do their best to take correct tax positions and Inland Revenue Department (IRD) will accept those tax positions as presented.

One of the vital lynchpins of voluntary compliance is a robust audit program. Not only are audits designed to detect and collect tax from that particular taxpayer, they are also intended to deter non-compliance by others aware of the review. In 2010 IRD were allocated an additional 20 million to be spent in future years on audit and debt recovery activity. Suffice to say we have noticed an increase in IRD audit activity in some areas over recent years.

When I was an IRD investigator, a large percentage of audit targets were selected randomly. Times have certainly changed and IRD now has much more sophisticated methods of targeting non compliers.

One effective method which is employed is referred to as 'data mining'. This is a process where computer software is run across a database to extract particular information based on set parameters. In a simplistic example, the Land Information New Zealand (LINZ) database could be searched for entities or individuals that transferred more than a certain number of properties. This information could then be used as a starting point for targeting entities or individuals who may not have complied with the land sale provisions. IRD has several specialist units set up solely for reviewing land transactions.

Another example where IRD is likely to use a focused technique of audit selection is in relation to recent changes to foreign superannuation repatriation. There are a number of databases IRD can search that will provide a telltale of what was withdrawn, by whom and when. This information will then be data matched with tax returns.

IRD has always received anonymous information regarding false tax positions, which are often from disgruntled, previous partners or employees. They do follow up on this information. So while the IRD selection process is certainly more targeted based on risk, there will always be a certain element of serendipity. Even though your door may not have been 'knocked on' for a number of years, you cannot rule out it happening tomorrow.

How to become a millionaire retiree

Wed, 20 May 2015 14:00:00 GMT

How would you like to have a $1m nest-egg on retirement? Think it's not possible? Well you can, and you can still spend 80% of your income!

Take a look at the table below and start saving now before it's too late!

5 things you need to do before selling your business

Mon, 18 May 2015 23:00:00 GMT

Did you know that the average age of business owners in New Zealand is around 58 years old? Unless they're going to work until they die (thanks BNZ, great commercial!) this means there's going to be huge numbers of businesses coming up for sale in the next 10 years or so.

If you're thinking of selling, you're going to be one of many so make sure you prepare well. These are a few of the things you should be doing before you sell.

1. Seek good advice beforehand Selling a business successfully can be tricky, stressful and difficult to face on your own so you need to get a good team in support, including a good accountant with the right experience, a great commercial lawyer and possibly an experienced business broker. Yes, they'll cost money, but they'll save you money by protecting your interests and not letting you be bullied or misled by the buyer or their advisers. Unlike you, they are involved in selling businesses regularly!

Read the other four here

How to handle issues with the IRD

Tue, 12 May 2015 23:00:00 GMT

The IRD can be a scary bunch even if you don't get offside with them, so it's best to be wary of how you talk to them and handle any issues that arise. As many have found, the consequences of getting your tax obligations wrong can deplete your wallet considerably, perhaps even leading to bankruptcy and financial ruin.

Ideally of course, it's best to avoid getting into a situation where it's necessary to even have contact with the IRD. If you file all your returns and pay on time, and take a reasonable approach with taxes, you can keep a low profile and thus avoid getting yourself into an audit or enquiry situation. After all, it's mostly common sense, and there's always someone out there doing something really stupid to take the heat off you (such as filing tax returns showing $10,000 worth of income with no other means of support).

To read the full article click here.

I am a small business getting big – How do I manage my growth?

Tue, 12 May 2015 23:00:00 GMT

Many successful small businesses get big without even realising they are no longer a small business. The most important thing is to recognise and accept that you are now bigger and can no longer run the business the way you used to. Then, and only then, can you take the necessary actions to manage your growth:

Seek help

Many small business owners are great at their own trade, service line or profession but just haven't had any experience in running a bigger business or managing staff or finances. If that's the case, it's necessary to face this head-on by seeking help from experts in the areas where you are lacking. This may include a great accountant who is prepared to help beyond tax and accounting, a practical lawyer, employment specialist or a really useful business coach. Yes, this will cost money, but it's better that than the consequences of getting it wrong or experiencing total business failure.

Get training

There are some great short courses in areas like financial awareness, corporate governance, systems and business planning - and some of these are subsidised by the taxpayer. These can be generic or tailored specifically to your needs, so take a few days away from your business and up-skill yourself in those all-too-important disciplines rather than remain in the dark.

To read the full article click here.

Which business structure should I choose?

Sun, 10 May 2015 23:00:00 GMT

This is a perennial question indeed and one which should take account of the following factors:

So what are the main options? Read these here.

Payroll – Making it Work

Wed, 06 May 2015 23:00:00 GMT

Most small businesses struggle to cope with payroll processing. Whether you have 1 or 100 employees, it is has to be 100% correct as nothing can undermine an employee's confidence more than if their pay or leave has been incorrectly calculated. As with all areas of business, you need a system to follow:

If you can't afford to sub-contract out your payroll, get it checked regularly, as in the long run, it could save you plenty at the Employment Tribunal! If you would like a free review of your payroll to pick up any problems before it is too late call Nick on 0800 ASK NICK, or e-mail nick@abac.co.nz

Is your activity a business or hobby?

Mon, 04 May 2015 23:00:00 GMT

It's important to be able to tell the difference. If you're running a business, your income is taxable and your business expenses are deductible. But if it's a hobby, you don't pay tax on your income and your expenses are not deductible. The "business or hobby" issue can be complex. This article gives you general information only. Each case must be decided on the facts, so if you have any questions about your own situation, please contact your tax advisor or Inland Revenue.

What is a business?
The law says that a business: "includes any profession, trade, manufacture, or undertaking carried on for pecuniary profit…"

The courts have held that a person is probably running a business if:

Note that "intending to make a profit" doesn't mean you must make a profit - an activity can make a loss and still be a business - but the intention must be there. Establishing intention involves considering the person's words and conduct.

What is a hobby?
A hobby is an activity conducted primarily for private pleasure or recreation. The hobbyist is not interested in making a profit. They may sell goods, but any sales are of secondary importance.

Business or hobby?
Deciding whether an activity is a business or a hobby is one of the "grey areas" of tax law. It depends on the scale and volume of transactions, the effort and time involved, the dollars generated, the type of activity, whether government regulations have to be followed and your intentions.

Here are two examples of the "business v hobby" decision, taken from actual court cases.

Example 1
A husband and wife partnership purchased a run-down farming property of 216 acres. Over the years they developed the property by clearing it of gorse and refencing it. A Hereford stud herd of a modest size was established. The farming activity made losses over the years 1972 - 1980. The husband and wife, in their income tax returns, each deducted their share of the losses from their other income.

Example 2
A dentist owned a launch. He used the launch privately, but also conducted a launch charter activity - which made a loss. The High Court found that the charter activity was not a business for these reasons:

Developing a business from a hobby
Do you enjoy your hobby so much that you'd like to earn your living at it? Some home businesses did originally start out as hobbies. If you want to develop a business from a hobby, the important thing to remember is expenses you incur prior to starting your business are usually regarded as capital expenses and are non-deductible for income tax purposes.

In most cases your business will "officially" start when:

Example 3
Anne makes teddy bears from home. In any given year she usually makes about 10 bears, keeps one or two for herself and gives the rest to family and friends. Sometimes people pay money to Anne to cover her costs and sometimes they don't.

At this stage, Anne's teddy bear activity is a hobby.

Because her bears are so popular with her friends, she decides to have a go at profiting from the activity. She takes the following steps.

Because Anne has changed the way she is running the teddy bear activity - it is now organised with an intention to make a profit - the activity has changed from a hobby to a business.

If you are in this situation, get in touch with Nick by email today or call 0800 ASK NICK.

Savings – Work Hard Then Throw it all Away?

Sun, 03 May 2015 23:00:00 GMT

We have seen many clients work very hard only to lose some or all of their savings. And they're not stupid people, quite the contrary.

Keeping your wealth can be a challenge. You need to think about how to do this. Also, think about why the mistakes have been made. Greed? Bad advice? Putting all their eggs in one basket? Collapse of the share market?

You'll be lucky to avoid making some mistakes. Let them be relatively small.

Here are a few examples of how you could have made mistakes:

So what should you do? It's not our job to provide financial advice and the law requires us not to do so. Besides, we don't have the specialist knowledge required.

However, consider these points:

The information in this article is of a general nature and should not be relied upon as a substitute for specific advice.