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It is great to know that there are a team of specialist, great bunch of people that are skilled in so many facets of business, thank goodness as I have had to use them on many occasions! Read On... |
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Joe Blog
Our team have a lot to say! This blog is a joint effort - it might be sharing something one of us has learned at a seminar, sharing topical news, or just reflection on the events of the day.
Accountants are often derided as being an expensive cost to a small business. While the use of an accountant is, for most businesses, a necessary cost, there are some things that business people can do to get more value from this relationship than just getting tax returns filed.
If you don’t tell your accountant what you need or want, we can’t help you. So here are some pointers for actions to take that will give you more value for your accounting dollar.
1. Determine how much of your bookkeeping you will do yourself. This is a combination of three factors – Time, Inclination and Education. Rate yourself, talk with your accountant about what system to use (from a manual cashbook to an integrated full on accounting system and everything in between), and take action accordingly. Well-maintained records will save you time and money, and help you run your business better, but poor records will send your year-end accounting costs skywards.
2. Ask – we have a saying in our firm that the only dumb question is the one you don’t ask. Your accountant has lots of information we can assist you with; don’t be too proud to ask (and if your accountant is a professional, and a decent human being, we will treat all your questions with respect, no matter how small)
3. When your accountant is doing any task at all for you – provide complete information. We need full information to do the best job for you –the request for lots of data for a forecast or those annoying end of year checklists for your financials are not just for fun – if you want us to do the best, quickest and most cost-effective job we can do for you, we need that information. And if you don’t understand what is required of you – look back to point 2!
4. Then there are the awkward times – things you don’t want to tell anyone – the screw-up, the credit card debt – any one or more of the numerous things that can go wrong for you financially. Believe me, your accountant has heard it all before. Talk to us – we can often help, and if we can’t it helps us advise you if we have the complete picture and we can look for solutions for you.
5. File your tax returns on time – keep onside with IRD and in communication. It’s hard to help someone who is about to be taken to court by IRD – and doubly frustrating when we could have helped them if they had come to us earlier. Keeping on the right side of the Revenue is of surprising help if things go wrong. Every return the IRD sends you is to be sent back to them, even if it is a Nil return. Non-filing of returns is increasingly attracting penalties, and even the most innocuous failure to file can cause you problems.
6. This point is a more indirect piece of information for the owner or director of a small or medium business. Take stock of yourself and your personal habits, personality and issues – your business is directly affected by these, and you have to take responsibility for your shortcomings and also take advantage of your strengths.
7. Tell your accountant when you have any major financial transaction or life change. All of these impact your financial life, and we may be able to help you in a practical way. More important, we may be able to stop a potential loss or maximise the financial benefit of an event.
8. Listen listen listen. Having sought that advice – listen to it and take action.
9. Another ask – in this case, it is to seek clarification–come back if you didn’t understand the advice you received. A good accountant should be able to explain clearly and in plain language…
10. And the final point refers back to that issue of fees. Accountants are aware that our fee is a significant cost for businesses, and often this leads us to neglect to tell you what else we can do for you. Your accountant can offer a number of business services – we do things from forecasts, structural advice, through to showing clients in an hour how to set up an efficient bring up file so that you manage your business better! And the service your accountant offers is not only often at a more competitive price than an outside consultant – it is with someone who knows you well because you have to turn up to see us at least once a year.
Remember that you can turn the annoyance of the cost of your accountant’s fees into the value of a supportive partner in your business!
We make the following points:-
- Deed of forgiveness of debt will still be needed.
- Financial arrangement rules potentially still apply unless the debt forgiven is in consideration of natural love and affection.
- Anti-tax avoidance rules potentially still apply. If a spouse were to gift $200,000 to his/her partner, to get a better tax deal, the arrangement could be upset. Use relationship property settlement to be safe. Good documentation can help support a transfer.
- A quick transfer of assets to a family trust, when a business is getting into difficulties, is likely to be upset by a liquidator.
- For this reason, if making a lump sum gift, prepare and sign a declaration of solvency – see your accountant or solicitor.
- Beware Regulation 9B of the Social Security Regulations 2005 and S147A of the Social Security Act 1964. If someone applies for a long term care subsidy and they have deprived themselves of assets, the deprived assets can be brought back into account. This applies regardless of when the deprivation occurred. Under this Act, the maximum they were entitled to gift was $27,000 between them. WINZ can claw back the excess over $27,000. This right of claw back is discretionary, it is not automatic.
- Under the same Act, loans made by the spouse of a person being means tested, with interest being payable if demanded can be deprivation of income, if the interest was not demanded.
Contrary to accepted wisdom the financial crisis is not global. There are no collapsed banks in Canada, Australia, Sweden, South Africa or Israel. Regulatory systems in those countries are strict and effective, and their governments are not in thrall to the markets.
Bailouts? There is an alternative to bailout. Icelandic voters decided to ‘share the pain’ by telling the country’s creditors simply to get lost. The country equivalent of corporate bankruptcy. Their crisis is over, and a robust recovery will now begin.. not a bad alternative really – definitely shorter, sharper and, to an extent, more honest.
Food for thought….
Thanks to Brent Gilchrist of “tax etcetera” for this Gift Duty update!
Gift Duty Repeal Tips
All things being equal, the only people that should be interested in the repeal of gift duty from 1 October, are those that are already gifting at the current maximum of $27,000 a year. One would expect that such persons will take the opportunity to immediately gift the balance. But should they? Should others now consider gifting?
Are gift statements still required?
No More Gift Statements?
From 1 October you can gift any amount to any person and not have to tell IRD.
So, no more gift statements.
No More Deeds of Gift?
Be careful as most gifts need to be validated by way of deed due to the lack of
consideration passing. While there are exceptions (e.g. land gifts registered in
donee’s name, chattels delivered to donee) debt releases must be by way of deed.
Play it safe and continue to record all gifts by deed.
Gift the Balance at Once?
My view is that if you are gifting $27,000 a year you have an intention of gifting
the entire debt as soon as possible, so why not gift the balance come 1 October?
But take September to review why the gifting regime was commenced in the first place? If the gifting is to a trust has the trust itself become at risk from attack? For example, has the trust exposed itself to income tax risk by, say, overlooking the minor beneficiary rule, or entering into an aggressive tax plan that, post Penny and Hooper, is at risk of being overturned?
Create a New Gifting Transaction?
Perhaps you had in mind a gifting regime but considered that $27,000 a year
simply did not make a dent in the debt, so you did not bother either transferring
the asset or gifting off the debt if the asset was transferred. Spend September
considering how your family/income tax/asset protection position might be
improved by a once and for all gift in October.
Why Rush?
While there is no need to make a decision on 1 October, my tip is that if you
think you might want to make a significant gift, do it before the IRD and other
Government agencies produce rulings at to how they are going to react to large
post-October gifts in terms of tax laws, family laws and creditor protection laws.
Making a gift around 1 October can perhaps be more credibly defended as a natural reaction to the exemption enactment and without too much planning involved
(the “because I can” defence). It might be more difficult to defend if made a year later and after extended discussions with advisers. Don’t make a hasty, uninformed decision but do take advice as soon as possible if you consider that there may be benefits in making a large gift post 1 October.
On Wednesday August 24, the Supreme Court decided that Christchurch orthopaedic surgeons Penny & Hooper were guilty of tax avoidance.
This decision was expected, as the two had allocated themselves much less income that they would have worked for under an arrangement with an unrelated employer. Unfortunately, this diminishes the usefulness of this decision in terms of determining what constitutes tax avoidance. Had they paid themselves a commercial salary, there would have been a whole different set of issues to be determined.
However we note that Inland Revenue (who already have a lot of money to throw at tax avoidance charges) may well interpret this as open season on tax payers who have tax-effective structures.
How do we address this? Document every business decision which has positive tax implications for your business, and always make sure (as we always advise clients) that all decisions are made for commercial reasons, and that any tax benefit is purely an incidental outcome of the business decision.
Ever considered running your own business? Head along to the Business & Franchise Expo in Auckland this weekend to find out more!
The Business Opportunities and Franchise Expo will have something for everyone considering buying their own business-whether they are in the serious stage of investing large capital, adding to an existing business or just exploring the idea of a lifestyle change like working from home.
Not only is it an important forum for people considering buying their own business – visitors are also in a position to meet experts and talk to business owners face to face , information that could take days to collect like interview appointments ,meetings and discussions can be researched all under one roof
- Mature business systems with available opportunities
- New Business opportunities launching for the first time
- Talk to the experts and learn to minimize Risk
- Free seminars run daily
August 12th, 13th and 14th. Open 10am to 4 pm daily. Hall one ASB Showground,
Admission $15, registration on entry or see the attached for a free pass!
Seminars start at 10.30am and are repeated daily.
We’d like to share part of James Griffins column from Saturday – we think he hit the nail on the head!
In Auckland, we’re in the middle of an Arts Festival. All over town there are actors, musicians, dancers and pornographic puppets doing their artistic business at myriad venues. We are embracing art in all its many and varied forms, which is, obviously, the point of an Arts Festival.
On top of that, as we hit festival overload here in festive Auckland, this week is the Pasifika Festival, where we celebrate our Pacific Island neighbours and peoples. This weekend, Auckland’s fickle weather permitting, thousands upon thousands of Palagis and Polynesians will descend upon Western Springs to bathe in the cultures of many countries and eat icecream out of a coconut.
All of which leads me to wonder what you have to be to earn the right to have your own festival. Given that the word “festival” is most commonly associated with words and phrases like “music”, “wine and food”, “film”, “readers and writers”, “religious” and, in this case, “arts”, it would seem that a festival generally celebrates the finer, more ethereal, more spiritual things in life. But who say this has to be the rule? How come we don’t have, for example, the Auckland Accounting Festival? Why can’t we have a week (or probably only a weekend, given how notoriously efficient accountants are) where we, as a community, celebrate the joys of book-keeping? Just because something is inherently boring to normal people doesn’t mean it shouldn’t be celebrated festively.
And, if the accountants I know are anything to go by, if you turned it into a Wine and Accounting Festival then it would truly go off – and would also, undoubtedly, come in on budget.
Let us know what you think – would you attend an Accounting Festival is there was one?
IRD issued a list of taxpayers they are holding money for – $55 million in total!
The IRD is providing “a service for the true owners of unclaimed money which has been left untouched for six or more years in companies such as financial institutions and insurance companies”. Most of the money is apparently not tax refunds, but for example a forgotten bank account or financial credit, handed over to Inland Revenue for safekeeping.
We don’t expect that clients of our firm will be owed any tax refunds, but you never know what else is out there! And human nature being what it is – who wouldn’t have a look?! We did!
Attached is the link and instuructions to see if you (or anyone you know) has any unclaimed money.
http://www.ird.govt.nz/unclaimed-money/unclaimed-money-0.html
1 October is here!
Remember to update your sales system, invoices or charges for the increase of to 15% GST.
If you employ staff, and you work out pays using the PAYE tables or calculations from the IRD website, remember you have to use the updated table or re-calculate the amounts from the website; or if you use MYOB payroll or another payroll system, remember to install the updates.
We are here for any queries you have over this time of change.
The team at Oborn & Johnson
When one describes the current economic climate we are in, it is certainly not business as usual. I think the Australians got the name right when they termed the events of mid-2008 the Global Financial Crisis.
The debate continues as to whether we are in recession or recovery – one attitude seeming pessimistic and the other optimistic. A colleague described the world economy to me the other day as being in transition. I think this is a great term, as we truly are transitioning from the world as we knew it, to something that not even the bravest economists will predict. Whatever it may be, I believe the Global Financial Crisis was the first leg of a three-ring circus – with its follow up acts being the Global Spending Crisis and the Global Technology Crisis.
The Global Financial Crisis was of course centred on the world’s banks – and finance companies. What we all need to remember is that a downturn is actually a correction – the bigger the excesses that precede it, the greater the correction. We all saw worldwide property prices going out of control, spending out of control, and the swing of the pendulum back has certainly had a significant impact on us all.
Currently we are in the second phase – Global Spending Crisis. The consumer driven economies of the world have taken a severe battering and people’s spending habits are changing significantly, probably forever. While we are not quite back to the days when my mother and her contemporaries washed and re-used plastic bread bags, we are certainly all learning what is important in our lives and where we really want to spend that money. Spending for spending sake is well and truly a thing of the past.
Once the spending crisis ends (and remember that is only a short term correction) eventually the world markets will get used to the new spending philosophy.
The third leg of this will be the Global Technology Crisis. Technology is changing at a huge rate and it is impacting on every business, whether we are aware of it or not. All business people should be looking constantly at their business to see what the impact of technology is – social media, new developments, processes which will become redundant, and, most exciting of all, where new opportunities for businesses exist. In five years time, virtually no business will be operating in an identical way to how it is now.
The thing to remember of course is that this is a transition economy and that this three legged driver of change will bring huge opportunity for businesses along with challenges.
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