Spring 2014

 

   
   
 
   

ANDREWS CORNER

I have now been an accounting practitioner for 30 years and have decided to take an extended break from the 21st September 2014 until the 7thNovember 2014.  In my absence Mr Tim Shaw, a former partner in one of the largest accounting firms in Auckland, will be overseeing my practice and will be available should you require any consultation or professional advice.  His number can be obtained by contacting my office on 09-620-4939.  He will be available to meet at our offices subject to a prior appointment. 

On the matter of our offices below is a photograph of our new offices which are located at Level 1, 2 Enfield Street, Mt Eden which we will be moving into on the 13 September 2014.  Our telephone number will continue to be 620-4939 and our fax number will be 620-4317.  Our email address has now changed to accountants@jacobsenassociates.co.nz

IRD and ‘your cheque is in the mail’

  From 1 October this year cheques must reach IRD by the due date for payment.

Posting a cheque on the last day will be too late. IRD will accept post-dated cheques but won't guarantee to not bank them early.

If there are insufficient funds to pay the tax, that’s the taxpayer's problem. IRD say they will endeavour to avoid banking early and we believe them. Mistakes are made, however.

To help ensure a post-dated cheque is not banked too soon, highlight the date on the cheque in a bright colour and staple a warning to the cheque that it's post-dated.

Payment on the next working day after a weekend or holiday is still acceptable. A provincial anniversary day is a working day, NOT a public holiday for the purpose of the tax being received on time.

Westpac will accept cash or eftpos for tax payments, but not cheques.

IRD will not accept cash.

IRD up in arms about ‘donations’

  IRD is getting upset about “donations” which are really in the nature of fees for services.

In Revenue Alert 14/01 it lists the criteria for a donation. When you analyse the list it amounts to:

·           The gift is made voluntarily

·           Nothing is received back in return for the gift either by the giver or anyone else

·           The charity doesn’t have to give anything away in return for receiving the gift.

The department is investigating arrangements where private education and child care centres charge nominal fees and then get parents to make substantial donations, for which they issue a donations receipt. They say these are payments, which would not ordinarily be donations, and are fees for services. The purported donations are used to meet running costs, which would otherwise have had to have been charged to parents.

GST is also an issue. These “donations” are really being paid for services. Therefore the education centre must charge GST.

The department says penalties and interest may be applied if it catches anyone transgressing.

What can you do? If this announcement affects you and you have been used to claiming these donations, you may need to forgo these claims, which is, of course, exactly what the IRD wants to achieve.

Rules for accounts change from 1 April 2015

The rules for preparing your accounts will change when we do your 2015 tax return.

 

The new rules are supplied by the tax department. The main difference between what we do now and what we will be required to do next year is to tell the IRD about “associated person transactions”.

Roughly translated, this means dealings the family, another family company or family trust have with the company. So, if you pay your daughter for sticking stamps on envelopes you’ll need to tell the IRD how much you paid her. The list of disclosures of transactions with associated persons is:

Interest paid by the company. Mostly shareholders, lend their money interest free to their company, so this won’t affect them.

Loans made from the company. This mostly arises when the shareholders are living beyond their means and need to borrow from the company instead of the other way around.

Payments for services received by the company. This includes wages, salaries, management fees etc for each recipient. The name of each person and the amount is sufficient.

Rentals and leases of land and other assets, which would include use of home.

Expenses for acquiring intangible property, which would apply, for example, if you charged your company for the use of a patent.

Important

Please make sure you are ready to provide this information when we require it.

Tax conference outlines IRD thinking

  On 12 and 13 June 2014 a conference in Wellington discussed tax administration for the 21st century.

You may be interested in the direction IRD may be taking us.

Issues discussed included:

More collection of tax at source – withholding payments.

More electronic filing.

More emphasis on collecting data rather than on getting tax returns.

Spread terminal tax over next year’s provisional payments.

Knowing these possible changes, might help you when planning your business systems.

Keeping hard-earned wealth a challenge

  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 is 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 sharemarket?

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: 

Ross Financial Management promising exceptional results.

South Canterbury Finance Company was a safe finance company wasn’t it?

Lending to the wrong finance companies, often on the advice of a professional.

Many tax avoidance schemes such as pine trees, kiwifruit, alpacas and films have not worked out so well.

Bubbles bursting, such as the sharemarket in 1987.

Over-exposure to debt when the market recedes, usually while investing in real estate or the sharemarket.

ANZ Bank promoting Ing to its customers. Do you remember what happened?

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:

1. The higher the return on your investment, the greater the risk. Don’t be greedy.

2. Keep alert. Doing what everyone else does is, at times, wrong. Recently, gold was an example of this. It was going up for ever, wasn’t it! The 1987 sharemarket collapse was another.

3. Recognise your mistakes and maybe you should sell out before they get worse. Have you the courage to do this?

4. It's often a good strategy to get rid of your losers rather than cash in your winners. If your winners continue to win, you’re better to stay with them. You may have heard it said “No one ever went broke taking a profit”. It sounds wise advice but maybe it’s those who hang on to their good investments who really make the profits.

Spread your risks. If you're tempted into a scheme which looks too good to be true, it probably is. If you really are tempted, don’t go in big time. Only invest money you can afford to lose .

Beware complaints

You must be more careful than ever to avoid complaints about your business. The internet has become very powerful and if you create a bad reputation it can spread very quickly. Once a comment is on the internet, it probably can’t be removed. Try looking up reviews of Australian airlines if you want to see the negative publicity which can be generated, even if the criticisms are sometimes unfair.

Mileage unchanged

Mileage rates are unchanged. They remain at 77 cents per kilometre. This is the third year at this rate.

Claiming for partner

When can you claim the travel costs for your spouse/partner, accompanying you on a business trip? The IRD says the companion has to support the business person to a reasonably substantial degree, in the business being undertaken. It has issued a document called QB 13/05, which sets out guidelines in some detail. If you want to claim a companion’s travel costs, we will be guided by this IRD pronouncement when advising you on its tax deductibility.

Perception is reality

What matters is what the customer feels about your service. If the customer is peeved, you’re in the wrong in their eyes. However, if one of your customers is consistently unreasonable, you don’t need to continue to do business with them. Get rid of them, preferably in a way which doesn’t cause offence.

Tax Calendar

August 28

1st instalment of 2015 Provisional tax if you pay three times a year (March balance dates)

September 29

2nd instalment 2015 Provisional tax (December balance dates)

October 28

1st instalment of 2015 Provisional tax for those who pay GST twice a year

November 28

1st instalment of 2015 Provisional tax

(June balance dates)

 

 

 

 

 

All information in this newsletter is, to the best of the author’s knowledge, true and accurate. No liability is assumed by the author or the publisher for any losses suffered by any person relying directly or indirectly upon this newsletter.   You are advised to consult professionals before acting upon this information.

 

About Us

We are a full service Chartered Accountancy firm based in Mt. Eden, Auckland, New Zealand.  We provide full tax accounting, management accounting, trust accounting services.

Member, Institute of Chartered Accountants