March - End of Financial Year :-)

Posted 4 years, 8 months ago by Maggie Waine    1 comment


Be sure to change trustees to NZ resident trustees before the client departs from NZ.  In Australia, a trust is subject to its tax laws based on where the trustees are living.

Therefore, if you wish to avoid Australian taxes on the trust, including capital gains taxes, you need to make sure that the trustees of the trust are not at any time Australian residents.



From 2 November 2012, fringe benefits provided to working shareholders are distributions of profits.  They are no longer fringe benefits, because the company is a sole trader or partnership for tax purposes.  Thereofre, if a working owner has the use of a company car, he/she will need to keep a log book to calculate the non-deductible share of car running costs.  Add the value of this to the income of the shareholder at year end.  It's a pity the new rules couldn't have commenced from 1 April 2013.  About the best you can do to cover the period 2 November to year end is to start keeping a  log ASAP.



The law commission is currently undertaking a review on trusts which is the most significant piece of legislation that is likely to come before the house in respect to trust legislation since 1837.  The effect of the new act is that it will look at codifying a lot of equitable law and enshrine it within the existing legislation.  This includes what beneficiaries are and the obligations that trustees will have on beneficiaries.

 There are a number of changes that are proposed within the review and many lawyers are suggesting that this is going to be a fait de compli, however is still going through the submission process before anything is put before the select committees and drafted into a bill. 

 The make up of the review has placed a lot of emphasis on trustee disclosures and the rights and obligations of trustees towards the beneficiaries.  While in theory I do not have a problem with many of the proposals that have been put forward; most notably, the fact that trustees must act to the benefit of the beneficiaries and ensure that sufficient disclosure and information to the beneficiaries of their entitlement is given; ultimately I do have a concern that this could cause some fractious behaviour between the beneficiaries and the trustees (most notably mum and dad and the kids).  Imagine if a child had $70,000 of income allocated to them, turns 18 and is given a copy of the trust accounts and they ask for the $70,000 cash?

 There are some implications to us as professional advisors and trustees.  While this may not concern you at the outset, this may incur a rise in our premiums for Professional Indemnity, and as such we will be monitoring these and try to keep them to a minimum, but there may be a cost to you as the client for our professional services.  Under the current Professional Indemnity Insurance that I hold, any trust that I charge for as a trustee (this is your annual review process) is covered under my existing PI insurance.

 Some significant movement in the professional trustee area has been in a landmark case of Newmarket Trustees Ltd where a trustee company was wound up while shown to be insolvent and some of the comments passed by the Judiciary, has found its way into the new submissions.  Most notably the fact that if a trust company is incorporated and intends to be insolvent, there is an ability to “pierce the corporate veil” and look through to the individual trustees.  This will have a more significant impact on trading trusts than it will do on the “normal” asset owning trusts.

 The most significant area of reform which you would need to be conscious of is the fact that good administration is going to become an essential requirement of the new trust Act.  Good administration has never been a problem and is something that I have advocated for a number of years, however in recent times, the court has swung more towards intent than it has on administration.  The effect of legislation in its proposed form would incorporate intent as well as administration and this may be something that we need to address with some trusts as we go through the annual review process for this year.

 The other change which may or may not be beneficial to many trusts is the extension of the Perpetuity Act from the existing 80 years to 150 years.  While this sounds agreeable in principal, the reality is that most trusts would not extend beyond their natural life of the settlors with most of the beneficiaries agreeing to have the trust wound up and distributed through to the beneficiaries upon the death of the settlors (most notably mum and dad).  Of course, this changes when you are setting up a trust in your twenties as we begin to live longer when after 80 years you reach 100 years you may actually still be alive in which case extending to 150 years would show an indication of transferring wealth to the next generation.

 We of course will continue to monitor the proposals as they move through the legislative process but at this point in time it is our recommendation that all trusts ensure that their trustees are brought up to date with the prospective changes in legislation.



IRS decides to audit Grandpa, and summons him to the IRS office. The IRS auditor was not surprised when Grandpa showed up with his attorney.
The auditor said, 'Well, sir, you have an extravagant lifestyle and no full-time employment, which you explain by saying that you win money gambling.
I'm not sure the IRS finds ...that believable.'
I'm a great gambler, and I can prove it,' says
Grandpa. 'How ...about a demonstration?'
... The auditor thinks for a moment and said, 'Okay. Go ahead.'
Grandpa says, 'I'll bet you a thousand dollars that I can bite my own eye.'
The auditor thinks a moment and says, 'It's a bet.'
Grandpa removes his glass eye and bites it.
The auditor's jaw drops.
Grandpa says, 'Now, I'll bet you two thousand dollars that I can bite my other eye.'
Now the auditor can tell Grandpa isn't blind, so he takes the bet.
Grandpa removes his dentures and bites his good eye.
The stunned auditor now realizes he has wagered and lost three grand, with Grandpa's attorney as a witness. He starts to get nervous.
'Want to go double or nothing?' Grandpa asks 'I'll bet you six thousand dollars that I can stand on one side of your desk, and pee into that wastebasket on the other side, and never get a drop anywhere in between.'
The auditor, twice burned, is cautious now, but he looks carefully and decides there's no way this old guy could possibly manage that stunt, so he agrees again.
Grandpa stands beside the desk and unzips his pants, but although he strains mightily, he can't make the stream reach the wastebasket on the other side, so he pretty much urinates all over the auditor's desk.
The auditor leaps with joy, realizing that he has just turned a major loss into a huge win.
But Grandpa's attorney moans and puts his head in his hands.
'Are you okay?' the auditor asks.
'Not really,' says the attorney. 'This morning, when Grandpa told me he'd been summoned for an audit, he bet me twenty-five thousand dollars that he could come in here and pee all over your desk and you'd be happy about it.'

Far Out, its February!

Posted 4 years, 9 months ago by Maggie Waine    1 comment

Where has the time gone?  Its flown by so quickly.  The Easter eggs are out in shops before the tinsel is vacuumed up!!

The month of January was a busy one on the personal side.  David had surgery at the end of January to remove his varicose veins and has been on bedrest for the last two weeks.  He will be back in the office on Monday 11th February.  Thanks to the staff in the Hamilton and Tokoroa offices however, we are pretty sure that most clients weren't aware that he was out of action!  He is making a great recovery and Heath is enjoying immensely being able to climb all over him again.



Anthony Grant -

Many lawyers think the Family Court is "soft" on Trusts and will modify them by one means or another.

JEF v GJO & Anor [2012] NZHC 1021 - a decision of Duffy J on appeal from Judge Brown - shows this assumption is wrong.

A woman, who had children from a previous marriage, met a man in mid-2004.  She was having a home built and it's now owned by "her" Trust.  The man had two children and was about to separate from his wife.  After the separation he acquired a house ("Lee Road") which was transferred to a Trust of which he and his accountant were trustees.  Following the transfer the Trust owed him $650,000.

The man and woman started a sexual relationship in about June 2004, and in October 2005 she and one of her children moved into Lee Road.

She left the house in 2008 and, with a parting gesture of ingratitude, handed the man a notice of claim under the PRA.

This is how the Courts treated her claims.

  1. She said the debt of $650,000 was relationship property.  As the debt arose from a transfer of Lee Road to the Trust when the parties were not in a relationship, Judge Brown said the debt was not relationship property.
  2. She said that as he had left the debt to her in a Will that he later revoked, it should be treated as relationship property.  The court said that separate property does not become relationship property because it is left by one party to another in a Will.
  3. She said that as the sum of $100 that was supposed to have been settled on the Trust at the outset had not been paid, the Trust was void for uncertainty.  Both Judge Brown and Duffy J rejected this. ("I see no reason why the $100 cannot still be recovered from [the man's] estate" - Duffy J.)
  4. She said the man's right to occupy the house at Lee Road was relationship property and the value should be divided.  Judge Brown said the man occupied the property pursuant to a discretion and right to occupy was not an item of property that had value.
  5. The man had the right to appoint and dismiss trustees.  The woman said these rights had a value equal to the value of the Trust's assets and the right was relationship property.  Without referring to the "Bundle of Rights" doctrine as such, the argument was rejected.  Reliance was placed on Winkelmann J's decision in FMA v Hotchin [2011] 2 NZLR 469 where she held that a power to appoint trustees and discretionary beneficiaries does not give the appointor "control over the assets of the Trusts, because that control rests, at law with the trustee..." [83]
  6. The man had included the Lee Road property in the Will that he later revoked.  The woman said that by treating the property as his own, there was an "alter ego" Trust.  Judge Brown held that as an "alter ego" Trust is merely evidence to show a sham Trust, and as no claim of sham had been pleaded, her claim failed.  Duffy J said "The mere fact that there was actual control exercised by the settlor over the trustees or the Trust property [does] not provide justification for looking through or invalidating a Trust.  It is merely an indication that the settlor had an intention to create a sham Trust" [63].  There was good evidence that the man created the Trust to provide assets for his children:  "the evidence shows that a primary motive" for the Trust was to provide for them [69].
  7. Judge Brown said that if the argument of sham had been pleaded, he had no jurisdiction to determine the dispute since the Family Court cannot investigate claims in equity where the amount in dispute is more than $200,000.  Duffy J said she saw no reason to "address the question of whether the Family Court has jurisdiction to determine the validity of Trusts".
  8. The woman said she had a good claim for a constructive trust over assets of the Trust "because she put energy and time into upgrading and making the Lee Road property acceptably presentable" [31].  Judge Brown said that the man had paid for the cost of redecoration; the woman had live rent-free in the property at Lee Road while being able to rent out the property that was in "her" Trust; and that "it would be inequitable for her to have a constructive trust" interest in the Lee Road property [31].
  9. The woman said the trustees held the Lee Road property on a bare Trust and, as a consequence, the man was the beneficial owner of the property.  Duffy J held that the man, being one of two trustees, was not "absolutely entitled" to the asset.  The trustees were not therefore bare trustees [78].  If he was a bare trustee, he was only one of several beneficiaries and they all had a beneficial interest in the property.  And even if his discretionary interest could be considered to be "property", it was not relationship property since the interest had been created before the relationship began.
  10. The woman made claims under ss.44 and 44C (which concern the disposition of relationship property to a Trust).  These claims failed because the relationship began after the property was transferred to the Trust.

Lesson: The Courts are not as opposed to Trusts as some people think.



Anthony Grant -

First, a bit of history, In 1867 England gave us a short provision which empowers the Courts to modify "nuptial settlements" - ie settlements that have been made on one or both parties to a marriage or an intended marriage.

The Courts have said that a Trust can be a "nuptial settlement".  The provision, whose current statutory identity is s 182 of the Family Proceedings Act, applies to Trusts that were settled by one or other of the spouses and to Trusts that were established (and funded) by a parent or other relative of one of the parties to the marriage.

For a century or more the section was "buried" in statutes where its existence was unknown to the legal profession.  When Parliament modified the Matrimonial Property Act in 2001 the politicians weren't aware of s 182's existence.  Not only that, but they refused to enact provisions that were anything like as invasive of Trusts as s 182 is.

Instead, they enacted, s 44C of what became the Property (Relationships) Act - a much more modest provision.

Section 182 as it exists today is an anomaly, like a time traveller who has ended up in the wrong century.

  • It is available to people who were married or were parties to a civil union and isn't available to co-habitees.
  • It isn't available on separation, but only after a marriage or civil union has been formally dissolved.

These anomalies stem from his historical origin.  Back in the days when women had the status of chattels, they had no property rights, and they couldn't vote, when divorces were almost impossible to obtain and when people who co-habited out of wedlock (note the sinister connotation in that historic term) were said to live "in sin".

The Commission proposes that s 182 should be amended in two ways:

  • It should be available to de facto couples; and
  • It should be available as from the date of separation, rather than from the day when a marriage or civil union is dissolved (more than two years later).

Any change that makes s 182 more readily available, clashes with the will of Parliament when it last considered the rights that should be available to people following the dissolution of a marriage or de facto relationship.

The Law Commission is concerned with "black letter" law.  Not social policy.

Having read the Parliamentary debates, the draft Bills and the other materials that preceded the enactment of the PRA, I think it inconceivable that Parliament intended that a Trust established by a parent for a child following the child's marriage, should be able to be broken into and all its assets taken by the child's spouse at the end of a relationship.  Yet that is what s 182 allows.  I aslo think that it is morally wrong in this day and age that the Courts should allow one spouse to seize the other spouse's inheritance.

Section 44C

The Commission suggest that s 44C might be modified to require trustees of a Trust to which relationship property has been transferred, to compensate the spouse/partner whose claim or right has been defeated by the disposition.  Alternatively, it suggests that the PRA should be reviewed "to determine whether there are circumstances ... where dispositions to Trust should be set aside, to better give effect to the equal sharing regime in 'the PRA'".

If s 182 is retained and extended to include Trusts that are associated with de facto couples, changes to s 44C are unnecessary.  The Courts will have ample powers under s 182 to make any changes they like to Trusts, including the incorporation of new clauses that require the trustees to disgorge assets to an estranged spouse or partner.

The Commission's proposals for s 182 are understandable when viewed from the perspective of legislative consistency.  If the section is available to people who are married and the subject of civil unions, it is entirely logical that it should extend to de facto unions since de facto unions are now recognised by law.  Similarly, it is logical that s 182 should be able to be invoked after parties separate, rather than when their marriage or civil union has been formally dissolved, since other property rights can be invoked on separation.

The bigger picture is where s 182 should sit in our law, having regard to Parliament's refusal to enact a law that resembles s 182 - even remotely.

If the Trustee Act is to be comprehensively amended, Parliament should simultaneously look at the PRA and consider whether the Courts should have an unfettered hand to make any changes that they like to "nuptial" settlements.

The Commission made an alternative recommendation for modifications to the PRA and I favour Option 2.  This provides that "a review of the [PRA] should be undertaken to determine whether there are circumstances (not currently addressed by the provisions of the PRA) where dispositions to Trusts should be set aside ... ".


 FONTERRA DIVIDENDS - Clarifying the tax treatment of Fonterra dividends.

Mark Irving, CA [December 2012 NZICA Journal]

As Trading Among Farmers (TAF) continues to progress to reality, the tax treatment of Fonterra dividends from the new entities created - the Fonterra Shareholders Market and Fonterra Shareholders Fund - is still being considered.

This prospect has prompted a review of the tax treatment of the current Fonterra dividends due to some apparent variation among tax practitioners.

Fonterra sought and got legislation enacted in 2010 for special treatment of its new dividend which was previously described as a Value Add payment.  Under CD34B the general rule is that a distribution from a co-operative company is not a dividend, provided that the co-operative company elects in writing to the Commissioner to apply the rule before the distribution, and that election has not been revoked.  Fonterra has confirmed that they do make the election each year when they file their tax return.

As a distribution of business income for income tax purposes there are some consequences.

From Fonterra's perspective there is no requirement to attach imputation credits or deduct any withholding tax.

As the distribution is not a dividend it is part of the farm income for income equalisation deposit purposes.  A dividend on the other hand is not part of "net income from the business of farming" which determines the maximum income equalisation deposit a farmer can make in a year. 

As farming income, and if received by a sole trader or partner in a partnership, then that income is liable for ACC levies, which currently for a dairy farmer total 4.7% of that income.

The Fonterra Roadshow to Rural Professionals in August indicated some fruther changes for current dividends and outlined some general principles that are likely to apply to the new Fonterra Shaereholders Fund entity.

Fonterra has obtained a non-binding ruling from Inland Revenue (IR) that buying and selling shares to meet the Share Standard requirements will generally be on capital account.

The tax treatment of dividends on dry shares will change.  They will be treated as dividends for tax purposes as opposed to business income.  Fonterra will be required to deduct resident withholding tax (RWT) where applicable.

The tax treatment of dividends on wet shares will not change and they will still be treated as business income.

Neither will the treatment for GST purposes change, with both wet and dry share dividends not subject to GST.

The Fonterra Shareholders Fund will elect to be a portfolio investment entity (PIE) for income tax purposes.  The Fund will pay tax on behalf of resident investors at their prescribed investor rate (PIR).

TAF will have implications for sharemilkers as the additional flexibility of the three-year rolling average as the Share Standard will mean that in good production years the shares held will be less than production but still compliant with the Share Standard.  A lower price will be paid for non-share backed milk supplied.

Fonterra has emphasised that the above changes are all subject to TAF proceeding and the details being in the prospectus that will be issued.  Meanwhile, the correct treatment of the current Fonterra dividends is a "live" issue.


The Commissioner has conceded that he incorrectly interpreted legislation around the timing of provisional tax payments for new non-standard balance date taxpayers.

Initially of the view that every taxpayer had a 31 March balance date, the Commissioner consented to taxpayers adopting a non-standard balance date.

The consequent practice of treating the first year of an entity which had adopted a non-standard balance date as a "transitional year" was stated as being based on the Commissioner's interpretation of the legislation.

The effect of that interpretation was that new taxpayers were required to pay provisional tax two to three months earlier than would otherwise be required.

After being challenged on that interpretation, followed by nine months of stonewalling, the Commissioner has now conceded his interpretation was wrong.

Where it is clear a non-standard balance date has been requested and approved at the time of inception, then the first year is not to be treated as a transition year.  In practice that simply means applying for the non-standard balance date with the required supporting information at the same time as applying for an IR number for the entity.



A group of scientists placed 5 monkeys in a cage and in the middle a ladder with bananas on the top.

Every time a monkey went up the ladder, the scientists soaked the rest of the monkeys with cold water.

After a while, every time a monkey went up the ladder, the others beat up the one on the ladder.

After some time, no monkey dare to go up the ladder regardless of the temptation.

Scientists then decided to substitute one of the monkeys.  The first things this new monkey did was to go up the ladder.  Immediately the other monkeys beat him up.  After several beatings, the new member learned not to climb the ladder even though he never knew why.

A second monkey was substituted and the same occurred.  The first monkey participated on the beating for the second monkey.  A third monkey was changed and the same was repeated (beating).  The fourth was substituted and the beating was repeated and finally the fifth monkey was replaced.

What was left was a group of 5 monkeys that even though never received a cold shower, continued to beat up any monkey who attempted to climb the ladder.

If it was possible to ask the monkeys why they would beat up all those who attempted to go up the ladder.... I bet you the answer would be....

"I don't know - thats how things are done around here"

Does it sound familiar?

Noteworthy November!

Posted 4 years, 12 months ago by Maggie Waine    3 comments

Only a month until Christmas! Where has that time flown to?  Baby Heath is a baby no more and has just turned 1!  Our offices (both Hamilton and Tokoroa) will be closed from Monday 17th December and reopening again on 14th January 2013.  During that time the phones and emails will NOT be monitored, so any messages will not be checked until we reopen.  We hope that you all have a safe and happy holiday and that Santa brings you lots of pressies!!

Just another reminder that our Hamilton office is NO LONGER located at Horotiu Road.  We have had a few clients drop off their records on the doorstep.  This will prove problematic when we move!!  Please ensure that your records are sent to:

4A Mill Lane, Whitiora, Hamilton

Along with the change of address we have also upgraded our telephone system.  You now only have to call 0800 MATLEY and we are able to divert your call directly to whom you require - in either office!  The new fax numbers are:

Tokoroa 07 886 8178

Hamilton 07 838 9193

If you would like to receive this newsletter to a different address - please reply back with the address that you would like it changed to and we will update our system.  Also, if you think that you have a friend or colleague who would like our newsletter, please forward them this copy and they can subscribe following the instructions at the bottom.



- Tax-e-mail, Issue 1207 (Published by The Small Business Institute Limited)

Clients who rent out their apartments for short term stays, are involved in a commercial activity.  This may mean GST registration.  However, it may also mean they can claim the 15% fit out adjustment.  There is some debate about this.



- Tax-e-mail, Issue 1207 (Published by The Small Business Institute Limited)

The new IRD rate is 77 cents/km.  It is effective for the 2012 year.  The annoucement was made on 3 August 2012.




- Tax-e-mail, Issue 1206 (Published by The Small Business Institute Limited)

The IRD has just issued QB 12/11.  The QB says it is not tax avoidance to sell your home to an LTC for rental purposes, maximise your borrowing then use the money to buy a new home to live in.

Tax avoidance is very difficult to define and since the Penny and Hooper decision the goal posts appear to have moved again with the introduction of the "Parliamentary comtemplation test".  QB 12/11 only deals with the avoidance issues from the point of view of the Parliamentary contemplation test and does not provide sufficient detailed analysis of how this conclusion is reached.  We are threfore left up in the air as to how the IRD now sees avoidance.  We have asked for an explanation but have not yet received an answer.




- CCH, NZ Tax Tracker, Issue 8 Aug 2012

On 16 August 2012, the Income Tax (Universalisation of In-work Tax Credit) Amendment Bill (51-1) was introduced.  The purpose of the Bill is to enhance the fairness of the Working for Families tax credit scheme by amending the Income Tax Act 2007 to remove the discriminatory aspect of the in-work tax credit and extend the payment of an in-work tax credit to a parent who is in receipt of an income-tested benefit, veteran's pension or a parent's allowance.

The Bill proposes to amend the Income Tax Act by repealing ss MA 7, MD 8 and MD 9, and amending ss MC 6 and MD 4.




Now usually we find titbits online about the "uniqueness" of New Zealand's Inland Revenue Department, but this one actually came into our office.  Our staff member JANINE sent a message to the IRD for a client about a reoccuring problem with trying to change their balance date.  This is the reply that was received:

Dear Janice (yes, name wrong),

Thank you for your email.

My telepohione (yes that is the spelling) call to you yesterday also refers.

My most sincere apologies.  Our records show we actioned your request, but we actually did nothing. (yes, that is what it says)

I hope to have rectified everything in the next couple of days.

Yours sincerely

David W Barnes Customer Sercvices (yes that is the spelling)

Special aren't they???




Botox and nose drops and needles for knitting,

Walkers and handrails and new dental fittings,

Bundles of magazines tied up in string,

These are a few of my favourite things.

Cadillacs's and cataracts, hearing aids and glasses,

Polident and Fixodent and false teeth in glasses,

Pacemakers, golf carts and porches with swings,

These are a few of my favourite things.

When the pipes leak, When the bones creak,

When the knees go bad,

I simply remember my favourite things,

And then I don't feel so bad.

Hot tea and crumpets and corn pads for bunions,

No spicy hot food or food cooked with onions,

Bathrobes and heating pads and hot meals they bring,

These are a few of my favourite things.

Back pain, confused brains and no need for sinnin',

Thin bones and fractures and hair that is thinnin',

And we won't mention our short shrunken frames,

When we remember our favourite things.

When the joints ache, When the hips break,

When the eyes grow dim,

Then I remember the great life I've had,

And then I don't feel so bad.

New Hamilton Office

Posted 5 years, 1 month ago by Maggie Waine    3 comments

Hi everyone,

I've received some reports that some people didn't get anything on my last update.  I do apologise, and have NO idea how that happened.

I can confirm that the Hamilton branch of Matley Financial Services is now located at 4a Mill Lane, Whitiora, Hamilton.  The postal address however remains the same as PO Box 10318 Te Rapa Hamilton 3451.

If you are phoning us please phone 0800 628 539 in the first instance.  We are then able to transfer you to the person that you need to speak to in either the Tokoroa or Hamilton office.

Email addresses and mobile numbers are still the same for Maggie and David.


Hamilton Office Move

Posted 5 years, 1 month ago by Maggie Waine    1 comment

August Update

Posted 5 years, 3 months ago by Maggie Waine    1 comment


(Tacks Fax Published by the Small Business Institute Limited - Issue 1205)

In the Australian Government's 2012-13 budget it says "The Government will remove the 50 per cent capital gains tax (CGT) discount for non-residents on capital gains accrued after 7:30pm (AEST) on 8 May 2012. The CGT discount will remain available for capital gains accrued prior to this time where non-residents choose to obtain a market valuation of assets as at 8 May 2012".

Any NZ resident clients who own property in Australia, need to get their property valued as at 8 May 2012.



(Tacks Fax Published by The Small Business Institute Limited - Issue 1203)

The rules for depreciation of commercial rental property are different from residential. Where there is a building involved, you will need to go carefully through the depreciation schedule to determine which assets form part of the building and are therefore subject to depreciation at zero percent. We remind you even though the 20% laoding is still there it is no longer applicable for new assets.

We also remind you, where fit out was not separately identified for a commercial property at the time of acquisition, you are entitled to take 15% of the book value of the building (at the end of the 2011 income year) and then depreciate this at 2% CP per annum. Where there have been subsequent building alterations, and fit-out has not been separately identified, we believe this should also be subject to the 15% rule.



(CCH - Tax>NZ Tax Tracker>2012>Issue 8, August 2012>Convictions for tax offending quashed)

The Court of Appeal has allowed a taxpayer's appeal against conviction on four counts under ss 143A and 143B of the Tax Administration Act 1004 and quashed the convictions.


At material times, the taxpayer's husband (Mr N) operated a business as a forestry contractor. He did so inititally using two companies, Forest Tech 2000 Ltd (Forest Tech) and Forestech Contractors Ltd (FCL). He later traded under the name "Forestech Waikator Contractors". The taxpayer was a director of FCL but was not an officer or employee of either of the other two entities. The companies employed gangs of forestry workers who were paid wages. Mr N was responsible for the day-to-day operation of the business in the field.

Initially, the taxpayer assisted her husband with the administration of the business. In June 2002, she accepted a position as an investigator employed by the Inland Revenue Department (IRD). When her manager issued a directive that IRD employees were not permitted to be involved in businesses owned or operated by their relatives, the taxpayer resigned as director of FCL.

FCL failed to account to the Commissioner for PAYE deducted during the month ending 31 March 2002. The Crown alleged under count 1 of the indictment that the taxpayer knowingly applied or permitted PAYE deductions to be applied for a purpose other than in payment to the Commissioner in breach of s 143A(1)(d) of the Tax Administration Act. Count 2 alleged that the taxpayer had knowingly failed to pay tax deductions to the Commissioner by due date in breach of s 143A(1)(d) of the Tax Administration Act. Count 3 of the charge alleged that the taxpayer and Mr N had knowingly failed to file GST returns between 1 April 2004 and 1 June 2005 in breach of s 143B(1)(b) and (f) of the Tax Administration Act and count 4 alleged that the taxpayer and Mr N had knowingly file false GST returns during the period between 1 June 2005 and 31 March 200 in breach of s 143B(1)(c) and (f) of the Tax Administration Act.

The taxpayer was found guilty by jury in the District Court on four charges alleging breaches of ss 143A and 143B of the Tax Administration Act 1004, On 10 August 2011, the taxpayer was sentenced to nine months' home detention (R v Nayacak alou DC Hamilton CRI-2009-019-1128, 10 August 2011).

The taxpayer appealed to the Court of Appeal against conviction, She contended that the trial judge had failed to provide the jury with adequate directions regarding the essential elements of each of the charges on which the jury found her guilty. Separately, she contended that a miscarriage of justice had occurred because of errors in the manner in which her trial counsel had conducted her defence at trial.

Counsel for the Crown submitted that the Court of Appeal should direct a retrial on all charges.

Counsel for the taxpayer contended that several factors justified the Court exercising its discretion not to order a new trial. In particular, it was submitted that even if the Crown amended the indictment and proceeded under ss 147 and 148 of the Tax Administration Act, the prospect of the taxpayer being convicted was not great.

The Court of Appeal

The Court of Appeal upheld the taxpayer's appeal on the first ground and therefore found it unnecessary to deal with the alternative ground based on trial counsel error.

The Court of Appeal accepted that the Crown could point to sufficient evidence to seek a retrial on counts 1 and 2 but not on counts 3 and 4. The Court found that the following factors were sufficient to persuade the Court that it would not be appropriate to order a retrial on counts 1 and 2:

  • The difficulties that had arisen in this case were largely due to the manner in which the Crown chose to frame the charges. The Court considered that there would be an element of injustice in requiring the taxpayer to be subject to a second trial because the Crown proceeded on the basis of a flawed premise at the first trial.
  • The primary offender in this case was the taxpayer's husband. He was the person with overall responsibility for the operation of his business throughout the periods referred to in the indictment. He had been convicted on a large number of charges and was serving a sentence of imprisonment.
  • The offending had occurred between six and ten years ago. As a result of delays, none of which had been caused by the taxpayer, she had been under the strain of facing an IRD investigation and/or serious charges for nearly five years. She had also served one month of the sentence of home detention imposed on her by the District Court.
  • The taxpayer had lost, or resigned from, her job with the IRD.

The Court allowed the appeal against conviction and quashed the convictions. The Court declined to order a retrial on counts 1 and 2.



(ACC publication received July 2012)

For ACC purposes, the distinction between "active" and "passive" flows from the definition of self-employed earnings contained in section 14 of the Accident Compensation Act 2001. It provides that self-employed earnings consist of net income (other than employee or shareholder-employee earnings) "that is dependent on the person's personal exertions". Case law has refined this definition. If LTC owners contribute any physical or mental effort, including management effort, to the affairs of the company they are liable to paye an ACC levy on their LTC net income. Only the truly passive investor should include LTC income in "other income" in their tax return.



A man wrote a letter to a small hotel in a town he planned to visit on his vacation. He wrote: "I would very much like to bring my dog with me. He is well-groomed and very well behaved. Would you be willing to permit me to keep him in my room with me at night?"

Poppet Waine
Poppet Waine
An immediate reply came from the hotel owner, who wrote: "SIR: I've been operating this hotel for many years. In all that time, I've never had a dog steal towels, bedclothes, silverware or pictures off the walls. I've never had to evict a dog in the middle of the night for being drunk and disorderly. And I've never had a dog run out on a hotel bill. Yes, indeed, your dog is welcome at my hotel. And, if your dog will vouch for you, you're welcome to stay here too."

Heath Waine - July 2012
Heath Waine - July 2012

June Update

Posted 5 years, 5 months ago by Maggie Waine    2 comments


On 1 August 2012, the Companies Office will be making a series of changes to the fees it charges for services, and will also begin to collect levies to fund the Financial Markets Authority (FMA) and the External Reporting Board (XRB).

The new Companies Office fee structure addresses a funding deficit and better reflects the true cost of delivering services to the users of the Companies Office registers. FMA and XRB levies will now be included within most registration fees, annual return fees and with the filing of a prospectus.


Registration fees for NZ and overseas Companies virtually remain the same, with a slight reduction to $150, once the two new levies are included.

Matley Financial Services charge $135 plus GST to create a company plus the fee of $150 and the $10 name reservation fee make the cost of creating a company $295 plus GST - this remains unchanged from previous years.


The company annual return fee is being re-introduced as the Companies Office can no longer continue to provide this service for free. The new annual return fee will be $45, this includes a $25 registration fee, a $10 FMA levy and a $10 XRB levy.

This will increase the cost of the annual return fee from Matley Financial Services to $95 plus GST per year for filing an annual return. The $50 that we charge is our time to ensure compliance with the Companies Act and retaining correct records on file.


The Financial Markets Authority (FMA, an independent Crown entity established on 1 May 2011, is NZ's financial services and market conduct regulator. FMA's operational activities contribute to improving confidence in capital markets and financial service providers through education, licensing and supervision.

The External Reporting Board (XRB) is responsible for all aspects of financial reporting and auditing and assurance standards setting.

New Zealand needs well-functioning capital markets to provide a vital source of finance to help our businesses grow, this includes having clear rules and regulations for market participants to follow.

Through the establishment of the FMA and XRB the government aims to restore investor confidence and help drive economic growth in NZ. In order for the FMA and XRB to do their job they need to be adequately resourced and the collecting of levies is essential to fund this.


The Charities Amendment Act (No 2) 2012 (No 43) received the Royal assent on 6 June 2012 and comes into force on 1 July 2012. The Act disestablishes the Charities Commision and reassigns functions and duties under the Charities Act 2005 to a Board and to the chief executive of the Department of Internal Affairs.

The legislation was introduced to Parliament on 29 September 2011 as part of the Crown Entities Reform Bill (No 332-1). The Charities Amendment Bill (No 2) was divided from the Crown Entities Reform Bill by the committee of the whole House as Bill 332.3C.

The Charities Amendment Act (No 2) proposes a number of consequential amendments to other enactments relating to the Charities Commission. The Tax Administration Act 1994 has been amended by repealing the definition of "Charities Commission" in s 3(1) an substituting s 81(4)(fb).




Nationwide residential property values have risen again in May according to the latest QV index. This is after values had remained relatively steady for a couple of months. As a result values are up 1% over the past three months, 3.9% up over the past year, and are now 2% below the previous market peak of late 2007.

Sales activity has remained relatively strong for the past couple of months, with no evidence yet of the usual decline in sales seen over winter and there are now buyers who have been looking for a house for some time and either cannot find something that meets their needs or are being out-bid by other keen buyers.



Many clients have been asking about Heath. He is growing like a weed. He is now almost 7 months old - has three teeth (two lower, one upper) and loves to chew everything (especially Dad's calculator). He's a very social little boy with ready smiles for everyone. He's working hard on crawling and has rolling and shuffling backwards down pat.

Dad and Heath enjoying a drink at Scott's Epicurian in Hamilton


Heath at 6.5 months.


March Madness!!

Posted 5 years, 8 months ago by Maggie Waine    1 comment


We like to keep our clients abreast of pertinent accounting issues, so you have received this as you are a valued client of Matley Financial.

If you don't want to receive these emails, there is an "unsubscribe" function at the bottom of this email.  If you would like this email sent to another email address you can email with the email that you would prefer this turned up to.


Its been a wee while since our last newsletter.  We hope that everyone had a lovely Christmas break and New Year.  Since it has been a while since the last newsletter I thought it would be good to catch you up on the staff members.

We now operate two offices.  One at our home in Te Kowhai, Hamilton and the other on Bridge Street in Tokoroa.  At the Hamilton office we have Benjamin Anderson and Jo Reading.  Ben is currently in his last year of Wintec studying accounting and works full time around his studies.  Jo is David's secretary and works one day a week in the Tokoroa office as well.  She is the "go-to" girl for appointments!

Maggie is back working part-time.  Her job has moved to a more administerial role (she like to say "Financial Controller").  She works in and around caring for Heath who is now 3 months old.

David is in the Hamilton Office on Mondays, Thursdays and Friday.  He is in the Tokoroa Office on Tuesdays and Wednesdays.

In the Tokoroa Office we have Jenny Joynt who is the Office Manager, Janine Park who is our newest arrival and is an Accounting Technician.  We also have Wendy Harrison and we are looking to take on another part-time school leaver in April.



- by Anthony Grant,

Today's article is about one of the most significant Trust cases to be decided in this country in recent years: Spencer v Spencer and Another CIV-2001-485-000857, 19 October 2011, a decision of French J.

Most Trust deeds contain clauses that excuse trustees from all liability except fraud, dishonesty or other deliberate fault.  The UK Privy Council considered such a clause last year in Spread Trustee Company Limited v Hutcheson & Others [2011] UKPC 13.  I wrote about it in NZ Lawyer on 15 July 2011 ("To what extent can trustees limit their liability for loss?").  By a majority, the PC upheld the clause.  I said that the dissenting judgments of Lady Hale and Lord Kerr seemed more compelling in their logic than the arguments of the majority.

In the Spencer case French J had to decide wehther a clause that excluded liability for "any loss not attributable to [a trustee's] dishonesty..." would excuse trustees who had committed several breaches of trust.  She held that the three trustees - one of whom was an accountant - could not rely on the clause as they "simply did not act as an honest person would [have done]": 194.  In saying this, she gave an unusually expansive interpretation to the concept of "dishonesty".

The litigation involved a Trust that was created following the collapse of a marriage.  A mentally disabled son of the spouses was supposed to receive $200 pw from the net income of a Trust.  He got a few payments but they stopped when the father trustee, via a Company, charged the Trust for so many expenses that it had no "net income".

These are some of the acts that were held to be a breach of trust.

  • The husband's Company owed the Trust $195,762.  It was held to be a breach of trust for the trustees not to have sought interest on the payment of that debt, or to have taken steps to recover it.
  • The husband's Company charged the Trust fees for managing a property.  It was held that this was prohibited by a clause which prevented the husband from taking "any benefit whatsoever for any act, service or business performed as a trustee hereof" [111].  The Judge held that the Company was "a legal entity controlled and beneficially owned by the settlor" even though the shares in the Company were co-owned with the other two trustees and the accountant trustee was a co-director with the husband.
  • The management fees that were paid to the husband's Company were held to be excessive.
  • It was a breach of trust for the trustees to have approved the Company's fees and deducted them from the debt that the Company owed the Trust.
  • It was a breach of trust for the husband not to have paid interest on his advances.
  • It was a breach of trust for advances made to the husband for the benefit of the children (to enable him to buy them birthday presents and take them out for meals), to have been treated in the accounts as a debt owing by the children to the Trust.
  • It was a breach of trust for the trustees not to have obtained rent from the husband's Company [200].

The husband and truth did not lie well together.  He told the Court that the Trust debt was "creative accounting", which was designed to deceive creditors [56].  He also said a claim that his Company was paying an equivalent sum $200 pw for rent was "a deliberate mis-statement so as to try and make the building look more attractive to prospective buyers." [161].  Such deceptions tend to poison judicial goodwill.

But the husband was only one of three trustees.

According to the Judge, all of them "expressed a strong sense of outrage at being sued"  and regarded the husband's former wife "as not only vindictive but also ungrateful for all the support they claim to have given her and the family in the past during difficult times.  They consider they have done absolutely nothing wrong and have worked very hard in the interests of the beneficiaries." [190].

The Judge said she was "driven to the conclusion that they may well have believed that what they were doing was morally justifiable... They all for exaple, seemed strongly imbued with the idea that the relationship property settlement was unfair to [the husband] and that [the wife] was unreasonable.  They were also strongly imbued with idea that payment need not be made to [the son] because he was well provided for by [another Trust].  I gained the clear impression that this was a key reason for not making the payments [to him]..." [192].

It is in the context of these findings of subjective innocence that the Judge's finding of "dishonestly" is of particular interest.

Trustees are now on notice that breaches of trust may be categorised as "dishonest" even though the trustees themselves believe that their conduct was at all times morally justified.

Many will think it anachronistic and wrong that trustees can be chosen to manage wealth for the benefit of others, be paid for doing so, and yet be excused for all the loss they cause by their incomptence and fault.

This case may become the springboard for a new approach to the interpretation of clauses that purport to exclude or limit the liability of trustees.

If its reasoning is to be followed, the question of significance for the future is where the line of responsibility is to be drawn.



- Quinovic Special Report,

Did you know that if you own residential rental property you have important responsibilities under a law introduced in 2010 that sets out new rules and penalties for both landlords and tenants?

There has been a change to the Residential Tenancies Act that now helps ensure your properties are well looked after by managers while producing steady rental income.

However, the legal changes raise the barriers for "DIY" landlords.  Anyone who isn't thoroughly familiar with the rules can face significant financial penalties through the Tenancy Tribunal, including fines of up to $3000 through the Tenancy Tribunal for a range of unlawful acts.

One important change is that landlords who are going to be out of the country for more than 21 consecutive days, and don't already have a property manager, must appoint a New Zealand based agent and notify tenants and the bond centre if a bond is held.

The monetary jurisdiction of the Tenancy Tribunal has increased from $12,000 to $50,000 and the Tribunal now is able to determine disputes between a landlord and the guarantor of a tenant.  Landlords can recover reasonable debt collection costs incurred in enforcing Tenancy Tribunal Orders through a private debt collection agency.