Winter2015

  Good systems breed success

Success in business has a lot to do with systems. Get your systems right and your work will flow better. Your systems will save you time and costs.

Here’s some useful tips for good systems:

Start each day by planning what you’re going to do and the order in which you are going to do it. You’ll get interruptions and you may not finish the work. Put the most important work first so the remainder can be safely held over until the next day. Don’t confuse urgent with important. Organising your golf for next Sunday might be urgent but it might not be important for your business. Make it wait until after work.

Use checklists. Whenever you have repeating work, develop checklists so you don’t overlook anything. If you’ve made a mistake in a costing, for example, change your checklist so it never happens again.

Keep a notebook. Any ideas you get should be written down immediately. If you leave this till later you’re sure to forget that good idea.

When you’re organising papers to take to your accountant, get a system to make the job easy. For example, if you receive dividends and interest, have a folder or someplace where you always put the details of each amount when you receive it.

Systems apply just as much to selling. Some situations call for scripting exactly what your staff member is to say when selling.

 

 

 

 

 

 

 

 

Watch out for phishing expeditions

Inland Revenue tells us there are currently two email scams targeting Inland Revenue customers.

These emails can’t be trusted.

If you or any of your clients receives one of these emails, IRD asks that you please report them by emailing phishing@ird.govt.nz

“We're aware of a phishing attack mimicking Inland Revenue's website,” the IRD says. “Customers receive an email saying they're eligible for a tax refund. The phishing link redirects the customers to a fake page with multiple redirects to fake banking links. Be careful, not use those links”.

Another email scam is asking New Zealand taxpayers to complete a Property disclosure return (IR4T).

“If you receive this email, please ignore it and delete it. Don't complete the IR4T or send it to the fax number or email address in the email.”

  Take notes as evidence

Occasionally you'll encounter a conflict, which you'll usually try to resolve on the telephone.

Sometimes you'll succeed.

Recently a traveller took out a travel insurance policy for a year. Towards the end of the year he was heading overseas on his last business trip which would be covered under this policy. As a precaution, he told the insurance company something that had arisen recently, that he thought they should know. When he talked to the claims department he was told that if any illness resulted while overseas it would not be covered.

Since he was travelling via the United States, you can imagine this was alarming. After a stressful three or four hours he managed to contact a more senior person in the firm who acknowledged the first claims manager was wrong. The traveller asked for confirmation by email and when he hung up he took detailed notes of the conversation.

Our message is clear. When you have conflict such as this, write notes immediately of what was said. They form excellent evidence if you ever have to take the matter to court or if there's further argument. Be sure to make a note of the date and time you wrote the notes.

These days, all you need to do is make a note on your smart phone or send yourself an email which will have the date and time on it – excellent evidence!

Splitting a couple’s income

Generally, splitting income of a couple is allowed only if you can justify the amount paid to the smaller income earner.

If you work for yourself, you’ll need to get the Inland Revenue’s approval before paying your spouse or partner. This need for approval does not apply to companies. All that is needed is for you to be able to justify the income if IRD asks.

The rules for couples who are partners in business are a little more complicated. Please ask us if you want to know what they are.

Where the couple are both working fulltime in a company, the usual rule is you can pay them as much as you like. However, we think excessive salaries to a low skilled partner could upset IRD. The department can also be upset by excessively low salaries, particularly if they result in lowering the overall tax paid.

Useful website

If you're a borrower or a lender the website interest.co.nz should be useful to you.

You can find out quite a lot about what the banks are offering and you can compare banks. You can also use their calculator.

An investor, for example, can compare a PIE investment at one bank with a term deposit at another. If you wanted to reinvest interest as you go, you could work out what you could earn over the term of the loan.

Similar calculations can be made by borrowers.

Bank charges are down

There has been a big cut in bank charges. A bank client paid over $70 a month last year merely to deposit and withdraw money. That amount excluded cheque fees. One day he found out from a teller he could have as many of these transactions as he wanted for just $5 a month.

This led him to check all his accounts. He found a personal account was costing $5 a transaction because the bank was paying a tiny amount of interest. Have you reviewed your bank charges recently? You might be paying for an overdraft service fee you never use.

Are you using the correct PAYE tables?

Each year the PAYE deduction tables change, even if it's very slightly. This occurs even though tax rates may be unchanged. It's caused by changes in ACC levies. IRD does not send out new PAYE deduction tables. You can get them off the internet or apply for them from IRD.

  ANDREWS  CORNER

I watched with interest the machinations of Seth Blatter who until the 3rd of June was head of the International Football Federation.  I noted that one commentator said Blatter resigns but his toxic legacy will live on.  I was recently at a conference in which the Inland Revenue Department were present and discussing their stance on property traders/speculators in various areas around the country.  They are actively reviewing property transactions and individuals or companies seeking to avoid tax on property sale gains.  They made it very clear that once they become aware of such individuals or companies all their future property transactions will be closely monitored.  Property traders need to be aware that once they create a toxic legacy with Inland Revenue Department they will be continually monitored and any misdemeanours will be picked up.  On another note a recent seminar on the GST ramifications on land and property transactions clearly outline the extremely complex nature of GST claims and the absolute imperative  of ensuring sales and purchase agreements are correctly completed in all respects.  If you are contemplating or are active in trading or purchasing properties that have mixed use activities, it is essential that you receive the correct advice.  DO NOT RELY UPON REAL ESTATE AGENTS TO DRAFT SALE AND PURCHASE AGREEMENTS. 

Another issue that has just come to light is in the area of charitable donations.  The Inland Revenue Department are on a crusade with respect to donations in the form of forgiveness of debt or donating property or time.  For the donation rebate to be claimed there must be a cash payment made and the IRD require to be able to track the payment from the donor’s account to the donee’s account.

This newsletter would not be complete without a comment on the economic situation we currently face.  A review of our trading partners particularly Australia and China are not encouraging.  Australia’s economy is faced with a double whammy.  The latest economic figures are expected to show that growth is at its slowest pace in two years and there is a major fall in commodity prices.  Interest rates are at a record low of 2% but as a result real estate prices are soaring.   With respect to China its economic growth is already at its lowest in decades and is likely to get worse before it gets better.  Although Beijing has repeatedly cut interest rates and freed the banks to lend more, this has done more to fuel debt funded stock market speculations than productive investments.  It appears that China has stockpiled large volumes of milk powder and other agricultural products which is one reason for the down turn in the global commodity prices.  This is bad news for New Zealand’s economy as these are our two largest trading partners.

On the home front interest rates are at an all time low with a distinct possibility in the short term they might go even lower depending upon the Australian Reserve Bank.  However if you are planning on borrowing money then depending on the purposes and reasons for borrowing you should be looking to lock in these low rates for as long as you require the loan.

Some clients are not sure where to park when they come to our offices.  If you go onto our website and click on the link at the bottom it will show you exactly where the car parks are available.

UOMI rates up

The Use of Money Interest rate charge by IRD has just been increased from 8.4% to 9.21%.  Clients get caught for UOMI when they have big incomes. The current threshold for an individual who has no tax deducted at source is $179,030. If this is you, see us now and let us get some more tax paid, even if you're not yet ready to see us about annual accounts. If you have a family trust and you want to keep income in the trust, the threshold is only $7575 before UOMI applies.

New car and FBT

In one case recently, a car company included a free set of tyres with a new car after three years, $1000 worth of petrol vouchers and free servicing for three years. You can’t deduct the value of these from the price of the car, to achieve a lower cost for FBT purposes. They're merely promotional items. However, they could be used as bargaining chips to get the original cost of the car (and hence FBT) reduced.

Investment income

Where a couple have a joint account, the income from money taken out for investing belongs to both people. This is true regardless of who earned the money. Split the income equally. Some people are tempted to treat the income as belonging to the partner with the smaller income. This is wrong and would not be acceptable to the Inland Revenue Department.

NZ in tax swap info deal with United States

New Zealand has entered into an agreement with the United States for information sharing in response to a US Act called the Foreign Account Tax Compliance Act (FATCA).

Our financial institutions have to provide information about US citizens to the US Government. Citizens of the US are subject to tax on their worldwide income, even if they live in New Zealand. If you're a US citizen, be sure to tell the IRS about any income you have derived in New Zealand.

It works both ways. The New Zealand Government will receive similar information about New Zealand residents who have accounts in the US.

  Read important documents

The Insurance and Savings Ombudsman said recently that customers of financial advisers should keep all documents, read them carefully, and always ask questions.

This includes insurance companies.

Who has the time to read all this detail? When it comes to these documents, you need to make the time. You should challenge anything you read and don’t like. Get it deleted or changed. If the company won’t negotiate, look elsewhere.

A woman took off her expensive diamond ring and put it on her dressing table. It was stolen. The policy required the ring to be always worn or put in a locked safe – no claim.

Be careful of open homes when selling a property. Before you start, read the policy and see if there any nasty clauses.

Employment contracts

Any employment contract will not do. The law changes constantly. Employment contracts need to be handled by a professional.

The story goes of a caretaker of a block of flats. After a few months in the job, the poor fellow hurt his back and could do no more work. One of the flats went with the job and it was rent free.

The flat owners were in a tizz – should the caretaker be asked to move out, or start paying rent? We assume the quandary was due to an unsatisfactory employment contract. We wonder if it was a DIY contract.

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