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.



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