March Madness

Posted 2 years, 6 months ago by Maggie Waine    0 comments

Hello everyone!  We hope that the first few months of 2015 have treated you well.  Its that CRAZY time of year in our offices....the dreaded "31Marchitis" that we contract each year.

Not much has changed in the last few months, Ben is married and about to be a first time daddy (any minute now!)...and thats about it for team news - bit scarce on the office gossip side of things.

Now to the actual newsletter!

 

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A NOTE FROM DAVID

31 March is looming and remember if income is up we need to increase expenses by bringing in deferred expenditure.  Now is not the time to buy Assets!!!

All provisional tax will be looked at when we do GST for the period ended 31 March 2015.

If you are contacted by Inland Revenue staff by phone or email, please ask them to deal with us directly as we are your tax agent.  Legally we cannot stop IRD staff from contacting our clients directly, but if the clients themselves advise IRD staff to liaise directly with their tax agent for any information they require, then they will do so.

We have had a lot of clients who are getting contact with IRD staff over information that we as their tax agents can easily provide.  This, in some cases, is causing a lot of distress as this information is not necessarily readily available at our clients fingertips like it is for us!  Also, in some cases we are communicating with the IRD in relation to administration things that clients may not even be aware of. (ie, transferring credits, GST de-registration etc)

So long story short - let us deal with the beaurocracy and don't take IRD phone calls.

 

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DIRECT FROM THE INLAND REVENUE

New rules, effective from 1 April 2015, clarify the tax treatment of accommodation and meals you provide to employees.  The rules also cover allowances paid to reimburse employees for accommodation and meal expenses.  Some employers can backdate the new rules to 1 January 2011 for accommodation and 1 April 2011 for meals, if they meet certain conditions.

Key Changes

Accommodation and accommodation payments are tax-exempt for employees:

  • on out of town secondments for up to two years
  • on capital projects for up to three years
  • who work at multiple workplaces on an ongoing basis
  • who attend meetings, training courses or conferences as part of their job

Some employees have longer tax-exempt time periods.  Specific rules apply to:

 

  • people working on Canterbury earthquake recovery projects
  • New Zealand Defence Force personnel
  • ministers of religion
  • people working overseas.

 

Meals and meal allowances are tax exempt for employees:

  • on work-related travel for up to three months
  • who attend meetings, training courses or conferences as part of their job.

What you need to do

Employers must ensure they tax their employees' accommodation or meal correctly.  Receiving accommodation or meals can affect their employees' Working for Famililes Tax Credits entitlements, child support payments and student loan obligations.  Please tell any of your employees who may be affected.

Find out more

The IRD has an online decision tool available on their website from 1 April 2015 to help you work out whether the accommodation or meals you provide are taxable.  In the meantime, go to www.ird.govt.nz (search keywords: employee allowances)

 

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RUNNING A TRUST AND GETTING IT RIGHT

There are many different ways that a trust can be attacked - and various people who may want to do so.  Usually the best defence to any attempt to undermine a trust is to ensure the trust has been administered properly.  If trustees can show they have acted honestly, with a careful eye on the best interest of the beneficiaries, there is less likelihood the courts will want to interfere. 

Trustees Duties

The terms of any trust are usually set out in a deed.  Alternatively the trust can be created under a will or some other document.  This document will set out some of the important obligations imposed on the trustees.  Irrespective of the form of document which sets out the terms of the trust, it is important to be aware that there are other obligations imposed on trustees by law.

These duties imposed by law are default duties.  That means that the duties apply except to the extent that the terms of the trust (the deed or will) might say otherwise.  Because the duties are not all conveniently all written down in one place, they are often easily overlooked.

Most trustees enter into trusteeship with little or no knowledge of the duties imposed on them by law.  However it is also important to remember that (with one exception) the common law duties of trustees must be read subject to anything to the contrary set out in the terms of the trust.  That one exception is to act honestly, in good faith and in the best interest of the trust and its beneficiaries.  The terms of the trust cannot contract out of that fundamental duty.

Schedule of Trustees' Duties

This schedule sets out the main duties of trustees in law.  Trustees may have further specific duties in some circumstances.  The deed or other document under which the trust was established (the "terms of the trust") may impose further duties or may vary these duties.  Apart from the final duty (to act in good faith and for the beneficiaries' benefit) any of these duties may be waived, totally or in part, by the trust document or by consent of all the beneficiaries provided they are all adult and have full capacity.

1. Know the terms of the trust

Trustees must be familiar with the provisions of the terms of the trust.  If trustees are unsure what the trust terms mean, they should take legal advice.

2. Follow the terms of the trust

Trustees must act strictly in accordance with the terms of the trust and the law.

3. Diligence and prudence

Trustees must exercise prudence, diligence, skill and care in administering the trust.

4. Distribute to beneficiaries

Trustees must pay the trust money to the beneficiaries, or distribute assets to them, when required under the terms of the trust.  

Example: Trustees must not allow anyone to benefit from the trust who is not a beneficiary under the terms of the trust.

5. Impartiality

Trustees must act fairly and respectfully towards all beneficiaries.  Unless the terms of the trust say otherwise, all beneficiaries are entitled to equal consideration.

6. Prudent investment

Whenever trustees invest trust money or retain investments, they must:

a). Invest in the manner required by the terms of the trust;

b) Exercise the care, diligence and skill that a prudent person would exercise when managing another person's property; and

c) If the trustee is a professional trustee, exercise the care, diligence and skill a prudent member of that profession, employment or business would exercise when managing another person's property.

A professional trustee is one whose profession, employment or business includes acting as a trustee or investing money for others, or who has been appointed because of a professional relationship (whether as lawyer, accountant or any other profession) with the settlor or any trustee.

7. Accounting and information

Trustees must provide all beneficiaries with financial statements and other documents and information sufficient to enable the beneficiaries:

a) To exercise their rights as beneficiaries; and

b) To hold the trustees to account where necessary.

However, trustees have a discretion to withhold information where:

i) the beneficiary is underage (but trustees in that case should send all relevant infomration to the beneficiary's parent or guardian where appropriate);

ii) necessary to maintain commercial confidentiality or the personal privacy of any person; or

iv) the beneficiary does not have full legal capacity (in which case trustees must consider whether information should be provided to some other person such as an attorney or manager)

8. Act jointly and unanimously

If there are two or more trustees, all must act jointly and all trustees must join in all decisions and actions.

Example: A decision reached by only two out of three trustees of a trust is invalid, unless the terms of the trust allow majority decisions.

9. Act personally

Trustees must not delegate any of their duties, unless the decision to delegate:

a) is specifically allowed by the terms of the trust; or

b)  is approved by legislation; or

c) cannot be avoided for practical reasons and is usual in the ordinary course of business and the agent is employed within the scope of the agent's business.

10. No Profit or payment

Trustees must not profit from their appointment.  They are not entitled to be paid for their time or work as trustees.  The only exceptions are:

a) Where this is permitted by the trust document or by legislation or is awarded by the court;

b) Payment by agreement with all the beneficiaries, all of whom are adult and have full capacity;

c) Charges which a lawyer trustee is entitiled to make as a barrister when representing all of the trustees in court; and

d) Reimbursement for actual and reasonable out of pocket expenses.

11. No sefl interest

Trustees must not place themselves in a situation where there is a real conflict between their personal interest and their duties as trustees.

Example: Unless authorised, a trustee must not take part in any decision which will benefit that trustee

12. Self dealing

Unless authorised, a trustee must not enter into any transaction between the trustee as such and the trustee personally.

Example: A trustee must not personally purchase trust property unless the terms of the trust include a clause which specifically allows this.  This includes any attempted purchase through an agent or any other person.

13. Genuine exercise of discretions

Whenever trustees are given a discretion, they must exercise this in good faith and taking into account all relevant circumstances at the time the decision is required.  Trustees must not agree in advance to place a limitation or restriction on the future exercise of any discretion.

14. Good faith and for the beneficiaries' benefit

Trustees must always act honestly, in good faith and in what they believe to be the interest of the trust and its beneficiaries.  This is the fundamental duty of all trustees and the terms of the trust cannot reduce this obligation in any way.


New Year, New Start, New Resolutions to break......

Posted 2 years, 8 months ago by Maggie Waine    0 comments

Welcome to 2015!!!  We hope that you all had a great Christmas and New Year break and are ready to tackle the 2015 year.

This year, I'm going to send out an email newsletter like this every 8 weeks or so.  This will help keep you all in the loop with any Inland Revenue news that might be interesting, plus any little articles that we find that may apply to your financial situations.  

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TRUSTS - BEST PRACTICE 

Last year David attended a professional development course that illustrated the best practice for administering Trusts and the potential pitfalls that trustees may find themselves in.  

The following paragraphs are excerpts from this professional development course that was presented by Grey Kelly Law Ltd.

Trusts and Relationship Property

There are a number of issues but in essence New Zealand's matrimoial or relationship property laws over the last 30 years or so have evolved to recognise or enforce equal division of property acquired or built up during the course of a relationship.  This is not unique to New Zealand; jurisdictions such as Australia, the UK and California have rules ensuring equal division of resources.

Trust laws uphold the right of a person (the settlor) to transfer assets to a trust for up to 80 years for the benefit of a number of discretionary beneficiaries who commonly include the couple, their children and grandchildren.  Inherent in the concept of the discretionary family trust is the trustees' ability to treat beneficiaries unequally; indeed some beneficiaries may receive nothing at all.  Fundamental to the administration of a trust is the power to appoint and remove both trustees and beneficiaries.

It makes sense for a person who has inherited a significant sum of money or who retained a significant sum of money from a first relationship which ended, to place those assets into a family trust to protect them.

Section 44C Property (Relationships) Act 1976

If the court is satisfied that since the marriage or de facto relationship either of the partners has disposed of relationship property to a trust and the disposition has the effect of defeating the claim or rights of one or the spouses or partners, and s 44 does not apply, then a range of orders is available to the court.  A umber of points need to be made about s 44C:

a] It does not apply to a trust under a will or codicil;

b] Section 44C allows the court to award compensation - it does not claw back the items of property disposed of;

c] The court cannot make orders under s 44C if the disposition is one to which s 44 of the Act applies.

Section 182 Family Proceedings Act 1980

Secton 182 is an historical anomaly which has its origin in the English Matrimonial Causes Act 1859 which was replicated in New Zealand.  It authorises the court on or within a reasonable time after making an order for dissolution of a marriage or civil union, to enquire into the existence of any property agreement between the parties or eithe rof them or any ante-nuptial or post-nuptial settlement made on the parties.  Having made those enquiries the court can make such orders as it thinks fit about the application of the whole or any part of any settled property of the variation of the terms of the settlement for the benefit of the parties or the children of the marriage or civil union.

Ward v Ward

The most important case on s 182 is Ward v Ward.  In that case the couple transferred their shares in a farm-owning company to a trust and then undertook a gifting programme.  At the time of separation the farm was worth in excess of $2 million with approximately $250,000 owed on it.  Mrs Ward applied to the Family Court for an order under s 182 and in the Family Court an order was made dividing the trust into two separate one-halves; one half for the benefit of Mrs Ward and the children and the other for the benefit of Mr Ward and the children.

The proceedings went all the way up to the Supreme Court which agreed to create two trusts and dispose 50% of the assets in each.

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XERO

For some time now we have been investigating more technological advancements of managing the general ledger for clients in our accounting system and ways of gaining efficiencies to minimise any cost increases in respect to clients.  We appreciate that many clients are happy to pay for our time involved in value added, but see the cost of compliance as a necessary evil of being involved in business.  To that effect we have looked at the developments that MYOB are currently putting into the commonality of ledger with interaction with clients and also with the general ledgers suites being generated by Xero.

The decision has been made by Matley Financial to implement Xero for the ledgers from the 1 April 2015.  While this is an internal decision it has no direct bearing on you the client.  What we will be looking to do over the next couple of years is to progressively move people away from Banklink and into Xero products.  This is in order to maximise efficiencies from our end and what you will find is that while monthly invoices will be generated to cover the Xero fees by direct debit that this will not have an overall increase in your annual accounting fee.  Rather than be billed once a year with these as disbursements, they are billed on a monthly basis to recognise the cost of the Xero fees that are being billed to us.  

The Xero fees overall will generate efficiencies in our system that allows us for data capture and transferring that data capture into a set of accounts.  If clients are integrated into the Xero product as well it also enables you to access those reports and we can also use it as a way of cross referencing and checking information at any time that you may request it.  This is particularly important if you are talking to banks or other people who require a set of financial accounts which no longer requires you to ring our office and get a set electronically sent to you, as these are published onto your ledger directly.

We recognise that a number of clients enjoy Banklink and it is not our intention at this point in time to move people away from Banklink unless they so request.  We have noticed an increase in fees being charged by Banklink over the last couple of years and its important to note that MYOB purchased Banklink two years ago.  We believe that there is a limited shelf life for Banklink as MYOB will use it to integrate into their other accounting software packages that they operate.  While it remains a stand alone product if you wish to continue to use Banklink, we recognise that and there is no requirement by us at this stage to convert all Banklink clients to Xero.

If you wish to discuss anything in relation to how Xero could be used as a tool for the performance of your business then please contact us and we will be happy to assist with your enquiry.

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REMINDER FROM THE ACCOUNTING TEAM

Annual Accounts

If you have not already done so, please bring in your records for 2014 so that your annual accounts can be prepared in a timely manner.  You can drop these off at either the Tokoroa or the Hamilton office.

Direct Debit

Have you been double paying?  If you are paying your monthly fee by direct debit, ensure that your automatic payment for the same amount has been cancelled.  We have had a number of clients who have been double paying their accounts each month - now this isn't a problem for Matley, but it does affect the client's cash flow!!  You can cancel your automatic payment by visiting your bank branch or logging into your internet banking and changing it there.

Xero Subscriptions

We are in the process of instigating a new accounting programme called Xero which enables the client and the accountant to have an interactive view of their bank account transactions to code and view GST returns etc.  This is a great tool and a lot of clients have moved to this system as it saves time and money as there is less handling from our side.

The subscription for this service must be paid by direct debit however.  We are charged directly from Xero for each and every client's subscription to the service and as we have a large number of clients signed up to this awesome product, we disburse the cost on so that our cash flow is not adversely affected.  

Please ensure that you if you wish to sign up to Xero through Matley Financial Services that you have completed a direct debit form.  These are available at both the Tokoroa and Hamilton offices.

 


End of year already!

Posted 2 years, 9 months ago by Maggie Waine    0 comments

Wow!  2014 has just sped by.  Lots of changes have happened in the Matley Team over 2014.  We increased by one employee - Steffan Sinclair.  He came on board with the Hamilton office last month.  David and Maggie's family has stayed stable at Heath (3) and Zara (1).  Benjamin is looking forward to his wedding to Natalie in January 2015 and the addition of their heir in April 2015.  Janine, Jenny, Nicholas, Wendy and Angeline have all just stayed along for the ride!

 

Christmas and New Year closure

Matley Financial Services is closed to the public from Monday 15 December 2014.  We will be reopening on January 12, 2015.  We hope that all our clients have a Merry Christmas and Happy New Year and stay safe over this break.  Some clients will have received a little something from us in the mail (should NZ Post decide to deliver!).

 

Direct Debit reminder

Some clients pay their accounts by direct debit.  If you have recently moved from Automatic Payment to Direct Debit, please ensure that you check that you have ceased your Automatic Payment to us as you will now be double paying your account each month.

We are moving from receiving payments from Automatic Payment to Direct Debit to streamline our debtors and better budget our income each month.  If you would like the ease of paying your account this way, please contact the office and we can arrange the forms for you.

 

Overdue Accounts

This is something that is just distasteful in general, but this year we have had a number of clients who have been unable to pay their account for work that we have completed.  

If you are concerned that you will not be able to pay for our services prior to us undertaking the work, please phone and ask us for a quote so that you can budget our accounting fee.  We offer a range of payment services, and you are able to prepay your account under certain circumstances.  We unfortunately do not accept payment after the services have been provided as we have staff costs that we need to cover immediately.

Once we make the decision to send any overdue amounts to Debt Collection, we delink that client from our agency with the IRD and sever our engagement.  This is irreversible and only occurs when all other efforts to settle the account has been explored.

We hate doing this, so please pay your invoices as they fall due :-)

IRD tax payments

On the theme of fleecing you from your money, the Inland Revenue have changed their policy on receipt of tax payments.  If you pay your tax by cheque you need to ensure that the cheque actually gets to the IRD on the due date.  If you send it on the due date, you will incur interest and penalties on your tax as the IRD deems it to have been paid late.

The best way to avoid this is to send your cheque payment 10 days before it is due (since NZ Post takes this long to send letters now), or pay by internet banking on the due date using the "pay tax" function in your internet banking.

If you do not have access to internet banking there is the option of paying your tax into our Trust account for us to pay on the due date for you.  If you would like to take advantage of this, please notify the office in plenty of time to obtain the Trust Account bank account number.

 

coming up in January 2015

  • Information about Trusts and best practice
  • Tax due dates: Provisional Tax 15 January 2015; GST for period ended 30 November 2014 due 15 January 2015;  PAYE for period ended 30 December 2014 due 20 January 2015; GST for period ended 31 December 2014 due 28 January 2015.

 


New Arrival

Posted 3 years, 9 months ago by Maggie Waine    0 comments

Hi Everyone,

Just a quick email to let you all know that Maggie and David were safely delivered of their daughter on Friday 6 December 2013 at 5am.  Zara Ruth May Waine.  7lb 9oz.  Everyone is doing well and Heath is enjoying his new sibling.

 


November/December - Have you fulfilled your 2013 New Year Resolutions?

Posted 3 years, 10 months ago by Maggie Waine    0 comments

END OF 2013

How often do you think about whether you have fulfilled the New Year Resolutions that you so determinely (or not) make on January 1st?  If you make the resolutions simple and easy and not too unobtainable, you will be surprised at how fulfilled you feel at the end of the year when you realise you actually may have achieved them!

Matley Financial Services offices in both Tokoroa and Hamilton will be closed from Monday 16th December 2013 through to Monday January 13th 2014.  All the staff - David, Maggie, Jenny, Janine, Benjamin, Nicholas, Angeline and Wendy wish you a safe and happy holiday season through this time.

As at the sending of this newsletter, David and Maggie are still awaiting their new arrival.  They may send a picture or two once its all happened!!

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PASSPORT INFORMATION WILL BE USED TO TRACK DEFAULTERS 

(SOURCE - CCH Tax>NZ Tax Tracker> 2013> Issue 9, September 2013)

A new regulation made by Order in Council will allow the Department of Internal Affairs to share information with Inland Revenue to help track student loan borrowers and child support payers.  The regulation comes into effect on 3 October 2013.

Under the information sharing agreement, Internal Affairs will provide Inland Revenue with contact details from adult passport renewals or applications.  The information sharing agreement is the first to be made following changes to the Privacy Act 1993 which enabled effective and carefully controlled information sharing between agencies.

In announcing the new information sharing agreement together with the Internal Affairs Minister, the Hon Chris Tremain, the Inland Revenue Minister, the Hon Todd McClay said "Our tax system relies on voluntary compliance and the vast majority of people pay their taxes, their child support paymets and their student loan repayments on time.  But for those people living overseas who fail to comply, the principal reason is that many of them have simply lost contact with Inland Revenue.  This common sense measure will allow Inland Revenue to contact those people to arrange payment".

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CHILD SUPPORT CHANGES FROM 1 APRIL 2014

(SOURCE - CCH Tax> NZ Tax Tracker> 2013 > Issue 8, August 2013)

Inland Revenue has recently released a media statement outlining the forthcoming changes to child support laws.

The item notes that from 1 April 2014, the amendments "...include a comprehensive new formula for calculating child support assessments based on the circumstances of both parents, improving the way the child support scheme operates, and improving the way penalties are managed".

The new formula is designed to consider factors that include incomes of both parents "...and the level of care that both parents provide to their children".

Refer to the news release for further details on the child support changes

Source: www.ird.govt.nz

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GIFTING - ASSET DEPRIVATION

(SOURCE - The Small Business Institute Ltd, Tax-e-mail, Issue 1307)

There is a common misconception concerning gifting.  The maximum amount of gifts which can be made, prior to the gifting period (5 years before the date of means assessment for geriatric care subsidy) is $27,000.  The 2005 regulation is not clear whether this mens for the person being assessed or for a couple.  However, WINZ is interpreting it as for the person being assessed.  These last words are important.  If a couple are being assessed for going into care, then the total for the two of them is $54,000.  Thus many clients may prefer to gift $27,000 each per year.  If one only of a couple has to go into care, then the $27,000 gifted by the partner will be included as part of the amount for determining deprivation of property.  Ross Holmes Lawyers LP provided this advice.

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IMPORTANT BANKLINK CHANGES

We have been advised by Banklink of a number of important service updates we would like to share with you.

 Changes to the system requirements for all BankLink desktop products

A recent Microsoft directive means that from 1st February 2014, Windows 2000 and Windows XP operating systems will no longer be supported by MYOB BankLink.

This will not affect your ability to use MYOB BankLink desktop products on these operating systems. However, as Microsoft no longer supports any changes to these operating systems, if an issue occurs that is related to the operating system itself, and not the MYOB BankLink desktop product, we will be unable to offer a resolution.

These changes affect all MYOB BankLink desktop products only (not our online services):

  • BankLink Practice
  • BankLink Books
  • BankLink Notes (desktop)
  • BankLink InvoicePlus*
  • BankLink PayablesPlus*

* Windows 2000 does not apply to either of these products, as the operating system has never been compatible.


What does this mean from 1st February 2014?

  • Support will continue on how to use all MYOB BankLink desktop products, as it is now.
  • Installation of MYOB BankLink desktop products in either a Windows 2000 or Windows XP environment will no longer be supported.
  • Any issues with the software not working as expected in a Windows 2000 or Windows XP environment will no longer be supported.
  • MYOB BankLink will discontinue testing upgrades of MYOB BankLink desktop products in a Windows 2000 or Windows XP environment

We will continue to fully support Windows Vista until 31st October 2014, at which point, we will also discontinue support of this environment. A reminder communication will be sent out closer to the time.

If you plan to upgrade the operating system on any of your practice computers, or if any of your clients decide to upgrade their operating system, please talk to MYOB BankLink Support about the MYOB BankLink desktop products that will be affected. They will be able to offer advice on what backups you need to make, and whether the software can be moved or is required to be reinstalled.


For Banklink Clients Only

Posted 3 years, 11 months ago by Maggie Waine    0 comments

This email is for all clients who use Banklink.

It has become apparent that some of our clients are having issues importing their BankLink file.

The error looks similar to this:
> ClassName:    TApplication
> ErrorClass:    EAccessViolation
>
> Message:       Access violation at address 00012FE5. Read of address FFFFFFFF
>
> BankLink Books is using C:\BK5\
> Current Directory is C:\BK5
 
 
Benjamin has been in touch with BankLink and they have sent him a set of instructions which I have included below for our clients to follow so that they can upgrade to the latest version.  If the instructions have been followed correctly it should fix the problem.  If not, please call us for further assistance.
 

INSTRUCTIONS TO UPGRADE YOUR BANKLINK BOOKS

Please find below the upgrade link and instructions for your client to get them up to date with BankLink Books:

 Instructions

 BankLink Books Update Link - http://www.banklink.co.nz/files/setup_update_books_nz.exe

 

  • Please make sure you have BankLink Books closed before running the update file

 

  1. Please click on the link above and select “save as”
  2. Save the file to your desktop
  3. Once the file has finished downloading browse to your desktop
  4. Run the file – “setup_update_books_nz.exe”
  5. During the upgrade process you will need to point the update application to your current installed location of BankLink Books. This location can be obtained in BankLink Books under HELP > ABOUT or by right clicking on the BankLink Books shortcut on your desktop and selecting PROPERTIES

 

This will update you to the latest version of BankLink Books

 


Direct Debit Facility Now Available!

Posted 4 years ago by Maggie Waine    0 comments

Just a brief email to let all our clients know that a Direct Debit facility is now available with Matley Financial Services.

No more worrying about being late with your accounting fee, or having to remember to pay by the correct due date!

If you are interested in this, please contact Maggie on 0800 628 539 to set this up. 

If you currently pay by Automatic Payment and would like to convert to a Direct Debit, please also let Maggie know and this can be arranged.  Over the next 12 months, all AP's will be phased out and transferred to a Direct Debit option.

 


Matley Update - July 2013

Posted 4 years, 1 month ago by Maggie Waine    0 comments

Hi Everyone!

Its been a while since we have sent out a newsletter, but we haven't forgotten!

Just a quick update first on what Matley Financial's creators have been up too.  David and Maggie have moved house.  They are now happily ensconced in Rototuna.  This month was a bit haphazard because of the move, so if you have found its been hard to get hold of either of them, this is probably the major culprit!

Also, there will be a new addition to the Waine family at the end of November, beginning of December with Maggie expecting a sibling for young Heath.   Maggie is expecting to be on maternity leave from early November, but will continue to work from home where possible, so she will still be a point of contact should you require it.

As David is quite difficult to get a hold of at times now with running between three offices, please ensure that you get your appointments in with plenty of notice and if he is unavailable on the phone we have several other qualified staff who may be able to assist you.  If its an accounting query, you can talk to Ben, Jenny or Janine and if they can't help, David will be able to call you back if you leave your query with them.

TAX REFORM CONTINUES APACE

10/07/13 - www.nzica.com - Peter Vial ACA NZICA's General Manager - Tax

Recent and proposed changes in taxation.

Although tax was not "front and centre" in Budget 2013, some of the tax proposals buried in the fine print are worth keeping an eye on as they develop.  Also worth a watching brief are various legislative amendments and changes to tax policy that Parliament and Inland Revenue are currently working on.

Budget 2013

The 2013 Budget focused on expenditure ("spending well and not spending up" in the words of Minister of Finance, Bill English) and not on radical changes to the revenue side of the equation.

As expected, tax reform was a bit part player, with the focus more on housing, "bang for buck" in the public sector, and the Christchurch rebuild.

The Minister of Finance reiterated that the government is comfortable with tax policy settings in the "near term".  This suggests we are unlikely to see significant tax changes between now and the 2014 election and possibly throughout 2017 if there is no change in government in the meantime.

The National-led Government has considered and rejected major reform measures such as land tax and a capital gains tax and, instead, is focusing on "base maintenance" - filling perceived gaps in the tax base and closing loopholes.

The Budget also confirmed that tax revenue for the current year is up from the estimate by $1.5 billion - not surprising given they economy has expanded and unemployment has dropped.  A further sizeable jump is expected for next year.  In fact the government is banking on increases of about $3 billion per year for the next three years.

R & D tax break

The government is promising a tax break for small start-up businesses that invest heavily in research and development.  It will refund losses that arise from R & D expenditure up to a specified limit.  As we got to print, the detail, including an implementation date, has yet to be released but is expected soon.  The tax break will be useful provided the rules for accessing it are straightforward.

Blackhole expenditure

The government will address certain types of "blackhole expenditure", ie expenditure that is neither tax deductible nor depreciable.  The specific areas targets are company administration costs, certain costs related to patent and plant variety right applications, and expenditure on certain resource consent applications.  This is a welcome development.  However, there are many other types of expenditure that are still in the "blackhole" and that the government needs to address.

Thin capitalisation

 The Minister of Finance confirmed that changes will be made to the inbound thin capitalisation rules that apply to New Zealand taxpayers controlled by non-residents.  The key proposed changes are targeted at non-residents such as private equity investors who are "acting together" but are not subject to the current rules.

The changes are expected to generate $20 million over three years from 2014/2015.  It is critical that the changes do not "over-reach" and alarm foreign investors.  The detail is still to be finalised and NZICA will continue to engage with officials as they firm up the proposals.

IR's property investment focus

In the Budget the government allocated an additional $6.65 million a year of funding to Inland Revenue to tackle property investment tax compliance.  This follows several additional tranches of funding allocated to the Inland Revenue in the past few years for tackling compliance in the property sector.

According to the Minister of Revenue, about $110 million has been raised from additional property audit funding since July 2010.  On the same day as the Budget, Inland Revenue released an Issues Paper on the vexed question of when a taxpayer's intention or purpose to acquire land should be determined.  It invites views on which of the following two options is appropriate: when the sale and purchase agreement is entered into; or when the agreement becomes unconditional.

Tax legislation

There are currently three tax Bills in Parliament.  Two of them are so called "omnibus" Bills because of the wide range of issues they cover.  The first, which includes changes to the livestock valuation regime and new rules for mixed-use assets (such as baches, boats and aircraft that are used for both private and business purposes) is likely to be enacted in the next few months.  We are expecting confirmation that the mixed-use asset rules will apply to baches from 1 April 2013 and to other mixed-used assets in a later year.

The second Bill was introduced in late May and is likely to be enacted in the first half of next year.  It simplifies the law relating to foreign superannuation and brings the taxation of specified minerals mining (gold, silver and iron sands) more into line with the taxation of other businesses.  It also introduces the mechanism whereby Inland Revenue will be able to set minimum financial reporting requirements for certain taxpayers (in addition to companies that will be required to prepare financial statements).

Under the proposed changes to the taxation of foreign superannuation, the foreign investment fund (FIF) rules will no longer apply to foreign superannuation schemes.  Instead, lump sums from foreign superannuation schemes will be taxed when they are withdrawn or transferred to a New Zealand or Australian scheme.

The amount of tax will depend on how long the taxpayer has been a New Zealand resident, using one of two calculation options.  Periodic pensions will continue to be taxed in full on receipt.  People who transfer their foreign superannuation scheme interests into KiwiSaver will be allowed to make a withdrawal from the KiwiSaver scheme to pay their tax bill.  The proposed changes are intended to come into effect from 1 April 2014.

The third Bill, which introduces the concept of income sharing for parents with children, has been languishing in Parliament since 2010 and seems unlikely to get enough support to progress to a second reading.

Tax policy developments

Late last year Inland Revenue released a draft interpretation statement on the residence of individuals and companies.  When finalised it will replace a 1989 Public Information Bulletin which many practitioners currently consider when looking at residence "scenarios".

The Commissioner's new interpretation of the law of residence for individuals differs in several key respects from the 1989 view.  For example, in determining whether a person has a permanent place of abode in New Zealand the Commissioner is now proposing to place more emphasis on the availability of a dwelling.  Significantly it also concludes that a dwelling can be available even if it is rented to a third party - this is on the basis that such a dwelling can be within "sufficient reach" of the person.  The new interpretation also comes to some different conclusions regarding how the residence tie breaker tests under the double tax agreements work.

NZICA and members have made submissions on the draft statement and Inland Revenue is working through the issues raised.

Allowances

The Commissioner has issued an operational statement on the income tax treatment of accommodation payments, employer-provided accommodation and accommodation allowances.  The statement concludes that accommodation is generally treated as income of the employee and subject to PAYE.  An exception applies to "temporary accommodation".

The Commissioner has rejected the "net benefit" approach, which many practitioners have applied.  Under this approach, where an employee maintains a home in their original location, the argument is that no benefit arises from the employer-provided accommodation or allowance and that therefore no tax is payable.  According to the Commissioner the maintenance of a house in a different location is irrelevant.  It is fair to say that the statement has met with considerable opposition.  It seems likely that the government will introduce legislation intended to bring more certainty to this area.

The statement can be viewed at www.ird.govt.nz.

 

ACC DISCOUNTS - WORKPLACE SAFETY DISCOUNT (WSD)

- Nice ACC Lady that visited our office on Thursday 1st July 2013.

You Get:

- 10% Work Levy Discount for 3 years

To Qualify:

- Available to any business with 10 or less employees or payroll of less than $537,000.

- Open to all industries

 To Do:

- Fill in a self-assessment booklet and provide Health & Safety documentation

- May be subject to an audit.

 

RENTAL PROPERTY REPAIRS VIEWED DIFFERENTLY

 - Small Business Institute Tax-e-mail Issue 1304

Now there is no depreciation on buildings, you should look at repairs in a new light.  For example, a kitchen forms part of the house structure and you cannot claim depreciation.  The kitchen is a small part of the total cost of a house.  Therefore replacing it could be considered to be a fully tax deductible cost assuming the basic configuration is the same and any improvement is merely due to technological advancement.

For commercial property the law is being amended to remove this doubt.  This draft legislation will impact on repair treatment for commercial property.  The proposal is that even where an item is not a separate stand alone asset, if it has been separated in the depreciation schedule sometime in the past, it will be treated for repair purposes as a separate asset.  For example electrical reticulation.  We will report further on this with an example when the legislation is enacted.

In future, be careful splitting out the assets like reticulation, as separate item.  If they are getting near the end of their useful life and are going to need to be replaced in a few years, it could be better to forego the depreciation and leave them as part of the building.

 

LTC AND CURRENT ACCOUNT - BIG PROBLEM

- Small Business Institute Tax-e-mail, Issue 1306

A credit balance in the shareholder current account of an insolvent LTC will become income when the company winds up for ceases to be a LTC.  This arises because the debt owing by the company to the shareholders becomes forgiven and thus is income to the company under the accruals rules.  Company income has to be returned in the shareholders' tax returns.  To overcome this, we need to capitalise the loan.  This can be done by using the credit balance to pay for share capital or by subscribing for the shares in cash which is in turn used to repay the current account.  Either method will involve minutes and filing documents with Registrar of Companies which is why it is important to tell us when winding up a LTC.

 

FINANCIAL REPORTING FOR SMALL BUSINESSES

- Small Business Institute Tax-e-mail, Issue 1306 

From 1 April 2014, subject to the requirements of the Financial Reporting Act being repealed by that date, the requirements for small and medium sized businesses (not being issuers) to prepare financial statements will be largely governed by IRD needs.

IRD will want companies to continue to prepare financial statements.

For all other entities it intends to require the use of of double entry bookkeeping, accrual accounting and some minimum level of notes and accounting policies to be supplied by all entities.  Further, it will require a note of all related party transactions.

It looks as though nothing much is going to change.

 

STAFF DAYTONA COMPETITION

On April 12 2013 the Matley staff had a competition to see who was the speediest of them all.  For some fun, here are the results...

1. Benjamin (fastest lap time 28.60 seconds; slowest 30.74 seconds)

2. Nicholas (fastest lap time 29.74 seconds; slowest 33.83 seconds)

3. David (fastest lap time 30.87 seconds; slowest 35.69 seconds)

4. Angeline (fastest lap time 38.20 seconds; slowest 45.28 seconds)

5. Janine (fastest lap time 38.44 seconds; slowest 47.65 seconds)

6. Jenny (fastest lap time 58.15 seconds; slowest 1 minute 13.75 seconds)



Shim