Have you ever felt confused about choosing the right accountant for your small business? Do you worry about making a mistake that could cost you time as well as money? Finding a good accountant is one of the most important decisions for any small business owner. The right accountant can always help you save money, stay organised, and grow your business. But if you choose the wrong one, it can lead to stress, financial problems and missed opportunities.

Many small business owners make simple mistakes when picking an accountant, often without realising it. In this blog, we will talk about the most common mistakes people make and how you can avoid them. By making the right choice you can ensure your business runs smoothly and you get the best financial advice for your needs.

Avoid These Key Mistakes When Hiring an Accountant for Your Small Business

Choosing the right accountant is an important decision for any small business. However, picking the wrong one can lead to stress, financial mistakes, and even legal issues. Let’s look at common mistakes small business owners make when searching for the best accountant for their small business and how you can avoid them:
1. Ignoring Experience with Small Businesses
Not all accountants are the same. Some work mainly with large corporations, while others focus on small businesses. Therefore, hiring someone without experience in your industry or business size could lead to poor advice or missed opportunities. Always look for an accountant who has worked with businesses like yours and understands your specific needs.
2. Focusing Only on Cost
While it is important to stay within your budget choosing the cheapest accountant may cost you more in the long run. Low fees might mean fewer services, less expertise or poor communication. Therefore, instead of focusing only on price consider the value they provide. A slightly more expensive accountant with a strong track record could save you money as well as stress in the future.
3. Overlooking Qualifications
It is very easy to assume that all accountants are qualified, but this isn’t always the case. You need to make sure the accountant you choose is certified or chartered. That means they have completed the necessary training and are held to high professional standards. In the UK, always look for qualifications like ACCA, ACA, or CIMA.
4. Skipping References or Reviews
Many small business owners skip the step of checking references or reviews. However, this is a mistake. Speaking to other clients or reading online feedback can always give you a good idea of what to expect. Look for an accountant with a reputation for being reliable, approachable, and knowledgeable.
5. Not Checking the Services They Offer
Different accountants offer different services. Some only handle bookkeeping and tax returns while others provide advice on business growth, budgeting and financial planning. Make sure the accountant you choose offers the services your small business needs both now and in the future.

Make the Right Choice for Your Business

At Elite Accounting Limited – Chartered Accountants, we specialise in helping small businesses with their accounting needs. Our experienced as well as friendly team always provides expert advice, tax-saving strategies, and personalised support to help your business succeed. Moreover, we take the stress out of managing your finances so you can focus on growing your business. 

Get in touch with us today and let us help you take your business to the next possible level!

The Taxation (Income Tax Rate and Other Amendments) Bill was passed last year, and this required increased disclosure from Trusts. These changes have been made to improve the transparency of trusts and their financial positions.

Additional information disclosed as part of the new rules will help Inland Revenue understand how trusts are being used to accumulate and distribute income.

From the 2022 income year, trustees will need to provide the following information to the IRD as part of the annual filing process:

• Financial summaries with a statement of profit or loss, as well as a statement of financial position.

Statements of profit or loss, must include the following information:

• Net profit or loss before tax
• Any Tax adjustments and
• Any Untaxed realised gains and receipts

A trusts statement of financial position, must include information on:

• Assets – including, financial arrangements, land, buildings, shares/ownership interests and total assets
• It must also cover Liabilities – including, financial arrangements and total liabilities, and lastly
• Equity – this is broken down into owners’ equity, drawings, current account year-end balances, and movements in beneficiary accounts

Also need to indicate the valuation methodology applied to the Land, Buildings and Shares/Ownership interests categories of assets.

• Details of distributions made to beneficiaries (capital and income) and beneficiary details: name, IRD number, date of birth (the source of the distribution may also be required to be disclosed)
• Details of settlements made during the year (amount of settlement and type) and settlor details: name, IRD number, date of birth
• The names, birth dates, tax residence information and filing numbers for every person having a power to add or remove Trustees or beneficiaries under the trust
• Other information as specified by the Commissioner e.g., any transfers to the trust by associated persons

The above disclosures are required as part of the trust’s annual return requirements. The additional disclosures are required for the 2022 income year and going forward, however the Commissioner is entitled to request information back to 2013 where issues are identified.

Exemptions

The following types of trusts are exempt from the above requirements

• Non-active trust
• Foreign trust
• Charitable trust
• Eligible to be a Māori authority
• Widely-held superannuation fund
• Employee share scheme
• Debt funding special purpose vehicle
• Energy lines trust

Help with your trust

As you can see, the trust reporting and disclosure requirements are getting increasingly complex. Get in touch with us if you’d like to discuss the new requirements for your trust and how we can help you navigate these.

The period after 31st of April of every year can be both nerve wrecking and a relief as the end of the financial year is met. Sole traders and companies will hustle and bustle to get their annual accounts done (also known as financial statements and/or taxation returns) and it is a busy period for everyone, including accountants. For everyone, worried or not, we have collated a checklist of everything you could possibly need to complete your annual accounts. It is a process which can be easily managed, even under time pressure.

The NZ tax laws state that all financial statements and annual accounts to be completed by 7th of July 2022.

For those with accountants that have an Extension of Time (EOT) from IRD, including Elite Accounting Limited, you will have an additional 1 year to file your return ending 31st March 2023, if you meet the requirements.

The main things you need to remember:

• Gather all your statements, receipts, documents used on your business
• Make sure and understand what you need to fill out and bring
• Familiarize yourself with any questions that may be asked
• Contact your accountant and let them do the work
• Be patient and compliant with sending information required
• Once your accounts are done, review them and sign

Some of the information you need to gather:

• Copy Bank Statement showing closing balance 31 March 2021
• Copy Loan & Hire Purchase Statements
• Total Stock held as at 31 March 2021
• Accounts Receivables Summary
• Accounts Payables Summary
• List of Assets purchased & sold (send documentation)
• Cash on Hand
• Investment income – Interest & Dividend statements
• Transactions not through business account (full details required)
• Covid-19 Relief Subsidy, details of Wages, Small Business Cashflow Loan scheme etc
• Motor Vehicle Business use vs Total use
• Home Office Table

​	April 21 – March 22
Home address	​
Home area (Sqm)	​
Office & Workshop Area (Sqm)	​
% of time used for business	​
Power	​
Insurance (Building & Contents)	​
Water bill	​
Rates	​
Interest on Mortgage	​
Rent	​
Phone bill	​
Repairs & Maintenance	​

Now that you have everything you need to complete these returns and statements, the next step would be to contact your accountant or an accountant. At Elite Accounting, we understand the importance of filing tax returns on time and completing your annual accounts to accuracy, including how stressful and complicated it may be.

In saying this, Elite Accounting have your back, we aid you, meet with you (over call, online or in real life at the office) and complete the job for you without any stress, extra time or paying a large sum of money. Whether you are a small business or a big one, a sole trader with rental properties, an individual that has a large tax debt, or perhaps someone who is heavily involved in dealing with crypto currency, we have got your back. Talk to us today.

Unless you want Inland Revenue (IR) audits and consequences, you know you are bound to do it. Without it, you never will be in control of your company’s financial state. Besides, your decisions and assessments would be shots in the dark. Wondering what we are talking about? Business accounting, of course.

A sincere and consistent job of accounting will help you evaluate your business performance accurately, create a better budget, make precise future projections, and ensure statutory compliance. Now the question is, what is the best accounting software that you can trust to simplify the accounting process and always keep an eye on your business’s financial health?

This post aims to answer that!

Xero Accounting Software – Providing Comprehensive Accounting Solution

Xero is a highly potent cloud-based accounting application that allows users to manage business finances from anywhere in the world with the integration of more than 1,000 apps. This software has skilfully streamlined the typical business accounting process by leveraging the power of modern technologies and a user-friendly interface. No matter what your accounting needs are – sales report or payroll, monthly expenses or purchase bills, Xero has the capacity to address them all.

As a Xero accountant in NZ or other countries, you can create records of suppliers, distributors, customers, employees, etc. Once the records are made, you can use them in making standard customisable transaction statements like purchase orders, invoices, quotes, etc.

What Sets Xero Apart

There are many features that make Xero the best alternative in the accounting software niche. We will discuss the 4 of them below:

1. The exciting new features of the Xero platform! Since its inception, Xero developers have kept on adding exciting new features to the platform. Xero Analytics Plus is one of them that provides advanced short-term cash flow projections to the users for the next 7 days, one month, 60, as well as 90 days.
2. Xero provides a business snapshot dashboard to the users where you can see your company’s profitability, expenses, etc.
3. You can even manage your fixed assets using Xero. No other accounting software in the market offers this feature.
4. It is a cost-efficient option than most of its competitors.

Final Verdict

Xero has incorporated several useful tools into its platform so that the users can reconcile their accounts, manage sales and purchase transactions, track the financial health of the company, and more. All of its subscription plans support unlimited users. It makes Xero subscription affordable and an excellent choice for small and medium businesses.

We hope that this post has come in handy in helping you make the best accounting software choice. Though Xero accounting software is affordable, you can even use it for FREE. Elite Accounting is currently offering a free Xero subscription for six months. Kindly note that this is a limited time offer with terms and conditions. Contact us now to learn more about this offer. Let us help you become a Xero accountant in NZ or other countries.

Cloud accounting is the form of bookkeeping your business online. This means that all records, expenses, assets, liabilities, and various details are all kept online within one platform or software. Software like Xero is an excellent cloud accounting software that Elite Accounting also uses for their clients, the platform is all encrypted, secure, and safe and can be accessed by both the accountant and the client. With moving your business online and utilizing accounting software solution, it means that your accounts are all connected to the cloud, which otherwise means that it is stored and can be viewed and modified online, anytime, and anywhere.

The reason why Xero is the leading software for cloud accounting in New Zealand is because of the services they offer. Being a subscription-based service, clients through their accountants can pay a minimal fee monthly to have all their bank accounts linked to Xero. Ultimately allowing all banking business transactions to be automatically uploaded to Xero to save the data entry aspect of accounting for the client, meaning clients and businesses do not have to keep, store and give all their receipts or business expenses to the accountant, and for the accountant to save the manual data entry. Overall saving both time, money, and energy in physically collecting your records and transcribing them online or into the system.

Additionally, running your business accounts online on Xero means that you can view your financial position at any time and always collaborate with your team and advisors. Resulting in an elimination of hard copies of files, scanning and fax between the client and the team or accountant. Overall, removing all unnecessary communication waiting times.

With those that are concerned about how complicated technology is, rest assured as Xero is a very user-friendly platform, easy to navigate and available across all operating systems such as Windows and Mac. The app and website are both created with user experience in mind, therefore everything is organized, easy to navigate, practical and ergonomic. With plenty of online courses, help videos and trouble shooting Xero offers, users should get a hang of it and become experts in no time.

More importantly so, Xero offers a platform and service that takes care of payroll, enables currency conversion at a quick and efficient speed, allows users to customize and run reports of their choosing and can streamline your accounts payable.

Overall, for the reasons mentioned above, Xero is hugely favorable by all users, companies, and small businesses across New Zealand. Especially for Elite Accounting, as we are silver partners of Xero, we offer Xero to all clients at a competitive rate. If this does not convince you enough to become a Xero user through your accountant, then why not try it for 6 months free so you are able to learn and grasp these benefits that Xero or cloud accounting offers. Elite Accounting is currently running a promotion for new users where 6 months are offered for free when users choose any business package offered on our website. Enquire now, call or message us to redeem this promotion or for more details. https://www.eliteaccounting.co.nz/free-xero

Every year many New Zealanders end up in debt to the Inland Revenue (IR) Department due to underpaying or underreporting their tax liabilities, whether on purpose or by mistake. Owing the Inland Revenue can be worrying and bothersome, particularly when they have placed a lien or levy on your wages and property. The purpose of this post is to educate our readers about tax debt so that they can avoid getting into it. Here we will also reveal how to get rid of one if you have already got into tax debt. So, continue reading to level up your tax knowledge.

Understanding Tax Debt

Individuals create and get into a tax debt when they fail to pay their tax liabilities by the due date. Here it is essential to understand that the Inland Revenue Department is accountable for collecting taxes and monitoring taxation practices. You can expect urgent notices from the IRD if you fail to pay your taxes and get into a tax debt spiral. Your further delay in paying your tax liabilities will trigger the tax recovery action in the Inland Revenue Department. The tax debt collection process typically includes:

1. Putting a deduction notice on your bank account
2. Sending you legal action notice
3. Asking your clients or employer to withhold an amount and pay your taxes

IRD may even take serious actions like charging penalties and interest on your tax debt if the above measures do not work. The penalties and interest will continue adding up on your tax liabilities until you pay them off. In extreme cases, they might even take legal action against you like issuing a levy on your property, assets, and bank account.

Digging Your Way Out of Tax Debt

Taxation in general and tax debt, in particular, are very complicated subjects. Dealing with them on your own can be daunting, especially if you don’t have any prior experience in this sector. We recommend seeking professional tax debt services if you find yourself in a tax debt spiral. Taking immediate action is essential when you see your tax level increasing. Inefficiency in handling your tax liabilities at the right time will make your tax debt and debt interest unmanageable. It may also lead to tax debt default.

Your Professional Help Is Here!

In conclusion, we would say that seeking professional help is your best chance to get out of tax debt and save yourself from penalties, lawsuits, and disputes. Now the biggest question is, who should you trust in a critical situation like a tax debt spiral? Elite Accounting is the answer. We are a highly rated, well trusted chartered accounting firm committed to helping clients in their financial matters. You can count on our tax debt services and snap out of the trap. Contact us now to discuss your tax liabilities and financial conditions with one of our expert CAs. Let us help you get out of tax debt.

The new tax rate for those that earn more than $180,000 NZD annually comes into effect from this month (April 2022). This tax bracket lies 11% above the rest at a 39% tax rate.

Besides being a form of sustaining economical loss within New Zealand and maintaining government revenue after the Covid-19 pandemic, the government has also placed its reasoning for this increase on its efforts in ensuring a “fair and progressive” tax system where everyone “pays their fair share of tax”.

The problem however is, the integrity of the 39% personal tax rate. The government is particularly concerned about the taxpayers who are avoiding the 39% personal tax rate using trusts and companies to earn their income, obtaining the 33% tax rate instead. The effects of this situation on the economy have also been outlined in a government discussion document and go severely against the government’s intentions of implementing this new tax bracket.

However, the good news is that the government is aware and has been actively reviewing solutions regarding supporting the integrity of the 39% personal income tax rate. There are three proposed solutions included in this document, which address and seek to improve the problem we have at hand. It has proposed:

1. Sales of shares of a company by the controlling shareholder being treated as giving rise to a dividend to the shareholder to the extent that the company and its subsidiaries have retained earnings. Additionally, there will also be an ASC (available share capital) increase which both address “current inequity in the imputation credit continuity rules” and prevents double taxation from occurring upon liquidation.
2. Required on a prospective basis to maintain record of their ASC and net capital gains.
3. The “80 percent one buyer” test for the personal attribution rule be removed.

Becoming informed about current and future changes relating to your tax environment is important. Understanding how these changes impact you and your organization and what you need to do in order to be compliant is essential.

If you have an opinion on how these changes will affect you, you can read the discussion document and email your submissions to policy.webmaster@ird.govt.nz

If you are concerned about how to plan for these changes, contact us.

Parliament has finally (on 29 March) passed legislation removing the ability of residential property investors to claim mortgage interest as a tax-deductible expense on existing properties. It is now just awaiting the formality of royal assent to become law.

There are two changes to be expected from passing the new rules. First, unless an exception or exemption exists, interest cannot be claimed as an expense for residential property purchased on or after 27 March 2021. Second, for property acquired before 27 March 2021, the ability to deduct interest on existing loans is being phased out over four years, ending 31 March 2025. Interest deductions for new loans drawn down on or after 27 March 2021 won’t be allowed from 1 October 2021 onwards. The phase-out will happen gradually for four years:

Phasing out interest deductions

Income Year	Interest you can claim
1 April 2020 – 31 March 2021	100%
​1 April 2021 – 30 September 2021	100%
​1 October 2021 – 31 March 2022	75%
1 April 2022 – 31 March 2023	75%
1 April 2023 – 31 March 2024	50%
1 April 2024 – 31 March 2025	25%
1 April 2025 onwards	0%

There are some exemptions to these rules. Investors can still deduct interest against income from the following properties:

1. if a component of the primary residence is used to generate money (for example, from flatmates or boarders),
2. residential properties that are utilized as commercial premises (for example, a house transformed into a doctor’s office, offices, and shops),
3. houses on farmland,
4. bed and breakfast establishments where the proprietor lives on the premises, and (5) accommodation for employees and students.

This new law aims to reduce investor demand for existing residential homes and help first-time buyers get a better deal. According to the Revenue Minister David Parker the government wants to curb investors’ appetite for existing residential properties but also want to stimulate investment in new housing.

Hence new builds are exempt from these new rules. This also ensures that proposed interest limitation regulations do not impede the continued supply of new property. It is proposed by the Government that for a property to be considered “new,” it must be at most 20 years from the time it has been issued the code of compliance certificate.

In addition, if the property is within the 20 years starting from 27 March 2020, the exemption applies to both the initial buyer and subsequent owner. This new build exemption is also applicable to purpose-built rentals. Housing Minister Megan Woods defines purpose-built rentals as huge home buildings meant for continued rental rather than sale..

Aide from these, it is also anticipated that there would be adjustments in the filing of income tax returns this tax year. From 2022, the income tax will include additional fields to obtain information about residential property interest expenses, which include total interest and interest expense claimed.

With all the changes that will occur, Inland Revenue estimates that there will be a tax revenue of $80 million in fiscal year 2022, $200 million in fiscal year 2023, $350 million in fiscal year 2024, $490 million in fiscal year 2025, and $650 million in fiscal year 2026.

Are you a property investor who is unsure of your tax obligations? Contact our Elite team and we will help you out with your rental property tax returns.

Disclaimer: All views expressed within the article are the views of the author. Whilst all efforts are engaged in providing accurate, relevant and useful information, the information provided will vary in different circumstances and should be discussed further to be applicable to the individual. Elite Accounting Limited and its authors do not accept responsibility or any form of liability upon an individual’s application or reliance of its contents. All information and suggestions are intended to to be considered and/or applied carefully within your own circumstances, as general information only with an informative purpose.

Before the COVID-19 pandemic, owning a business was hard enough. Now that we are living effected by a virus, maintaining a business has become even harder. We are faced full of uncertainties and for businesses, it’s either survival or a failure in this unpredictable time. With this, many business owners lose hope, and they end up giving up before the worst.

Here are some tips which may come in use in keeping things striving during the pandemic:

1. Have an organized and optimistic mindset. With all the negativities brought about by the pandemic, a business owner must keep positive and optimistic. This is to help organize thoughts which will help you get moving. Everything must begin with the right mindset; it may be your fuel to continue the business despite the situation.

2. Plan. A lot of things change as time passes by. Sometimes, planning daily is important, as yesterday’s plan may no longer be of use today. As the saying goes, “failing to plan is planning to fail”. Thus, planning is an important aspect to consider incorporating into your daily business schedule.

3. Be flexible and learn to compromise. A business must be adaptable and innovative. It is not only about being a business at the right time, but also about adapting to the needs of the current market and consumers.

4. Expect the unexpected. A business owner must always expect the unexpected and create reserves and emergency funds. This can be of great help when need arises.

5. Be updated with the latest trends. A reminder to keep up with the trends in your field of business. Knowledge is power. With this knowledge of new and fresh ideas, business may experience gains with the smallest efforts.

6. Expand and build network. Create lasting bonds with individuals or groups that are most relevant to you and your business. You can make use of social media platforms such as Facebook and LinkedIn to connect with professionals and build your network.

7. Be with the right people. It may be important to expand and build network, but it is more important to choose the right people to be surrounded by. A business will not be successful if the owner is doing all the work alone. There must be honest people that guide your thinking and point out what needs to be improved within the same workplace. Remember, it is crucial to have people that have the same goals in mind to improvement and progress.

With all of these, businesses will thrive despite the circumstances brought about by the pandemic. It shows us that the attitude of the owner matters in the identity and success of the business. Whether you own a big or small business, going back to the basics is necessary to build a stronger industry.

However, if by all means you need additional guidance, advice, or help, especially when it comes to the financial side of your company then contacting an accountant may provide this. At Elite Accounting, we work for you and help solve your problems, big or small, so contact us today if you’re in need of some solutions.

Managing a successful private practice in New Zealand can be difficult at times, especially when covid is present. Here are some tips on how to run a successful practice in New Zealand utilizing technology.

Dr Lynn Ho owns a solo family practice in America and shares her experience of ensuring a stable long term family practice with the use of technology, namely making her practice partially online. Dr Ho has claimed that technology has “improved patient access, makes her practice run more efficiently, and deal with documentation requirements”. The changes that technology was able to provide to Dr Ho’s office included tools that:

• Allowed patients to fill out their medical history electronically prior to their office visit
• Allowed patients to schedule their appointments online at the tip of their fingertips, including rescheduling and cancelling appointments
• Allowed patients to receive lab and test results back instantly through an email portal, being able to check their records at their convenience
• Provided e-visits. These were quick appointments online for simple issues where patients may not be able to leave their home, are on holiday, or cannot schedule an urgent matter. Patients gained access to a “medical history tool” which “supplied information on their problem”” that they could access anytime once given a diagnosis, recommendation, and treatment options within 4 hours of the e-visit.

Overall, technology has been able to restructure Dr Ho’s family practice to a more practical, optimal and accessible business for everyone, including patients and doctors.

Some other reasons why you may consider making more, if not all your practice online is for reasons such as better bookkeeping, client connection, maintaining staff retention, lowered costs, and flexibility within the practice.

Better bookkeeping

One of the main benefits of managing your practice with technology is for better bookkeeping. Specifically, this entails an easy and accessible form of keeping, editing, sending, and managing all documents online from all ends of the users within your practice. Privacy is also ensured with having an online bookkeeping system as the privacy of confidential documents can be controlled at ease.

Additionally, saving time and the hassle cultivated in looking for documents and files, including reducing the risk of losing important information.

Client connection

Connection is extremely important in such a technology driven world, especially the relationship your practice has with your clients. Maintaining this relationship with your client’s best interest might mean considering the impact an online practice would have on them. As we are still bound to covid restrictions with more and more people threatened by isolation; online meetings and appointments would be extremely beneficial for those that are kept at home. Clients are able to appreciate the diversity of options that your clinic may provide, whether that is making appointments, viewing results or being able to receive treatment online without having to wait for a scheduled appointment in advance, to consider commute or to take crucial time out of the day to make it to the practice.

Maintaining staff retention

Technology can become an outlet at your practice, crucial for staff retention. Work related burnout is a prominent problem that occurs in the workplace often, an issue relating to the paramount people that run the practice. Technology such as online appointment scheduling, billing tools, intake forms are able to delegate heavy workloads amongst everyone that run the practice, overall reducing the administrative burden in the workplace for everyone.

Lowered costs and flexibility

The idea of lowered costs and flexibility work hand in hand when utilizing technology into your practice. Ideally, for those that are thinking of running a practice, having a full online practice means there is no requirement of investing money into an office, waiting rooms and/or a reception area. You may run your practice in the privacy of your own home at any time of day you wish.

However, for those that already have a practice situated at an office, by having technology

incorporated, flexibility is also offered. As mentioned earlier, this can take the shape and form of online appointments, especially setting in more appointments that take shorter time in terms of commute or between clients whilst reducing the clients that reschedule, are late or cancel their appointments. Even when travelling between cities or anywhere but the office.

All in all, the conclusion that should be reached for the reader of this article is how significant it is to consider how technology can be utilized in your practice, whether you are already running one or in the process of wanting to start one, especially a successful once. Fortunately, here at Elite Accounting Limited, we are well versed in the use of technology in a business which we exhibit through our advisory services. If you would like to enquire into these services and what we have to offer in getting your practice off the ground or up and running successfully, then contact either Ravi or Margaret at +64 210 886 9295 or email us at info@eliteaccounting.co.nz.

About a decade ago, most of us were unaware of cryptocurrency and blockchain. However, the recent boom of utilising blockchain to develop various types of cryptocurrencies has gained much attention from institutional and retail investors. Since crypto-assets are considered a form of property, New Zealand tax residents are liable to pay income tax whether they buy, trade, sell, exchange, or even mine cryptocurrencies. The tax treatment depends on the use and attributes of the asset and not on what they are called. Here’s all you need to know about your tax obligations regarding cryptocurrency.

Cryptocurrency and Tax Residence

New Zealand tax residents are liable to pay tax on worldwide income, including crypto-assets earned from overseas transactions. However, if you are not a New Zealand tax resident, income from crypto-assets is only subject to NZ tax if it has been sourced in the country. New or returning (after ten years) tax residents are eligible for a 4-year temporary tax exemption on the income generated in foreign countries. It means if the crypto transaction has been made outside of New Zealand, the party is not liable to pay tax to Inland Revenue (IR).

Buying, Selling, Trading Cryptocurrencies

Disposals of cryptocurrencies are taxable under various tax rules. Traders and investors will be taxed on the profit that they make or be entitled to a loss if they:

1. Trade with crypto-assets
2. Acquire cryptocurrencies to dispose of them
3. Continue investing in a profit-making scheme

Mining Cryptocurrencies

Mining crypto-assets is a technical method of creating new blocks and getting consensus into them. Well, we will not get into the technicality of mining; instead, we will try to see this from the taxation’s perspective. Mining is usually treated as:

1. Ordinary income source
2. A business
3. A profit-making scheme

In most cases, the crypto-asset you earn from mining in the form of block rewards and transaction fees are taxable.

Exchange Business of Cryptocurrencies

Cryptocurrencies, security tokens, utility coins are different forms of crypto-assets, AKA digital assets. This asset class capitalises on cryptographic techniques to stimulate a form of commercial transactional exchange. Crypto-asset exchange firms typically possess different types of cryptocurrencies, security tokens, and other forms of crypto-assets for exchange and sale. Profits earned from selling or exchanging crypto-assets are referred to as business income, and therefore businesses involved in this sector are liable to pay tax.

Giving Crypto-Assets to Employees or Using Them for Business Transactions

Providing cryptocurrencies to employees fall under FBT (Fringe Benefit Tax) or PAYE (Pay-As-You-Earn Tax) category. Inland Revenue has already issued public rulings on different circumstances like paying cryptocurrency as salary, bonus, shares, etc. We recommend consulting with your crypto accountant in NZ to learn more about it. Accepting crypto-assets, on the other hand, is treated as receiving income. Therefore, the receiver will be responsible for dealing with the subsequent disposal of the currencies. For example, they can convert crypto-assets into fiat currency.

We hope that the post has helped you understand the basics of taxation on cryptocurrencies in New Zealand. But please note that this is not a recommendation to file the tax return on your own. Dealing with taxation is a bit complicated, especially for those who don’t belong to the finance background. Taking the wrong step while filing taxes may cause you big trouble. Therefore, consider hiring a crypto tax accountant in NZ when filing your return.

Elite Accounting is one of the most trusted CA firms in New Zealand, offering tax consultation, small business accounting, investment guidance, and other financial services to clients. Our experts also provide tax filing and consultation services on crypto-assets. So, contact us now if you deal with cryptocurrencies but are still not sure about your obligations. Let our comprehensive solution and expert guidance help you overcome all your crypto tax challenges.

Disclaimer: All views expressed within the article are the views of the author. Whilst all efforts are engaged in providing accurate, relevant and useful information, the information provided will vary in different circumstances and should be discussed further to be applicable to the individual. Elite Accounting Limited and its authors do not accept responsibility or any form of liability upon an individual’s application or reliance of its contents. All information and suggestions are intended to to be considered and/or applied carefully within your own circumstances, as general information only with an informative purpose.

ACC attendant care payments are payments made by ACC to any injured claimants for any services supplied by caregivers, either contracted or independent of the claimant’s choice. These payments that ACC now grant are treated wholly as income for the claimant following the new section CF 1(2)(g) of the Income Tax Act. These recent changes in provision stand to be effective since the 1st of April in 2007 following changes to the income tax 2004 and tax administration act 1994. Whereby, injured claimants are exempt from tax payments from the payments (income) provided by ACC to the claimant’s caregiver choice and services.

However, these payments are conditional, abiding by strict guidelines for the income received within a few sections of the amended Income Tax Act 2004.

Firstly, the new section, CW 28B, enacts that the claimant must use all the granted money they receive “as an ACC attendant care payment to pay for his or her attendant care” exclusively. To become exempt from tax for this income received, the condition that these payments “are applied for attendant care purposes” solely must be followed closely and correctly.

Secondly, section DF 4 of the Act emphasizes the above and primary condition of these ACC attendant care payments, further reiterating that a claimant’s full ACC money payment received must be paid entirely to the caregiver. If this does not happen, then tax will be required to be paid “on the portion of the ACC payment not paid to the caregiver”. The percentage associated with this tax is 15%.

Lastly, claimants are not required to file income returns if the income provided for the tax year is the only income. Tax will also be withheld in these circumstances following that the conditions of the first and second points above are followed correctly, present in section 22A(1)(a)(iiic) of the Act.

Furthermore, additional sections to note are within s33C, CE12, LD 1B of the Act. S33C states that a caregiver’s annual income, if not exceeding $9,500, will not be required to furnish a return of income for that income year. Whereas CE12 and LD 1B of the Act “provides the mechanism for a caregiver to recognize and take into account tax that has been withheld by ACC”.

If ACC Attendant Care Payments apply to you, whether that is currently, in the past or the future; it is ideal to have the full knowledge and services behind you to support you in your income tax, application and, or questions.

Disclaimer: All views expressed within the article are the views of the author. Whilst all efforts are engaged in providing accurate, relevant and useful information, the information provided will vary in different circumstances and should be discussed further to be applicable to the individual. Elite Accounting Limited and its authors do not accept responsibility or any form of liability upon an individual’s application or reliance of its contents. All information and suggestions are intended to to be considered and/or applied carefully within your own circumstances, as general information only with an informative purpose.

The Government has announced 3 additional forms of financial support for businesses with cashflow pressures as a result of COVID-19. These are:

• an increase to the base Small Business Cashflow Scheme (SBCS) and the ability to borrow a top-up if they did not borrow the full amount
• up to 3 COVID-19 Support Payments (CSP)
• an extension of IR’s ability to remit penalties and interest.

Small Business Cashflow Scheme (SBCS) changes

The following changes will be made to the SBCS before the end of March.

Base loan amount increased

The SBCS base loan will be increased to $20,000 (from $10,000). This means the amount that can be borrowed will be $20,000, plus $1,800 per full-time equivalent employee (up to 50 employees). The loan repayment period remains 5 years (60 months).

Interest free period

The first 2 years of existing loans will become interest-free provided the loan is not in default. Interest will apply at a rate of 3% per year on the remaining loan balance from the first day of the third year of the loan period.

Existing borrowers can get a top up loan

Existing borrowers who already have a loan (and have not defaulted on this loan) will be able to apply for a top-up loan. They can borrow an additional $10,000 plus any amount they did not borrow in their initial loan. The top up loan can be drawn down as a lump-sum or as up to 4 smaller instalments over time before the end of the scheme on 31 December 2023.

COVID-19 Support Payment

The CSP is a payment to help support viable and ongoing businesses or organisations which have experienced a 40% or more drop in revenue as a result of 1 or more of the following COVID-19 circumstances:

• the widespread presence of COVID-19 in the New Zealand community
• the legislative public health measures taken in order to reduce the spread of COVID-19 in the New Zealand community
• any business circumstances that are, or are reasonably likely to be, a consequence of the circumstances described above.

Three fortnightly CSPs will be available with applications opening for the first payment at 8am on 28 February 2022 for the period starting from 16 February 2022.

Each CSP will be $4,000 per business plus $400 per full-time employee (FTE), capped at 50 FTEs or $24,000.

The maximum size of the CSP your business or organisation may be eligible to apply for, depends on the number of FTEs you have, and your level of revenue. Businesses or organisations with low revenue will have their payment capped at 8 times their actual decline in revenue.

Eligibility criteria

To be eligible for the CSP a business or organisation must:

• have experienced the revenue decline of 40% or more as a result of 1 or more COVID-19 circumstances (as detailed above)
• have been operating the business or organisation for a period of at least 1 month before 16 February 2022 – if you have acquired a business or organisation after 16 January 2022, you may still be eligible for the CSP
• have taken all reasonably practicable steps (if any) to minimise revenue losses
• been operating in compliance with the COVID-19 Vaccine Certificate requirements (pursuant to COVID-19 Public Health Response (Protection Framework) Order 2021), for both the comparator period and the affected revenue period
• not have received, have an application pending for, or apply for or receive in future, a grant under the Cultural Sector Emergency Relief Fund: Grant for Self- Employed Individuals administered by Manatū Taonga – Ministry for Culture and Heritage (further details on this will be provided soon)
• be living, or (if a non-natural person) registered or otherwise established in New Zealand.

Drop in revenue

Businesses and organisations need to measure their revenue over a period of 7 consecutive days in the affected revenue period where the business or organisation has had a drop in revenue due to the COVID-19 circumstances detailed above.

To get the first payment you will need to show income is 40% lower in a 7-day period any time from February 16, compared to a typical 7-day period between 5 January 2022 and 15 February 2022.

The dates of the affected revenue period for the second and third payments are still to be decided.

The affected revenue period and the comparison period must be calculated based on what has happened, not a forecast of what might happen. If the revenue drop you have calculated is 40% or more you may be eligible for CSP.

If your business or organisation is part of a commonly owned group, the 40% revenue drop needs to be satisfied by you and by the group as a whole.

Businesses or organisations with highly seasonal revenue may still be able apply for the CSP. Further details for businesses with seasonal revenue will be provided soon.

For further information see: https://www.ird.govt.nz/covid-19/business-and-organisations/covid-19-support-payment-information

Remittance of penalties and interest

Penalties and interest can be remitted for tax payments due on or after 14 February 2020 up until 24 March 2022 (including provisional tax). This will soon be extended to 7 April 2024.The best way for customers to take advantage of this is to set up an instalment arrangement in their myIR account at ird.govt.nz

Please get in touch with our Elite team, if you need assistance in apply for any of the above support payments.

Businesses require different resources to be able to provide the goods and services it offers. These resources are considered assets for they are beneficial to the business’s success. However, as time passes, these assets wear and tear, for they have already served their purpose and reached their lifespan.

Depreciation is when an asset loses its value over time. It represents how much of the asset’s value has already been used. For example, suppose the business is an IT Company and the assets bought by the owner are computers. In that case, these computers usually have a lifespan of 3-5 years. As a result, this means that the computers have already reached their peak performance and will need repairs and replacement. The value of the computers depreciates from the original price to 0 eventually as it goes through its lifespan. Consequently, affecting the business, as in the case of the internet shop, old computers no longer perform at their best.

Therefore, depreciation is significant in business. Accounting for depreciation affects the profit of the company. First, depreciation is an expense, and as business owners, there is a need to know all the business’ costs. It may be a non-cash charge since it’s already been paid as the asset is purchased. Still, for financial reporting, it is a must to record it incrementally. Depreciation accounting aids in knowing how much value your assets have lost during that year. If depreciation is not recorded, expenses for the year may be underestimated, resulting in an incorrect computation of the business’ profit. Second, depreciation connects and affects taxes. With lower profit comes a lower tax bill, and with higher profit comes a higher tax bill. Accounting for depreciation lowers profit and therefore reduces the tax bill. Lastly, depreciation accounting values the business. When assets depreciate, there can be losses in the business. Going back to the IT Company business example, old computers have a lesser quality of performance than new computers. Suppose the IT Company does not account for depreciated assets. In that case, employees may be working on degraded performance computers, for what might take 10 minutes on a new computer will take 30 minutes on the old one.

It is important to note that not all resources are depreciable. In most businesses, fixed assets are the only assets that can be depreciated. A fixed asset is something which could help a business generate income for a year or more. These resources include tools, machinery, computers, office furniture, vehicles, and buildings, which are tangible. For intangible or non-physical assets such as patents and copyright, they can also be depreciated for they have an expiration. Assets which do not lose value, such as land, are non-depreciable. It is known to many that the value of land increases over time.

In regards, to computing the depreciation of an asset, the first thing to consider is an estimation of its lifespan. Depreciation is accounted for in different schedules depending upon what type of asset the business has. In case an investment was lost, stolen, or damaged, its value can be adjusted to 0 any time. Assets can also be bought, sold, or combined to form a new one. There are different ways on how to calculate depreciation and three of which are most used by business owners. First, an asset may be depreciated the same amount annually until its value reaches zero. This is called the straight-line depreciation. It is the most basic way of recording depreciation. For example, a company bought a machine for $5,000 with a lifespan of 5 years. The company then decides on a salvage amount of $1,000. Deducting the salvage amount from the cost of the machine, the depreciable amount is $4,000. Dividing the depreciable amount by the lifespan, $800 will be the depreciation amount per year, that is a depreciation rate of 20%. Second, an asset may be depreciated at a higher percentage during the first few years and lowers as time passes by. This is called the diminishing value depreciation. Lastly, an asset may be depreciated based on usage and not on its lifespan or age. This is called units of production depreciation. For example, instead of depreciating a vehicle in terms of its useful life, it can be depreciated based on the number of kilometers it can travel.

Overall, depreciation may be tricky and challenging, especially for small businesses, but it will be of great help in understanding business costs and tax bills. Accounting for depreciation of assets will aid an owner in keeping track of expenses and profits throughout the operation of the business.

We can help you with the depreciation of your business asset. Feel free to contact us at info@eliteaccounting.co.nz.

In order to evaluate the financial performance of a firm, Accounting has the highest importance as it helps investors, owners, shareholders to make decisions. Accounting provides the stakeholders with the perfect tool to analyze profit and loss as well as the risk and return of a business. It holds vital information about assets, liabilities, costs, owner’s equity, and income that help management in planning and controlling the operations and processes within a business. The primary objective of accounting work is to record all financial transactions and economic events of a business in a systematic and comprehensive manner for future financial decision-making.

Accounting accurately identifies, measures, and communicates economic information with an aim to reduce losses and unnecessary expenses of a business and helps the business owner to make appropriate decisions for maximizing profits and revenue. Moreover, government agencies and tax reporting agencies also want you to keep a minimum book of accounts for tracking the incomes and expenditures of your firm. An effective Accounting process and methodology also help you to avoid situations like overdue tax returns. Consider this blog worth reading to know what Accounting is important for small business firms.

Role & Purpose Of Accounting For Small Business:

Accounting is widely acknowledged as the primary language of business. Accounting effectively communicates valuable information to different stakeholders of a firm for future decision-making. The process helps the owners to run their business operations effectively and efficiently. Let’s take a glance at some of the most important roles and purposes of Accounting for small businesses.

Record & Report Transactions Accurately:

The primary purpose and objective of Accounting are to record all financial transactions and events of a firm accurately in a systematic and complete manner. Systematically recorded transactions are the cornerstone of an Accounting system. The transactions should be recorded in a manner that they can be viewed by the owners and other stakeholders at any point in time.

Decision Making:

Accounting helps business owners to take appropriate decisions at the right time by assisting them in a range of decision-making processes. Accounting information helps owners to develop and implement effective strategies and top-notch policies to increase the efficiency of business operations and processes. Accounting information helps business owners to make decisions like product/service price determination, funds necessary to undertake any project, marketing & selling decisions, etc.

Budget Planning:

Any small or medium enterprises have a scarcity of resources. Therefore, the business owners can allocate their limited resources like man-hours, machines, materials, and money effectively with the help of proper budgetary planning. In order to prepare a budget, business owners and management need previous financial records and data and Accounting helps to produce this information to the business owners.

Reporting:

The aim and objective of any business organization are to make profits. Accounting can inform business owners whether a business firm is making a profit or not. After evaluating the financial performance, business owners can make decisions on future business growth and market expansion.

Monitor Funds:

Working capital plays a crucial role in the day-to-day operations of a business. Accounting helps business owners manage working capital requirements and liquidity. Accounting can provide business management with a range of tools for evaluating the liquidity positions of an organization.

Statutory Compliance:

In Accounting, timely recording of liabilities that need to be paid within the time frame plays a crucial role. Accounting can provide necessary information to tax reporting agencies and government agencies. Accounting helps firms to avoid overdue tax returns.

Elite Accounting: Single Window Of All Accounting Solutions:

If you have a small business, then you will be glad to know that Elite Accounting, one of the leading Accounting service providers in NZ can offer you a range of services to meet the accounting needs of your business firm. We offer something more than just Accounting. We are small business accounting specialists. Our service offerings are available at every stage of a business life-cycle, starting from business formation, tax returns, business planning, growth analysis, and reporting. We offer a range of services at Elite Accounting such as:

• Business Advisory.
• Bookkeeping For Small Firms And Taxation.
• Business process Advisories.
• Cryptocurrency Accounting.
• Property Investment Consultation.

Visit our website to know more about our services. We are Chartered Accountants with accreditation in public practice. We offer Accounting services at a competitive price. To talk with our experts call us on 093937025.

It’s a good idea to hire an accountant as soon as you decide to start your company. A skilled accountant will assist you in correctly setting up your accounting and payroll systems. In the long run, this will save you a lot of time and money.

But that’s only the beginning. In addition, a great accountant will:

• Provide business guidance
• Keep a close eye on your cash flow.
• Keep track of your expenses and produce your annual financial statements.
• Give you tax advice

As you can see, your accountant will play an important role in your company and provide timely and effective advice.

Below are few useful tips to hire the best accounting company in NZ:

Select a chartered accountant

Accountants are controlled by professional organizations in many countries, which oversee accounting qualifications and strive to maintain high professional standards. Professional accountants are known as Certified Public Accountants or Chartered Accountants, depending on the jurisdiction. Chartered Accountants (CAs) are highly qualified professionals who have completed a professional competency program as well as degree-level studies.

A qualified or chartered accountant will be able to provide value to your organization right away because of their extensive expertise and understanding. It’s also a good idea to hire a professional accountant early on rather than later if you expect your business to develop.

Look For An Accountant Who Has Experience In The Field

You’ll need someone who has worked on tax returns and financial records for businesses that are similar in size and revenue to yours.

It’s even better if they’ve worked with businesses in similar industries to yours, as this will help them grasp your company’s particular requirements. You might want to inquire about their larger clients. If they do, that’s a positive indicator because it means they’ll be able to meet your rising needs in the future.

Ask for Referrals

When looking for an accountant, the best choice may be right in front of your eyes. Begin by asking any small-business-owning friends or family members if they would suggest their accountant.

Keep in mind that picking an accountant is a personal decision; what works for your friend’s PR firm might not work for your manufacturing firm. Consider disparities in business structure as well.

Make a list of what your company requires from an accountant

Make sure you consider your company’s demands and establish your criteria for hiring an accountant. A good accountant will do more for you than just balance your books and ensure that your paperwork is in order. The proper one will be able to fulfill all of your needs — and even more.

Elite Accounting-Your One-stop-solution for All kinds of Accounting Requirements:

At Elite Accounting, we work as one of the leading accounting companies in NZ and we specialize in small business accounting and business advising. We want to be more than mere accountants for you. We help clients with everything from company formation through tax returns, business planning, growth analysis, and even tax audits.

You’ll discover a variety of services at Elite Accounting, including:

• All of your accounting needs
• Small Business Accounting/Bookkeeping & Taxation
• Business advisory
• Crypto Currency Accounting
• Rental returns that are cost-effective, as well as property investment advice.

Click Here to learn more about our services. We are Chartered Accountants with accreditation in public practice. To ensure that our clients receive high-quality services, we must meet continuing learning and ethical criteria. Our rates are really competitive. To talk to our competent accountant, call us on 09 393 7025.

Every business needs the right professional to deal with financial matters at ease. Having an experienced Chartered Accountant (CA) in your team can help you to drive success in any business, be it small or big. From dealing with tax issues to finding growth opportunities a CA can handle most of your financial needs. If you still have doubts about hiring one, below are the fantastic benefits you can enjoy if you work with a CA.

1. Get Trusted Advice

Chartered accountants have the qualifications required to manage accounting and other financial tasks competently. In addition, they also have expertise and experience in advising clients on taxation laws. You will be able to reap all the available tax benefits if you hire the best chartered accountants in New Zealand or other countries. Your CA will also review your accounts regularly to reduce tax bills, prevent potential audit risk, and help your business to perform better.

2. Save Money and Time

Time is the most valuable resource for any business, and therefore owners should use it wisely. You may need more time to make your products and services more competitive, build new connections, and grow your business. With this in mind, hiring a chartered accountant will be a wise option. A CA will take care of all your accounting paperwork. As a result, you will get more time to focus on your core business operation.

3. Tax Consulting

An expert CA can manage your taxes & finances properly and ensures full compliance with the law. Chartered accountants make every effort to help businesses keep out of trouble with the tax authorities. They fill out all the necessary paperwork and ensure business transactions are handled effectively. Expert CAs can also minimize the level of taxes that are needed to be paid.

4. Manage Your Business Finances Effectively

Expert chartered accountants find smart ways to help businesses spend their money more efficiently. They can make your books more appealing to potential investors and help you get funds easily.

5. Security

Nothing can give you more peace of mind than knowing your money is in good hands. Chartered accountants follow the compliance rules and regulations that make them the most trusted and secured accountants in the market. You can always rely on them to manage your finances.

We hope the benefits of hiring a chartered accountant for your business are now clear to you. The next question is, who can you hire to handle the finances of your business? Elite Accounting is one of the best chartered accountants in New Zealand. Our experts aim to be more than just your accountants. We do everything in our power to help businesses reduce costs and improve productivity. Schedule an appointment today to learn how we can help your business to grow.

The current COVID outbreak and lockdown from 17th August 2021 have triggered government support payments for eligible businesses.

Below we detail the support available and how you can access these.

Wage Subsidy Scheme

(Applications open 9am 20 August 2021)

Apply here

This payment will be available nationally to help eligible businesses continue paying staff. To reflect increased wage costs, the payments have been increased to $600 for full-time employees and to $359 for part-time employees. Applications are initially open for two weeks.

Eligibility

The same rules as previous wage subsidy payments apply.

• You must retain employees you are applying wage subsidy payments for
• Your business is being or will be affected by the move to Alert Level 4
• Your business has had, or you are predicting will have, a decline in revenue that is attributable to the effect the move to Alert Level 4 of at least 40%
• Have obtained consent from employees for the application and the sharing of their personal details
• Have taken active steps to mitigate the financial impacts of COVID-19
• Meet the other criteria listed in the declaration

Resurgence Support Payment

(Applications open at 8am on 24 August 2021)

Apply here

Each time the COVID-19 alert level is increased from level 1, the resurgence support payments maybe activated at the government’s discretion. Once it is activated it is available nationally.

Eligible businesses can receive the lesser of:

• $1,500 plus $400 per full-time equivalent (FTE) employee, up to a maximum of 50 FTEs
• four times the actual revenue decline experienced by the applicant.

Eligibility

• This payment will be available to any business or organization in New Zealand that experiences at least a 30% drop in revenue or a 30% decline in capital-raising ability over a 7-day period, due to a COVID-19 alert level increase of level 2 or higher.
• You must have been in business for at least 6 months
• The business must be viable and ongoing

Click here for more detailed eligibility requirements

Other Support Available

The Leave Support Scheme

Apply here

• This payment is for workers who must self-isolate and cannot work from home.
• It provides a two-week lump sum payment of $585.80 per week for full-time workers or $350 per week for part-time workers
• The rates increase to $600 per week for full-time workers or $359 per week for part-time workers from Tuesday 24 August 2021

The Short-Term Absence Payment

Apply here

• This is a one-off payment (once per 30 days) of $350 for workers who must miss work due to a COVID-19 test and cannot work from home.
• The rate increases to $359 from Tuesday 24 August 2021

The Small Business Cashflow Scheme

Apply here

• This is cashflow loan introduced to support small to medium businesses and organizations struggling with a loss of actual revenue due to COVID-19. Applications are now open until 31st December 2023
• The loan amount is $10,000 per firm, plus $1,800 per FTE.

Small business owners prefer to thrive in a DIY environment. But the reality is the more hat they will wear, the less jobs they may complete successfully. Accounting is one of the most critical areas of your business that you cannot take lightly.

Using accounting software can be an excellent option to manage small business accounts, but they have some limitations. Besides, you also have to learn how to use them properly. Doing the accounting yourself can save some money at first. But sooner or later, you will feel the requirement of an accountant. Here’s why you should always consider hiring an expert small business accountant to manage your books.

1. Save Time

A recent study says that 30% of small business owners take care of business accounting independently. 28% of them have received a formal notice from the revenue department. Auditing books is a time-consuming job. After all the hard work, if you get a legal notice, it will surely cause anxiety. Checking things twice or thrice can help you avoid mistakes, but it will take a lot of time. You can save time and get rid of stress by hiring a Chartered Accountant.

2. Improve Cash Flow

Cash is the vitamin that you need to run your business. Efficient control of cash flow is required to run and grow your business. An experienced small business accountant can create effective cash management and credit control policies for you. Efficient credit control and cash management encompass how a company manages operations, financial activities, human resources, and other aspects. It allows businesses to manage a positive cash flow that results in covering expenses, repaying investors, etc.

3. They Are a Trusted Source of Support

Chartered Accountants are the most trusted source where you can seek reliable business-related advice. They have good knowledge of business management and strategies that allow them to provide better solutions than friends and family

4. Handle Growth Sustainably

An unexpected growth rate (too fast or slow) can cause different types of problems related to cash flow, workload, office space, etc. A well experienced small business accountant can empower you to react quickly and manage the situation.

5. Accountants Can Provide Business Consulting

Many accounting firms, including us, offer solutions to business problems. Our experts provide innovative solutions to clients that help to boost productivity and reduce cost.

We Can Help!!

Elite Accounting is a trusted Chartered Accountant offering accounting, business/tax advisory, and other related services. We aim to provide flagship services to each client and help them to thrive. You can confidently hire a small business accountant from our team to manage your business accounting. Our services are not just limited to accounting. Instead, we also offer several other services, including the followings:

• Property investment
• Investment guidance
• Tax debt
• IRD audit
• Business services
• Company administration
• Overdue tax returns
• Trust accounting
• Voluntary disclosure
• Financial supervisor

You can call us on 09 393 7025 to know more about our services or book a smart accounting package. Feel free to contact us to know about your options.

To run a business in an effortless way, you need to have teams of the most efficient and trusted professionals, who can look after all the important aspects of the business. Any business runs on profit and to ensure the same, you have to take various crucial financial decisions. And needless to say, taking such crucial financial decisions is never easy and if you have trusted experts beside you to support and assist, it certainly proves to be worthwhile. Elite Accounting can be that trusted business partner, who is capable of offering the best solutions to your business problems. It is much more than a small business accounting company. In this blog, we will discuss how this firm can help you with all its specialized business accounting and business advisory services.

Serving small businesses throughout New Zealand with specialized accounting services

Having reliable, experienced, and efficient business advisors for providing guidance and innovative business solutions is no less than a boon. With Elite Accounting beside you, nothing can stop your business from growing in leaps and bounds. A wide range of aspects are taken care of by these professionals like – setting up a business, tax returns filing, business planning, analyzing the growth, supporting in tax audits, and in a number of other ways, clients are assisted and served by these accounting experts.

The specialized accounting and business services offered by Elite Accounting

This reputable small business accounting company offers a range of services that includes trust accounting, franchise accounting, property investment, tax debt, IRD Audit, financial supervisor, investment guidance, company administration, rental property returns, overdue tax returns, voluntary disclosure, business services, and a lot more. All the services offered by this small business accounting company are affordable so that the small business owners in New Zealand can easily afford the same as per their business needs.

An overview of the smart accounting service packages

A number of smart accounting service packages are offered by Elite Accounting, such as –

• Business Startup or Starter/Contractor that includes the year-end financial statement, company tax returns, individual tax returns, correspondence with IRD, etc.
• Business Essentials that includes all the previously mentioned services along with GST Returns, tax planning, phone and email support, etc.
• Business Growth that includes all the previously mentioned services and payroll setup and support, Xero setup and training, business growth meetings, annual review meeting, etc.
• Business Elite package that includes the maximum number and variety of services that comprise all the aforementioned ones and some additional services like quarterly reporting, management reporting, forecasting and budgeting, and a wide range of customized customer services as required by the clients.

For signing up for these services, you can call these accounting experts or opt for a face-to-face meeting to discuss your requirements.

Last week some major changes affecting residential property investments were announced by the Government. This article provides a brief overview of these proposed changes.

Extension of the bright-line test from 5 to 10 years on properties bought on or after 23rd of March 2021. As with the original test the main home is excluded from the extension. Newly built homes are also excluded which, but they still have to use a 5 year bright-line test.

The bright-line test was first introduced in 2015 as a 2-year test, it has since been extended twice to 5 years and now to 10 years. See our original blog on the bright-line test.

Interest deductions on loans for residential properties will not be allowed as an expense for income tax. Currently owners of rental properties are allowed to claim interest paid on the property loan as a deductible expense. This can be a major expense for a lot of landlords. The Governments proposal is to introduce legislation to disallow this as an expense.

Interest deductions on residential property acquired on or after 27 March 2021 will not be allowed from 1st October 2021. Property acquired before 27 March 2021 can still claim 100% of the interest expense in 2021 financial year, however this will decrease by 25% each year till March 2025 after which no interest expense will be claimable.

It is proposed that new builds will be exempt from this legislation hence landlords will still be able to claim interest expense for new builds. (Note: full details will be released once consultation have concluded)

Lifting income caps on first home loans and first home grants to help first home buyers get into their own home. The government has lifted the maximum income cap to get the first home loan and the first home grant from $85,000 to $95,000 for single buyers, and from $130,000 to $150,000 for two or more buyers. Price caps on homes that can be purchased using these assistance programs has also been lifted.

$3.8 billion Housing Acceleration Fund announced to help fund infrastructure around housing developments. This fund also includes additional funding for the land for housing program which the government hopes will accelerate development of vacant land for housing.

Some of the above policies are still been worked though and full details will be known once the relevant legislation is introduced in parliament. In the meantime, if you have any questions regarding property tax get in-touch with our friendly team.

Applications are now open for the resurgence support payment. These payments are for businesses which have suffered a drop in revenue due to a COVID alert level increase to level 2 or higher. The resurgence support payment is part of the Government’s COVID support initiatives which was announced in the original COVID support package.

Eligible businesses and organization’s can apply to receive the lesser of:

• $1,500 plus $400 per fulltime-equivalent (FTE) employee, up to a maximum of 50 FTEs, or
• Four times (4x) the actual revenue drop experienced by the applicant.

The current eligibility criteria for the RSP:

• Applicants must have experienced a revenue decrease or decrease in capital-raising ability of at least 30% due to the increase in alert level.
• Businesses and organisations (including sole traders) must have been in business for at least 6 months.
• Applicants (including sole traders and trustees) must be at least 18 years old at the time of application.
• The business or organisation must be considered viable and ongoing.
• Charities and not-for-profit organisations may be entitled to the RSP, provided they meet the other eligibility requirements including that they are a viable, ongoing organisation.
• State sector organisations are excluded from the RSP but can apply to the Minister of Finance for an exemption to apply for the scheme.
• Income that is received passively – such as interest and dividends, and all forms of residential and commercial rent – is excluded from the measurement of revenue.

Receiving any other Government COVID-19 support does not affect eligibility for the RSP.

More information regarding eligibility and different business types is available on the IRD website.

If you or your spouse or partner having a baby, you might be able to take parental leave. In this article, we will discuss the following:

1. Commonly used terms
2. Employee Eligibility
3. Types of parental leave
4. Leave Application Process
5. Employer Obligations
6. Keep in touch days
7. Temporary changes to parental leave due to COVID-19

Commonly used terms

• Primary carer is usually the pregnant female or the female who has given birth to a child. The primary carer may also be her partner, if the entitlement to the parental leave payment was transferred to him/her, which means that the partner is now the primary carer until such time that the entitlement period ends.
• Partner is the spouse of the mother, the partner of the mother, or the chosen primary carer regardless of gender.
• Paid means with payment.
• Unpaid, which means without payment.

Eligibility

To be entitled to a parental leave, an employee must be eligible based on the parental leave and payment eligibility table released by the New Zealand Government. There are two eligibility criteria which must be met.

First, the 6-month eligibility employment criteria. In this criterion, an employee must be employed by the same employer for at least an average of 10 hours per week in the 6 months before the due date of the baby. Or, when her partner becomes the permanent primary carer of a child below 6 years old.

The second one is the 12-month eligibility criteria. Here, an employee must be employed by the same employer for at least an average of 10 hours per week in 12 months before the baby is due, or when her partner becomes the permanent primary carer of a child below 6 years old.

Also, a self-employed Mother may be entitled to parental leave if she is self-employed for at least an average of 10 hours per week for any 26 to the 52 weeks before the baby is due. This can also be applied to their partner if they have become the permanent primary carer of a child under 6 years old.

Note: From 1st July 2020, the minimum paid parental leave was increased from 22 weeks to 26 weeks for those who met the eligibility criteria.

Types of Parental Leave

There are various types of leaves. The first type is the Primary Carer Leave which is for pregnant female employees and/or her spouse or partner to whom all or a part of her parental leave is transferred. This is also for those who have the responsibility of taking care of a child under 6 years old.

Special Leave is an additional of 10 days of unpaid special leave for pregnancy-related concerns such as check-ups and midwife appointments.

Partner’s Leave is for the spouse or partner of the pregnant female. This leave will give one-week unpaid leave to a partner who qualifies in the six-month criteria, and a two-week unpaid leave to a partner who qualifies in the twelve-month criteria.

Extended Leave may be extended up to 56 weeks.

Negotiated Carer Leave allows employees who do not qualify for primary carer leave to take their leave to care for a child and receive parental leave payment.

Leave application process

The first step in applying for parental leave is an employee writing a letter to his/her employer stating the details of his/her leave. This is not always done in practice however it is advised that this should be done to avoid miscommunication and to make things clear for the employer.

This letter should include the type of leave, the date when the leave will start, and how long the leave will be. The employee must submit the letter at least 3 months before the baby is due or at least 14 days before he/she wants to take a parental leave if you will be the permanent primary carer.

Am employee must also provide documents stating who is pregnant and the due date. The partner will on the other hand, will present a letter written by the pregnant wife stating that the partner will assume the role of a primary carer.

Employer Obligations

The employer must then confirm the leave through a letter. He/She must also take into consideration who will replace the employee during the duration of the leave. Lastly, the employer must fill in the employer’s section of the application form.

Keep in touch days

The employee may also use the “keeping in touch” days which means that he/she may stay connected with the employer. They may arrange up to 64 hours during their 26 weeks paid parental leave. This will make the employee earn additional money since the paid parental leave is shouldered by the government, while the “keeping in touch” days will be shouldered by the company.

Temporary changes to parental leave due to COVID-19

Temporary changes to parental leave due to COVID-19 mean that workers can go back to work temporarily without losing their remaining entitlement to parental leave. It allows one temporary return to work for up to 12 weeks. While back at work the employee will not receive parental leave payments however this will resume once the employee goes back on parental leave.

It is important for an employee to learn his/her rights and responsibilities in taking parental leave or any kinds of leave. In the same manner, an employer needs to know his/her rights and responsibilities in providing leaves and other privileges to their employees.

Every business needs professional accounting services. But there are many who attempt to manage their accounting workflows by themselves or use an unqualified accountant.

The result? Most tend to fall short of the outcomes they could have obtained from a professional accounting service provider and their businesses suffer. Honestly speaking, the practices of professional accounting services are not easy to adopt. They achieve professional accounting efficiency through years of training and practice. There is no room to fashion it out by using a “DIY” attitude. It calls for regular practice and the accountants to stay updated with the latest changes to tax legislation and sometimes complex tax calculations.

In short, there is no alternative to professional accounting services. They know each area of accounting services and can aptly suggest and provide their accounting services depending on the nature of a businesses requirement.

Some of the areas accounting services include:

• Consulting
• Taxes
• Bookkeeping
• Analysis
• Advisory

There are many other services which are not covered in the above list. Below we explain some of the reasons why you need a professional accountant sooner rather than later.

Set up a Company Structure

Professional accountants are experienced advisors. They can help you in several ways to set up a company, from explaining the company mission and vision, partnership and sole trader legal structures, to enabling you to decide on the best option for your organisation. In addition, once your company is set up, a professional accountant can also provide ongoing business consultation.

Provide Business Planning

A professional accountant can provide financial analysis required by finance companies or banks when applying for funding, proposing new projects, and investing in growth opportunities.

Save Time and Money

Using the services of a professional accounting firm is an investment. The opportunity costs of not using a professional accountant start from your time spent doing something you are not qualified to do. Spending time and money on training/software which might not be of much benefit and failure to do things properly, you will end up in trouble with the Inland Revenue Department. Again fixing your accounts will cost more in terms of time and money. Hence it’s better to do it properly and correctly the first time by using a qualified accountant.

At Elite Accountants, one of the trusted accounting firms in NZ, has a country-wide reputation from providing services for setting up a company, filing tax returns, business planning, growth analysis, to helping clients through a tax audit.

Thinking of changing accountants or starting a new business? Get in touch today for a free phone consultation.

The government has announced that it will extend the Small Business Cashflow Loan Scheme by 3 years. This means that businesses can access the Small Business Cashflow Loan Scheme until the end of 2023. Loans need to be repaid within 5 years of been taken.

The interest free period will also be extended from 12 Months to 24 Months. Interest rate of 3% applies when the interest free period expires and it is important to note that once the interest free period expires, interest is charged from the date the loan is drawn down.

New Criteria

The government will also change the criteria for what the loans can be used for. The new criteria will be broader, and businesses can use the loan for core business operating costs as well as for capital items such as to investing in new equipment and digital infrastructure.

Around 100,000 businesses have benefited from the Small Business Cashflow Loan Scheme with total lending of $1.6 Billion.

Congratulations, as if you are reading this you either have made the brave move to be your own boss or are seriously considering it.

As far as business structures go small companies in New Zealand are very common. There are many advantages to operating under a company name which easily out-weight the costs.

Advantages of operating our business under a company name:

Limited Liability

As the name says a company’s liability is limited to assets owned by the company. Unless the shareholders provide personal guarantees or there is illegal activity, creditors cannot make a claim on the personal assets of shareholders.

Obtaining Finance

Creditors and finance providers may view a company more favorably than a sole trader in terms of offering finance. Sole traders face more difficulty getting loans because their personal credit history and personal finances are considered and they may be perceived to be more risky than companies.

Lifespan

A company does not close down if its shareholders die or resign unlike sole traders. The perpetual existence of companies allows current shareholders to transfer or sell their shares to new shareholders, friends or family.

Taxes

Companies in most parts of the world have a lower tax rate than individuals. This is to encourage business and to acknowledge risks taken by a business vs employees. New Zealand has a company tax rate of 28% whereas the highest individual tax rates is 33%.

Company formation

Now that you have decided on forming a company, how do you actually do it?

Forming a company in New Zealand is relatively easy. All you need is a real me ID. You can get this here https://www.realme.govt.nz/

Once you have a real me ID, you can create a profile on the companies office website: https://companies-register.companiesoffice.govt.nz/

Once done follow the steps to register a company. First you will need to reserve a company name. Choose this carefully and make sure it does not match or is similar to another company name, as it may be rejected and you will have to pay another fee to reserve another name.

Once your company name has been approved you can use this to form the company. You will need to enter details such as number of shares, share allocation, details of shareholders and company directors. You will also have to decide if you want to register for GST.

Once the above is done you will get directors and shareholders consent forms, you have to fill/sign these and upload to the company’s office website.

Upon approve of these your company is formed and you will get a confirmation email with the certificate of incorporation and company extract.

Maintaining a company

You have to file an annual return to update the publicly available information about your company. It this is not filed on time the companies’ registrar will remove the company form the register.

Note: An annual return is not a tax return or financial statement — it’s a yearly update of publicly available information about your company on the Companies Register. To remain on the register, you must confirm or update particular information when you file your annual return.

Companies Act 1993

Companies in New Zealand are legislated by the Companies Act 1993, this act states the requirements of companies such as company constitution, issue of shares and annual meetings.

Unless you are using a professional it is a good idea to read this act when forming or operating a company.

Companies Act 1993:

http://www.legislation.govt.nz/act/public/1993/0105/200.0/DLM319570.html

Summary

While it may seem like a daunting task to form a company it might be better for your business in the long term.

Take professional advice if you are not sure how to best structure your business. A good structure can save you thousands in the future.

The Inland Revenue Department is collecting investor data from Crypto Exchanges. It has requested exchanges such as Easy Crypto to provide data such as customers personal details and the type and value of their digital currency holdings. According to the IRD they want to get a better understanding of the crypto asset environment in New Zealand. This would in turn assist them in working out how to best help taxpayers meet their income tax obligations.

It seems that this move by IRD is part of an OECD and G20 initiative. OECD recently issued a report prepared and endorsed by the 137 members of the OECD/G20 Inclusive Framework on BEPS. This report looked at the tax treatments and tax policy issues of taxing virtual currencies. It also looked at the key concepts and of blockchain and crypto assets, looking at the characterization, legality and valuation of virtual currencies.

IRD comes knocking

The IRD is currently in the early stages of gathering this information. However, this would be a clear sign to crypto investors to meet their tax obligations, correctly declaring their crypto assets in their tax returns or doing a voluntary disclosure. This would save investors and crypto traders a lot of trouble down the line.

Accounting for Crypto assets

The Inland Revenue Department has recently released (perhaps in preparation of the above action) new guidelines on how ordinary tax rules apply to crypto assets. These guidelines make it clear that crypto assets are treated as a form of property for tax purposes. They also go into detail to explain your tax obligations when buying, selling or mining crypto assets.

If you are or have been investing in crypto currencies and are not sure of your tax obligations, give us a call today for a confidential, no obligation chat.

Currently there are 4 options of calculating provisional tax. (Not sure what provisional tax is? Read our blog Provisional Tax here). The 4 options are briefly explained below.

Standard Option

This is the default option for provisional tax. You can change to one of the other options by notifying IRD. Note: you can change from the standard option to estimation option or the accounting income method at any time during to the year however, you cannot change to the ratio option till the end of the financial year.

The standard option calculates your provisional tax based on the previous years residual income tax (RIT). Under this option your provisional tax is the previous years RIT + 5%. For example, if your last year’s RIT was $10,000, the provisional tax you need to pay this year will be: $10,000 + 5% = $10,500. This will need to be paid in 3 equal instalments of $$3,500.

If you have an extension of time, to file your tax return which will be the case for most of Elite Accounting clients, then your first provisional tax payment might be due before your returns are done. In this case the provisional tax is calculated based on the last filed return plus 10%.

Estimation Option

As the name says, using this option you have to estimate what you think your provisional tax will be. This option might suit a business whose yearly income is not stable or if you think your income will increase or decrease substantially over the next financial year.

When using this option, you can change your estimate as many times as you like up until the final instalment date. The risk with using this option is that if you underestimate your provisional tax you would be charged interest on the underestimated amount and might be penalized by the IRD as well.

Accounting Income Method (AIM)

This method of calculating provisional tax was adopted by the IRD in 2018 and is available to small businesses that have turnover of less than $5 million a year. AIM utilizes functionality included in approved accounting software programs to work out provisional tax payments.

Using accounting software, businesses file a statement of activity in line with their GST due dates. The statement of activity shows how each payment of provisional tax was calculated and it takes into account the income and related expenses of the business. Since AIM uses up to date information in calculating payments you only have to pay provisional tax when the business is making a profit.

Read more about AIM in our blog Accounting Income Method (AIM) for Provisional Tax

Ratio Option

The ratio option of calculating provisional tax is only available to businesses which are registered for GST on a monthly or 2 monthly basis, and have been registered for GST for the whole of the previous tax year and part of the tax year before that. If you want to use this option, you have to opt in at the beginning of the financial year.

Your RIT and GST taxable supplies from the previous year are used to determine ratio which is applied to the ratio calculation. Six provisional tax payments are required using this option and these are calculated based on your taxable supplies from the current 2 Monthly GST and the ratio calculated.

Summary

All 4 options will be beneficial to different types of business. Get advice on the option best suited to your organization as payment amounts can differ significantly between the options and some options penalize you for getting it incorrect.

Life is never slow when you are in the medical profession. You are so busy taking care of others that you barely get time to sort out your own paperwork and to make sure that you are complying with your tax obligations.

At Elite Accounting we understand the important work medical professional do. That’s the reason we have created specialized packages which take care of your accounting and tax requirements. Now you can really take that time off to relax rather than worrying about your taxes.

Accounting for our most important industry

General Practitioner (Accountants for General Practice) – Whether you run your own practice or are a contractor we can provide you expert advice and tax planning resources to better manage your tax obligations. For practices we can help you grow or run more efficiently.

Locums and GP’s on a Salary – We can help Locums with their tax filing. Advise on operating structures depending on your individual circumstance. For GP’s currently on a salary and wanting to start their own practice we can provide you with business planning services. If you are looking at contracting, we can look over contract proposals and compare salary vs contacting.

Dentist (Accountants for Dentists) – Running your own dental practice can be a challenge in it-self. Let us take care of the accounting side of things. We can also train your staff to correctly do bookkeeping and payroll for your practice or we can provide you with an end to end package that takes care of it all.

Physiotherapy, chiropractic and osteopathy – Your skills require years of training and now when you are ready to practice why waste your precious time on something you are not trained for. At Elite Accounting our Chartered Accountants will provide you the best service and make sure that your practice complies with all tax requirements.

Optometrist – Accountants for optometrists we have the foresight needed for effective financial planning and management of your practice. We can help you understand financial aspects of running your practice, to better manage it and make it sustainable.

Pharmacist – You might think accounting for pharmacies is similar to accounting for other small businesses. In some aspects you are right, however accounting for pharmacies and for pharmacist is very different in some aspects. Getting the balance right is as critical as prescribing the right tablets to a patient.

Midwife – Being a midwife while rewarding can be a hectic career. You schedule is always evolving, and you are on duty 24/7. This leaves little time to concentrate on your accounts and tax returns. Our accounting for midwives packages handle all your accounting and tax requirements. We do everything from bookkeeping, GST Returns, Payroll to Annual Accounts and financial forecasts.

Not sure if you want to be self-employed, an independent contractor or running your business under a company? We can help by providing you with structure advice and tax planning. We also focus on helping you achieve your goals whether that be growing your business or keeping it small and sustainable.

Accounting for medical practices – There is a whole lot involved in successfully running a medical practice then just providing the core services. You might be the best medical practitioner and really know your job, but still struggle with the finance side of things. Medical practices while providing an essential service are still businesses and they need to be run as such. Getting the correct advice and the right people can make all the difference.

We can provide a range of support for medical practices. For a small practice we generally take over all your accounting, payroll and bookkeeping giving you and your staff valuable time to do actual work. For larger practices with administration capacity we provide support to staff and make sure things are getting done properly. We ensure you have effective financial management in place and meet all reporting deadlines and filing requirements.

We support practice managers in recruitment and staff management. Depending on your practice we can also implement cloud accounting solutions and provide training for staff.

You might have heard of the provisional tax threshold being increased from $2,500 to $5,000 as one of the measures released by the government to provide some relief for businesses affected by COVID-19. But what is provisional tax?

When you start a business or become self-employed you don’t pay income tax till the end of the first financial year. This is when your accountant calculates the profit for the year and tax payable. You might get a large tax bill as it’s an accumulation of the entire years tax.

Provisional tax helps you manage your income tax by paying it in installments throughout the year rather than waiting for the end of the year. Your accountant will estimate your provisional tax by using one of the available options (see our blog on How Provisional Tax is Calculated) and you pay this in normally 3 installments throughout the year. At year end when your actual tax is calculated you either get a refund of any overpaid provisional tax or you have to pay the balance if your tax is higher than the provisional tax paid.

Provisional Tax Threshold

Not every business is required to pay provisional tax, the provisional tax threshold determines whether a business or individual is liable for provisional tax. The government has this year changed the provisional tax threshold from $2,500 to $5,000. This change was in response to COVID-19 however, it is a permanent change. This means that from 2020-2021 financial year, if your terminal tax is more than $5,000, you are liable for provisional tax.

There are a number of statutory deductions an employer has to make from their employees pay. These are shown on the employees payslip. Below we discuss some of the common deductions and how they are calculated.

· PAYE (Pay as you earn) – is deducted on every dollar your employee has earned. If your employee did not submit their tax code declaration form IR330 it will be your responsibility to deduct PAYE at the non-notified rate. The non-notified rate is 46.39 cents in the dollar (including ACC earners levy). Use tax code ND for the non-notified rate. If, however, they have submitted their tax code declaration form you have to use the tax coded declared unless advised by the IRD otherwise. The final tax you employees pay will depend on their annual income. This can be calculated based on the table below:

Example: This example shows how the final tax will be calculated.

If your employee Zia earns $20.00 per hour at 40 hour per week, her final tax is calculated as per below:

• Rate per hour $ 20.00
• Multiply by: hours per week 40.00
• Gross pay per week $ 800.00
• Multiply by number of weeks per year 52.00
• Gross pay per year $41,600.00

Income tax rate	Income	Tax
Income up to $14000.0000, taxed at 10.5%	14,000.00	1,470.00
Income over $14000 and up to $48000, taxed at 17.5%	27,600.00	4,830.00
Income over $48000 and up to $70000, taxed at 30%	0.00	0.00
Remaining income over $70000, taxed at 33%	0.00	0.00
	41,600.00	6,300.00

• KiwiSaver – these are voluntary deductions paid toward employee’s retirement. If the employee is not yet registered for Kiwisaver you need to register them even if they have opt out. The Kiwisaver rates are 3%, 4%, 6% and 8%. If an employee opted in, as an employer you need to pay the KiwiSaver Employer Contribution.
• Student Loans – if your employees have student loans, repayments will be deducted based on their income. Your employees and/or the Inland Revenue may request to deduct extra payments.
• Child Support – IRD will send you a notification if you will need to deduct child support for your employee.
• Payroll Giving – are basically donations. Your employee can opt to give to an approved charity. They can then claim back at least $0.33 for every dollar of payroll giving.

IRD offers a wide range of calculators including the payroll calculator. You may give it a try here

This blog is part of our small business basic accounting and New Zealand tax series aimed to refresh your understanding of basic tax rules.

Franchise accounting is similar to accounting for other businesses, however there are some aspects which are unique to franchises. Understanding how a franchise is managed and implementing strategies which suit and grow the business will be vital to its success.

Our blog Should I buy a franchise explains what a franchise is and the advantages and disadvantages of buying a franchise. In this blog we will try to explain accounting for franchises.

Cost of running a franchise

The franchisor owns the brand or other intellectual property however the franchisee normally owns the location they operate out of. The franchisee is responsible for the costs of the location, cost of staffing its operations and maintenance costs. The franchisee also pays initial fees or purchase price of the franchisee and then ongoing franchisee fees. There might be additional advertising and marketing contributions which the franchisee will have to pay.

Furthermore, to be successful the franchisee must have a set of key performance indicators (KPIs) which they should meet. These KPIs are sometimes defined by the franchisors but if not, franchisees should get their accountants to define these.

Brand & Intellectual Property

The franchisee might use the franchisor brand, trademarks, know-how and other intellectual property to sell its products or services, however as it does not own any of these it does not appear on the franchisees balance sheet.

Initial Fees

The initial fee paid by the franchisee to the franchisor for the right to use its brand, intellectual property etc is treated as a capital investment. The initial fee is treated similar to the investment when you buy a business hence it cannot be expensed.

Renewal Fees and Ongoing Franchise Fees

Ongoing franchise fees are a deductible expense and so are any advertising or service fees paid to the franchisor. Renewal fees might be deductible depending on the circumstances and the franchise agreement.

Cashflow Planning

Cashflow planning is very important, as buying and operating a franchise requires a large cash outlay. Depending on the type of franchise it may also have substantial operating costs. Good cashflow planning will assist in a franchise meeting its debt obligations on time such as paying suppliers, employees and taxes.

Bad cashflow planning will leave franchise with no liquidity and it will have problems paying its bills and in the worst-case scenario might lead to business failure.

Key Performance Indicators (KPIs)

KPIs provide a measure of success for franchises. These indicators can help the business focus on areas of growth or areas where improvement is required. They can also assist with driving behaviour amongst staff by measuring and rewarding good behaviour.

Every franchise needs to adopt a set of KPIs based on their business goals and measure these regularly.

This article provides a brief overview of accounting for franchises. For specific questions please contact us.

What’s a franchise?

Franchise is acquiring the right to use another party’s proprietary knowledge, processes, and trademarks to sell a product or provide a service. Franchising is a good way for franchisors to expand and can be a cheaper way for franchisees to enter the market.

Some of the largest and well-known franchisors in the world are McDonald’s, Taco Bell, Subway & KFC.

Why buying a franchise might be good?

Buying a franchise gives you access to proven concepts, strategies or products which have already been market tested. Some franchisors even provide you with a guaranteed level of income.

Most franchisors will help you with setup & training. They will also have manuals or guidelines on the normal operations of the business.

It also gives you the ability to use the buying power of the franchisor to purchase goods at a lower cost compared to similar independent businesses, giving you a competitive advantage.

You benefit from brand recognition from day one and in most cases advertising and marketing will be taken care of by the franchisor.

Risks & Shortcomings of buying a franchise

The franchise agreement will dictate how you run your franchise. As you are using the franchisors brand, the franchisor controls how it wants its brand to be perceived by outsiders.

You might have to follow the franchisors rules on how to present and run your franchise.

There might also be restrictions on how you operate, the products you are allowed to sell and suppliers you use.

As you are linked to one brand, bad performance by other franchisees or diminishing brand name will affect your franchise’s reputation and profitability as well

There might be additional costs of keeping your premises up to standards

Summary

Buying a franchise is like buying any other business, you have to do your due diligence. Even though the franchise might have a proven market, there is no guarantee of success and what the future holds. Good strategy, management and decision making is critical to the success and survival of any business.

Franchises are restrictive in the way they operate and products they sell, hence it might not suit everyone. Creative people or someone who wants to create their own unique brand or product will not suit a franchise.

Buying a franchise might be good for someone who does not have much experience as the franchisor will most likely provide training and guidance around the running of the business. All the tips and tricks of trade are provided to a franchisee hence little work is required other than executing these.

Investing into a franchise might also be a good idea as it could give guaranteed returns with little or no effort in penetrating the market.

Nonetheless its always a good idea to discuss your plans with a business advisor and lawyer first before signing a franchise agreement.

New Zealand has various types of taxes. Some of these are widely known such as goods and services tax (GST) while taxes such as fringe benefit tax (FBT) might not be that popular. There are different ways in which IRD collects taxes for example employees pay PAYE at source via their employer rather than directly to IRD, however if they short pay this then they are required to pay the balance directly to the IRD when they do their tax returns.

Tax Types and Rates

Taxation for companies

Company Tax (On profits)	28%
Goods and Services Tax (GST)	15%

Taxes when employing people

Pay as you earn (PAYE)	Varies depending on employee’s tax code
Fringe benefit tax (FBT)	Up to 49.25%
Employer superannuation contribution tax (ESTC)	Varies depending on individual annual income

Tax for individuals

Individuals if employed pay their taxes under the PAYE system. Taxes are paid at source where the employer deducts taxes and pays it to the IRD. The employee receives net wages after deductions.

Up to $14,000	10.5%
Over $14,000 and up to $48,000	17.5%
Over $48,000 and up to $70,000	30%
Remaining income over $70,000	33%

Tax for Contractors

If you are a contractor preforming certain activities or working in certain industries, tax is deducted as schedular payments. The rate of schedular payments varies depending on activity. IRD publishes for IR330C, tax rate notification for contractors which contains schedular payment rates.

Other taxes

• Resident withholding tax (RWT) is paid on interest received from savings. Rate depends on the individuals marginal tax rate.
• Non resident withholding tax (NRWT) is same as RWT however applies to non-residents.
• ACC earners levy is paid by both employees and employers to cover the cost of anyone injured in New Zealand.
• Capital gains tax – New Zealand does not have a general capital gains tax but has a bright line test on property investment. This is taxes at the investors income tax rate.

Double Tax Agreements

New Zealand has double tax agreements with around 40 countries. These agreements help prevent double taxing income derived across an international border by unilaterally granting its residents credits for foreign tax paid on income that is also subject to New Zealand tax up to the amount of New Zealand tax liability on that income.

Summary

Tax is a complex area and above information is only a summary. If you have questions regarding your specific tax situation, please contact us.

This blog is part of our small business basic accounting and New Zealand tax series aimed to refresh your understanding of basic tax rules.

GST is imposed and administered by the Goods and Services Tax Act 1985. GST was introduced in New Zealand on 1 October 1986 at a rate of 10% on most goods and services. It replaced existing sales taxes for some goods and services. Since then GST has had two increases, on 1 July 1989 the rate increased to 12.5% and on 1 October 2010 it increased again to 15%.

How it works

Goods and Services Tax is a value-added tax or consumption tax for goods and services consumed in New Zealand.

Businesses collect GST on their sales and pay it on their purchases from other businesses. This is done throughout the supply chain until the goods/service reach consumers. Consumers ultimately pay the entire cost of GST.

When do you need to register for GST

To register for GST you need to be running a business which carries out a taxable activity and your turnover was at least $60,000 in the last 12 months or you expect it to be $60,000 or more in the next 12 months. GST applies to all kinds of business weather you are a sole trader, partnership, trust or just working as a contractor. It does not apply to people in employment.

You must also register for GST if you add GST to the price of goods or services you sell, regardless of your turnover exceeding the $60,000 registration threshold.

This blog is part of our small business basic accounting and New Zealand tax series aimed to refresh your understanding of basic tax rules.

Maintaining a good cashflow is important for all businesses. However for small business this can be the key to survival. This is particularly important for small businesses in the post Covid environment.

Below we discuss some ways in which businesses can speed up their cashflow.

Direct Debit

Get customers to give you authority to direct debit their account on the day the invoice is due. Using smart direct debit facilities such as Go Cardless you can automate this process where the customers is notified before the direct debit is processed. The payment automatically gets deducted from the customer’s bank account and is paid to you.

You can also direct debit your customers on delivery rather than waiting the normal 30 days to be paid. Read our article on Direct Debit for more information.

Easy payment options

• Providing your customers with easy payment options will also encourage them to pay you promptly.
• Using software such as Xero Accounting you could add payment services to your invoices where customers can click on the payment link on the invoice and pay it the minute they receive your invoice.

Send a gentle reminder

Sometimes all it takes is a gentle reminder to get paid. We have to remember our customers might be busy and just forget to pay. Constantly reviewing your accounts receivables and sending reminders when necessary could be all that’s needed.

Give incentives for early payments

Early payment discounts have been used by larger organization such as councils and electric companies for years. You could implement a similar incentive for your customers which would encourage them to pay early and improve your cashflow. However we do suggest that you speak to us before implementing such an incentive as it’s important to understand the effects of this on your margin.

Late payment penalties

Applying late payment penalties or charging interest for late payments could encourage customers to pay on time. Decisions to implement late payment penalties needs to take in account your customer base and any negative impacts it might have on future sales.

Ask for upfront or payment on delivery

Small businesses and business operating on thin margins might not be able to finance their customers for the normal 30 days before they get paid. These businesses should consider earlier payment terms or asking for payment upfront or on delivery.

There are many ways to speed up your cashflow, if you are having difficulties in getting paid call us and we will be able to assist you implement systems to improve your cashflow.

Direct debit systems have been around for a long time. However, until recently, they have been too expensive for small businesses to implement. Now with online providers and easy to use applications direct debit systems are within the reach of these businesses.

Benefits of using direct debit for small businesses

• Rather than sending an invoice and hoping your customer remembers to pay it when it’s due, normally 30 days later. Small businesses can get a direct debit mandate to take out the invoice amount directly from their customer’s bank account on the due date or at the same time as the service is provided or goods delivered. (Businesses will have to update their terms of payment before doing this)
• Helps subscription based businesses get paid on time
• It ensures good cashflow for small businesses and saves time as you don’t have to chase payments.
• The entire process can be automated using software such as Xero Accounting for invoicing and Go Cardless as the direct debit provider.
• Having a direct debit service is also beneficial to your customers as they don’t have to worry about missing payments, thus making it very convenient for them.

What payments systems suit your business and customers? Contact us if you are unsure.

We have recently come across some cases where sole traders have unknowingly been employing and paying their spouse/partner from their business. This is fine as long as you’re a registered company and have registered as an employer.

However as a sole trader if you want to employ your spouse/partner in your business, you need to get Inland Revenue’s approval.

Employing Family Members

IRD have given further guidelines in QB 19/01 on the requirements for claiming tax deductions for payments to family members for services.

You cannot split the income you earn between your family members for income tax purposes. To claim a tax deduction for payments to a family member for services, the family member must provide services to your business and the amount paid must not be excessive. You must not pay the family member more than what you would pay a non-family member for the same services. In addition, if the family member is your spouse or partner, you must have the Commissioner’s prior approval for a deduction unless you run your business through a company.

Definition of family members are:

• your spouse or partner
• your parents, children, sisters, brothers, grandchildren, and grandparents and the spouses and partners of those persons
• your spouse or partner’s parents, sisters, brothers, grandchildren, and grandparents
• yours and your spouse or partner’s adoptive parents, adopted siblings, children, and grandchildren
• the trustee of a trust that any of these people has or can benefit under

The 2020 Budget announced by the government on Thursday is the single biggest spending package in New Zealand’s history. It is a $50 Billion Covid-19 recovery budget aimed to keep New Zealand’s economy afloat while riding out the effects of the pandemic.

According to the government in the aftermath of COVID-19, our key to rebuilding the economy is getting businesses moving and making sure Kiwis are in work. That’s why Budget 2020 focusses on jobs: creating new jobs, helping people to get the skills they need for the jobs we have, offering support to protect incomes and get people back into work.

There are no new taxes or large spending cuts in the budget, however treasury forecasts deficits for the next 6 years till 2027 Link.

Budget Highlights

• $50 Billion total spending which includes $13.9 Billion already spent as part of COVID-19 response and $20 Billion set aside for future projects.
• $3.9 billion to ensure all DHBs continue to meet the needs of their populations.
• $3.2 billion on eight-week extension of the wage subsidy scheme for businesses suffering a 50% loss.
• $3 Billion on infrastructure including a revamp of the provisional growth fund. Building 8000 state and transitional houses in partnership with housing providers.
• $1.6 Billion for two years free tertiary courses in construction, agriculture, manufacturing, and also vocational courses such as community health, counselling and care work. This is expected to benefit about 100,000 students.
• $1.1 billion capital invested in improving transport across New Zealand, including replacing ageing ferries and locomotives. This also includes $400 million to replace the Interisland Cook Strait ferries.
• $414.2 million for the Early Learning Sector, including funding subsidies, pay increases for educators, additional support for home-based educators and investment in playcentre sustainability
• $400 million targeted tourism recovery fund including a domestic tourism campaign.
• $246.1 million investment in community services, including a significant funding boost for family violence service providers.
• $193.5 million to support farmers through the eradication of Mycoplasma Bovis.
• $47.8 million to replace ageing communications capabilities for Police, Fire and Ambulance to support healthier, safer and more connected communities

Forecasted effects of the budget on jobs & Government debt

Treasury budget forecasts estimate the stimulus measures could see as many as 138,000 jobs saved in the current economic quarter and employment rise by 234,000 jobs over the next two years.

• $220 million on the free school lunch programme, feeding an additional 200,000 children up from the current programme which feeds 8000 children. This will create an estimated 2000 jobs.
• $1.1 Billion investment in conservation and environmental projects will create 11,000 new jobs.
• Government debt is forecasted to rise from 90 Billion currently owned to $200 Billion by 2024.

In the current environment, businesses are looking for ways to minimize all costs including taxes. The government has introduced a temporary loss carry back scheme. However, some businesses may not be able to take advantage of this due to their inability to meet the criteria. In this blog we will explore other ways in which companies can transfer losses between themselves to lower or zero their income tax liability.

Loss offset and Subvention payments are two ways in which a profit making company can reduce its taxable income by using losses of a loss making company.

Loss Offset

A loss making company can transfer its losses to a profit making company within the same group if it meets the shareholder continuity and commonality rules listed below.

Subvention Payments

Another method of transferring losses to a profit company is for the profit company to make a subvention payment to the loss making company. A subvention payment made to the loss making company is offset against the profit making company’s net income and it reduces the loss making company’s net losses by the same amount.

The below criteria must be satisfied before the losses can be transferred from one company to the other.

• The loss making company must either be incorporated in New Zealand or carrying on business in New Zealand through a fixed establishment and must not be treated as a non-resident because of a double tax agreement.
• The loss company must maintain 49% shareholder continuity from when the loss was incurred till when it is transferred to the profit company.
• Both companies must have at least 66% shareholder commonality during the period in which the losses were incurred till when it was transferred to the profit company.
• The loss transferred to the profit company is no greater than the profit companies net income

If shareholding changes during the year, the company can still offset losses for the part year by preparing accounts for that part of the year and filing an IR4 for up to the period of the shareholding change.

IRD has made a determination (Determination EE002) regarding payments made by employers to their employees to reimburse costs incurred as a result of the employees working from home during the COVID-19 pandemic.

This determination means that employers can pay employees, who are working from home, up to $20 a week tax-free for their home office expenses such as additional heating costs. They do not have to estimate or show what the employee’s actual expenses were. In addition to this employers can also make a tax-free payment of up to $400 per employee for furniture costs.

The determination only applies to payments for expenses incurred between March 17 and September 17 2020.

For this Determination to apply:

• An employer must make a payment to an employee.
• The payment must be for expenditure or a loss incurred (or likely to be incurred) by the employee.
• The expenditure or loss must be incurred by the employee in deriving their employment income and not be private or capital in nature.
• The payment must be made because the employee is doing their job and the employee must be deriving employment income from performing their job.
• The expenditure or loss must be necessary in the performance of the employee’s job.
• The expenditure or loss must be incurred by the employee as a result of the employee being required to work from home because of the COVID-19 pandemic.

Exclusions

This Determination does not apply to:

• Expenditure on account of an employee.
• Any payments made for a period after an employee ceases to work from home.
• An amount paid under a salary sacrifice arrangement.
• To a payment made to an employee to compensate the employee for the conditions of their service.

A temporary loss-carry back scheme has been legislated by the government as part of its COVID-19 response. The COVID-19 Response (Taxation and Other Regulatory Urgent Matters) Bill is the introduction of this temporary tax loss carry-back measure.

This scheme allows businesses expecting to make a loss in either the 2020 year or the 2021 year to use those losses to offset profits they made the year before. In other words the legislation temporarily changes the loss continuity rules hence enabling businesses to carry the loss back one year to the preceding income year and receive refunds for taxes paid for that year.

This scheme aims to help struggling businesses by giving them a cash injection by refunding some or all of the tax paid for the preceding year. Inland Revenue is managing this scheme and it is expected that the refunds will be processed at pace to help businesses survive.

To be eligible to carry back losses:

• Businesses needs to have made a loss or anticipate that they will make a loss in either the 2020 or 2021 tax year
• Made a profit and paid tax in the year before the loss was made

Companies need to also meet these conditions to be eligible:

• The company has maintained 49% common ownership throughout the loss year and preceding year
• The group has retained 66% common ownership throughout the loss year and preceding year
• Has a sufficient imputation credit account balance to cover any refund.

What could go wrong?

Use of money interest – at the moment many businesses are struggling and this may lead them to look at using this scheme for a cash injection. However given this is only the start of the tax year the effects of COVID-19 might wear off in the second quarter leading to the business making a profit for the tax year. If a business gets its loss prediction incorrect and ends up in a profitable position it will be liable for use of money interest. It cannot use the COVID-19 use of money interest relief provision when any tax is underpaid because of using the loss carry-back scheme.

The government has unveiled an interest free loan scheme to assist small businesses impacted by the COVID-19 economic shock. It hopes this will meet the immediate cashflow needs of these businesses by helping them pay for fixed costs.

The scheme will provide small businesses with an interest free loan of up to $100,000. The loan will be interest free for the first year, then interest will be charged at 3 percent for a maximum term of 5 years. No repayments will be required for the first 2 years.

A firm is eligible for $10,000 loan plus $1,800 additional loan per full time employee. For example a firm with 20 employees will be eligible for $10,000 + ($1,800 x 20) = $46,000

The loan is to be used for core operations such as paying rent, insurance, utilities and suppliers however it cannot be passed through to shareholders or owners of the business through dividends.

Detailed eligibility criteria not been released at the time of writing however it is expected that businesses applying would be viable and would have survived through level 4 and level 3, however experienced a decline in revenue of 30 per cent or more.

Applications for the scheme can be made from 14th May 2020, and it will be administered by the Inland Revenue Department.

Contact us if you require assistance with your loan application.

Reforms passed under urgency yesterday deliver the single biggest government support package to businesses via the tax system in modern New Zealand history.

It will provide businesses with more than $3 billion in tax relief. The package takes the total amount Government has, and is planning to, spend to more than $23b.

The measures include a $3b tax loss carry-back scheme that will allow a large number of businesses to access their previous tax payments as cash refunds. This means a forecast loss in the current financial year can be offset against the tax paid on a profit from the year before.

The omnibus bill also has measures to support commercial tenants and landlords and $25 million for further businesses support over the next year. The urgency with which the bill was passed means cash could start flowing to businesses via the tax system as early as next week. The tax package changes are in addition to the Government’s more than $10b wage subsidy scheme.

The main features of this package include:

• A tax loss carry-back regime allowing losses to be carried back one year.
• Allow Inland Revenue to change due dates, timeframes or other procedural requirements for tax returns for taxpayers affected by COVID-19.
• Ensure the treatment of benefits and pensions paid to New Zealanders stranded overseas is consistent with the treatment of equivalent payments in New Zealand.
• Bring forward the commencement date of certain protections relating to high-cost consumer credit contracts.
• Prevent famers and others working with animals having to call in vets to undertake minor surgical procedures during the lockdown.

Loss Carry Back Scheme

The loss carry back scheme means that business can project losses this year (due to the effects of COVID-19) and carry them back to last year to claim back tax paid during that year.

For example:

Let’s assume a Building Company had $100,000 profit last year and hence paid $28,000 in income tax. This year they are projecting to make a loss of $50,000. They could take the $50,000 loss back to last year and get back $14,000 of tax they’ve paid refunded to them.

As part of its Financial Support Package for businesses affected by COVID-19 the New Zealand government has allocated $5.1 Billion to a Wage Subsidy. This subsidy is available to all employers, sole traders and the self-employed.

Other Requirements

To qualify for the Wage Subsidy:

• your business must be registered and operating in New Zealand

This means that a business is:

• registered with the New Zealand Companies Office, and
• physically located in New Zealand, and
• their employees legally work in New Zealand

Sole traders are not required to be registered with the New Zealand Companies Office, but must have:

• a personal IRD number for paying income tax and GST, and
• government licences and permits for their business needs, and
• qualifications or registrations for their trade or profession

Sole traders must still meet the requirements to be physically located and legally working in New Zealand.

• your employees must be legally working in New Zealand
• the business must have experienced a minimum 30% decline in actual or predicted revenue over the period of a month when compared with the same month last year, and that decline is related to COVID-19
• your business must have taken active steps to mitigate the impact of COVID-19
• you must make best efforts to retain employees and pay them a minimum of 80% of their normal income for the subsidised period

Application Process

Small Businesses, Sole Traders, the self-employed and employers can apply for this subsidy through an online portal on the Work and Income website or using the below links.

Employer Application

https://services.workandincome.govt.nz/ess/employer_applications/new

Self-Employed (no employees) Application

https://services.workandincome.govt.nz/ess/trader_applications/new

What you need to fill in the application form

• your IRD number
• your business name
• business address
• the names of your employees
• your employee IRD numbers
• contact details for your business and your employees

The Ministry of Social Development will assess the application and email and text you to let you know if you application has been approved or declined.

If approved payments will be made within 5 working days however this might change due to the volume of applications.

How we can help

If you are still not sure if you qualify for the subsidy or how to apply contact us and we will be happy to assist. Contact us

If you have not yet been affected by COVID-19 but think you will in the coming months, we can help you plan for this.

The Government has unveiled a $12.1 Billion financial package to support small businesses, beneficiaries and the health sector through this crisis.

The package is broken down as below:

• $5.1 Billion – Wage Subsidy
• $2.8 Billion – Benefit Increases
• $2.8 Billion – Business tax changes to free up cashflow
• $600 Million – Aviation support package
• $500 Million – Health spending
• $126 Million – COVID-19 leave and self-isolation support
• $100 Million – redeployment package

Wage Subsidy

The wage subsidy is available for employers who are struggling to retain employees due being significantly impacted by COVID-19. To qualify for this subsidy the business must have suffered or is projected to suffer at least a 30% decline in revenue compared to last year for any month between January and June 2020. Registered businesses, sole traders and self-employed people can apply for the wage subsidy.

The subsidy is limited to $585.80 per week for a full time employee or $350.00 per week for a part time employee. It will be paid as a lump sum covering 12 weeks. The maximum amount any employer or business can receive is $150,000.

Due to the maximum cap of $150,000 this subsidy will mostly benefit small businesses.

Leave & Self-Isolation Support

The main way to stop the spread of COVID-19 is to self-isolate, the leave and self-isolation support payments aim to assist anyone who is required to self-isolate.

Same as the wage subsidy the leave payment is available to employers, sole traders and the self-employed. The payments will be $585.80 per week for full time and $350 per week for part time workers. It is available for those people unable to work who are in self-isolation, are sick with COVID-19, or caring for others with COVID-19.

Benefit Increases, Winter Energy Payment & In-Work Tax Credit Changes

The main benefits will raise by $25 per week from 1 April 2020. This is a permanent change which we assume would have been part of the next budget.

The rate of the winter energy payment will double in 2020, the rates will be $40.91 per week for a single person or $63.64 per week for couples or people with dependents. This is a temporary change and only applies for the 2020 year.

From 1 July 2020 families no longer have to satisfy the hours test to receive the In Work Tax Credit. Removing the hours test will extend eligibility for the IWTC to all families who are not receiving a main benefit and have some level of employment income each week. This is an important change as people may face a reduction of, or variable hours, in the wake of the COVID-19.

Some of the biggest changes to our tax system coming from 1st April 2019. Almost every taxpayer will be affected by these changes. Below we look at some of the changes coming in the next few months.

Automated tax assessments

Majority of the taxpayers in New Zealand have income which are taxed at source such as PAYE on wages, Interest on Savings etc. Normally these taxpayers will go to tax refund companies to file their tax returns in order to get their tax refunds. Not from this year, IRD have automated this process which means automated tax assessments will see around 1.67 million New Zealanders get a tax refund paid straight into their bank account.

Payday filing

Under the new payday filing system employers now have to file “payday” returns more frequently wit the IRD, within 2 working days if filing electronically. Payday filing will replace the employer monthly schedule (EMS). Employers who deduct $50,000 or less in PAYE (small businesses) will be able to file paper returns which should be filed within 10 working days after the payday. Read our article on payday filing for more information on this.

Tailored tax codes

Employees paying too much tax on a secondary job will be able to apply for tailored tax codes from 1st April 2019. IRD’s new system will enable users to apply for these tax codes online. IRD will also closely monitor the tax paid by wage and salary earners through the year. If it appears the worker is being over taxed, Inland Revenue will suggest a more suitable PAYE tax code tailored to that worker.

Donation tax rebates

With IRD’s new system taxpayers will be able to upload your donation receipts online throughout the year using myIR. The IRD will issue refunds at the end of the year once tax returns have been processed.

The above changes are part of IRD’s goal to making tax simpler.

IRD has released an issues paper on the proposal to change the rules of how losses from rental properties can be applied against other income. Under the proposed new rules these losses will be ring fenced meaning property investors will not be able to use these losses against their other income. The change according to the government is an effort to level the playing field between speculators, investors and home buyers.

At present if you own a rental property which is held under your name (sole trader), in a partnership or LTC and you make a loss, then you can offset that loss against your other income such as tax paid on wages. You will therefore get a tax refund.

According to the proposal the ring-fencing will be applied on portfolio basis meaning investors would be able to offset losses from one rental property against rental income from other properties – calculating their overall profit or loss across their portfolio.

The losses will be carried forward and offset against future income from the portfolio or on taxable income from sale of residential land.

What should investors do?

• There is no need to panic as this isn’t law yet. It is proposed that the rules will apply from the start of the 2019–20 income year. The rules could either apply in full from the outset, or they could be phased in over two or three years.
• Investors who are negatively geared need to look at paying of some of their mortgages and making their investments cash flow positive
• If you are dependent on tax refunds to make mortgage payment you may have to reconsider your investment mix. One of the solutions can be to buy cash flow positive properties to offset the losses and get a neutral portfolio.
• Consider your overall budget and see if you can do without the tax refund
• What impact with this have to your overall portfolio and take action based on this.

Again this is only a proposal; you can view the full document here.

ACC is something which is at the back of everyone’s minds that is until we get injured. Everyone (or almost everyone) know what ACC is, its insurance that covers you for accidents.

However, like any insurance ACC has different policies which provide different levels of cover. Below we explore how ACC works and what cover is right for you.

For employers

If you are an employer you automatically get covered under the workplace cover, this is the standard cover for employers.

The standard workplace cover covers you for:

• ​up to 80% of your employee’s salary while they can’t work
• subsidised medical care for your staff’s work-related injuries
• injury prevention schemes

What you pay for this workplace cover is dependant on the amount of wages you pay. Inland Revenue provides ACC with a summary of your payroll information and ACC uses this to calculate your levy and invoice you. The levy also depends on your industry classification so make sure this is correct with the IRD and ACC as more risky industries tend to have higher ACC levy rates.

Self-Employed (Sole-Traders, Contractors)

ACC CoverPlus is the default option for self-employed or a contractor. You are eligible for this cover as soon as you start your business and you are automatically covered.

ACC CoverPlus covers you for:

• up to 80% of your taxable income based on the most recently completed financial year.
• pays towards the cost of your treatment and rehabilitation.
• Compensation based on actual loss of earnings

Note: ACC CoverPlus does not pay you for the first week after your injury.

ACC CoverPlus Extra is available for Self-Employed and non-PAYE shareholder employees. You have to apply for this cover it is subject to underwriting approval.

ACC CoverPlus Extra covers you for:

• 100% of the agreed amount

Both CoverPlus and CoverPlus Extra cover you for:

• Fully paid emergency care and ambulance service
• Non-urgent surgery
• Payment towards medical fees including GP and physiotherapy
• Support services such as home help and childcare
• Support services to help your client return to work
• Lump-sum payments for permanent impairment
• Fatal injuries – cover for dependants and other death benefits

When does ACC invoice you?

• Employers and shareholder employees – every year based on your liable payroll filed with Inland Revenue. This invoice includes both your final levy and a provisional levy
• Self-employed and Contractors – this is usually after you file your income tax return
• New to Business – your first invoice will be triggered after you file your first tax return. This is usually in the second year of business.

Minimum wages are set by the government and are reviewed every year.

The current labour government committed to increase minimum wages to $20 per hour by 2021. The effect of this has been an increase every year to reach $20 per hour by 1st April 2021.

Current & Previous Minimum Wage Rates

The adult minimum wage increased by 50 cents from $15.25 per hour (1 April 2016) to $15.75 per hour (1 April 2017).

The starting out and training rates increased by 40 cents from $12.20 per hour to $12.60 per hour during the same period.

Consistently the adult minimum wage increased by 75 cents to $16.50 per hour from 1 April 2018 and the starting out and training rates increased by 60 cents to $13.20 per hour which is where it sits currently.

1st April 2019

Adult minimum wage increases to $17.70 per hour from 1st April 2019 and starting out and training minimum wage rates will increase to $14.16 per hour remaining at 80 per cent of the adult minimum wage.

To read more on the Minimum wage reviews and process Click here.

Tax Working Group recommends introducing capital gains tax and reducing personal tax rate

The final report by the Tax Working Group lead by Sir Michael Cullen came out today and unsurprisingly it recommended that the Government implement a capital gains tax. There is already a capital gains tax in the form of the bright line test which applies to residential properties bought and sold within 5 years.

The tax working group recommends that a comprehensive capital gains tax be introduced which will cover assets such as land, shares, investment properties, business assets and intellectual property.

According to the report “Unlike most other developed countries, New Zealand does not generally tax income in the form of capital gains (except in some specified instances). The inconsistent treatment of capital gains reduces the fairness of the tax system. It is also regressive, because it benefits the wealthiest members of our society.”

Key Recommendations of the Tax Working Group

• Capital gains tax on sale of resident property except the family home, commercial property, business, shares and intangibles.
• Art, boats, cars, bikes, jewellery, personal household items and the family home to be exempt
• Tax will only be applied to capital gains made after 1 April 2021
• Losses on the sale of assets can be used to offset capital gains made from the sale of other assets
• The threshold of the lowest tax rate of 10.5 per cent to be increased, meaning that more income will be taxed at the lower rate benefiting all low-income earners
• Houses on farms and land surrounding up to 4500 sq meters to be exempt
• Increase in prices of Emissions Trading’s Scheme
• All emissions should have a price including agriculture
• Increase tax on water pollution
• ETS to be more like a tax and raise revenue
• Encourages savings by refunding tax paid by KiwiSaver contributors who earn less than $48,000/year and cutting KiwiSaver tax rates for low and middle income earners

Click here for the full report from the tax working group.