Provisional Tax Made Simple

Most of you will have heard recent releases from IRD relating to their New Provisional Tax option for Small Businesses called AIM (Accounting Income Method).

They’re saying: “Once you’ve opted in to AIM you’ll only pay provisional tax when your business makes a profit. This will help you to avoid cash flow problems. As long as you make your payments in full and on time, there is no exposure to use-of-money interest. If your business makes a loss you can get your refund straightaway rather than waiting until the end of the year.”

This sounds great, and if the stars align it would be very useful.  But we all know the stars don’t always align and we believe this doesn’t work for everyone.

To see if this method will work for you – read on. Read More »

Provisional Tax Changes

You may have heard that the IRD have introduced some changes to the way they manage Provisional Tax.

For many years, some of the biggest gripes we have heard from our clients have related to Provisional Tax.

Why do you have to pay tax based on guesses as to what you are going to earn, and then get penalised if you get it wrong? And yes, we know that Use of Money Interest (UOMI) is actually interest and not a penalty, but people still see it as a penalty, especially as the IRD charge and pay interest as if they are a bank- they pay it at a low rate and charge it at a high rate.

Finally the IRD have listened and have taken the first steps towards making it a bit fairer. Read More »

Important note for all Directors

Following on from my blog last year and comments in our recent newsletter the new Health and Safety requirements come into place on the 4th of April 2016. You have probably seen various articles, including the one about Peter Jackson, regarding mass resignations of Directors in light of the new Health and Safety Requirements for Directors.

It is easy to read the headlines and pass it off as scaremongering, although in this case there is some substance to this and all Directors (as well as anyone else involved in business) should be considering their responsibilities under the new laws.

What are new Directors responsibilities?

All directors now have a responsibility to take reasonable steps to keep up to date knowledge of work health and safety matters and have an understanding of the business and its risks, ensuring it has appropriate resources and processes to eliminate or minimise risks.

This has always been the case for those involved in the running of the business but now extends to all Directors including those with no day to day involvement.

Do you need to resign as a Director?

As per the Peter Jackson article, in a lot of cases, if you don’t have regular hands on involvement in the running of the company it can be difficult to ensure that you maintain an up to date understanding of the business risks involved and the processes that are in place.

As a director you can be held liable if duties are not met by the company.

What happens if responsibilities are not met?

The Bill increases the penalties and creates three offence tiers relating to breaches of the health and safety duties:

  • Reckless Conduct – fines up to $3 million (or $600,000 and/or up to five years’ imprisonment for individuals)
  • Failure to comply with a Duty (that could cause death or serious injury) – fines up to $1.5 million (or $300,000 for individuals)
  • Failure to comply with a Duty – fines up to $500,000 (or $100,000 for individuals)

will still be required to work with you and help deal with risks, and has a number of codes and guides on their website to assist employers in managing specific risks.

At this time it is essential that you either get involved in the Health and Safety processes or consider your position as a Director and whether you are in a position to ensure the company is meeting the requirements.

Give Peta or I a call if you wish to further discuss your options.

Health and Safety Reform – Are you prepared for the changes?

Following on from the blog I wrote in the middle of last year, the Health and Safety Reform bill has just passed through Parliament and will come into effect on 4 April 2016.

You will have all heard the outcry from opposition politicians about high risk industries such as worm farms and mini golf while sheep and dairy farming are considered low risk. This has distracted attention a bit from the real purpose and impact of the new laws and how they will affect you.

Basically the implementation of the new regime will see more onus placed on people at every level of responsibility (in particular senior managers and company directors) who are required to understand and proactively manage health and safety in their workplace. There are now stronger penalties and wider enforcement tools for non-compliance.

I have gone through the Act and various articles including this summary from NZ Law Society on the implications and have tried to simplify them into a summary of the areas that everyone in business will need to be aware of.

This is not the complete Act so for further information about the legislation please go to Worksafe.

Who does the law apply to?

The new act widens the definitions of workplace and now applies to everyone who meets the new definition of a ‘Person Conducting a Business or Undertaking’ or a “PCBU”

Read More »

Investment Properties – How does the 1st October law change affect you?

You will all have seen the media reports about the Government introducing a ‘Not a Capital Gains Tax, Capital Gains Tax’ on Rental Properties.

John Key announced on Sunday that the Government planned a law change for October 1: that will make residential property bought and sold within two years subject to tax on any profit on sale, unless it was the family home, inherited, or needing to be sold because of a relationship split.

In reality how does this affect you? The answer is that for most people it doesn’t actually make much difference at all.

The law already says that if you buy a property with the intention of selling it for a gain – That gain is taxable. The situation though was that everyone says that isn’t their intention.

Now intention won’t come into it if you sell within 2 years, it’s taxable regardless of your reason for selling. I guess the reverse will also apply. If there’s a crash and you sell at a loss this may be claimable!

Extra funding has already been provided to Inland Revenue to enforce this.

This new law and the policy change requiring overseas buyers to have a New Zealand bank account and tax number, are extra tools to ensure those looking for a quick profit are taxed on any gain.

If you have any queries about your own situation give us a call.

Privacy Act

What safeguards do you have to ensure you maintain your clients Privacy and that your clients information doesn’t get into the wrong hands?

I am sure you all have better processes than the lawyer in last week’s paper who used the back of sensitive documents to photocopy information for sending to other clients! And that you have systems in place to avoid ACC style document mail outs. But systems and personnel change so it may be a good time to check your processes and review the requirements.

Here at BW we are all for recycling as much paper as possible but privacy is paramount and we are aware that a lot of the information we handle is for your eyes only. Rest assured your records and details are securely stored and we securely destroy all unwanted documents and don’t use client information for scrap. Our staff are all aware that information is sensitive and don’t divulge any of your details to others outside of BW unless you give permission.

Have you thought about the information you and your staff have access to? And have you discussed with them the unintended consequences that can come from casual conversations- many may not be aware that what is a normal conversation at work can really backfire in the wrong setting

Even with the best processes mistakes can happen. If you are on the receiving end of someone else’s error please think how you would like your information treated and resist the temptation to read it, contact the sender and either destroy it or return it as soon as possible.

To find out more about your responsibilities has some very good information and guidelines for processes as well as some examples of relevant situations.

If you have any concerns about your data or privacy please give us a call.

Have you got a Shareholders Agreement?

Following on from our previous blogs about buying or selling businesses, the importance of having a good shareholders agreement is evident.

Like wills these can be very easy to put in the too hard basket, but take a moment to think what would happen if your business partner(s) were to suddenly die or decide to sell their shares?

It isn’t all about value of shares (although having a method for valuating future sales/purchases is important) it is more about considering potential events. Even just having the discussion is great as it gives everyone a chance to establish priorities, find out if you are on the same wavelength and address any areas that may cause concern in the future. Do you have the funds/insurances in place to cover unforeseen circumstances? Do you want rules about selling shares, who to, notice period?

Even if you are already in business it isn’t too late to do a shareholders agreement.  If cost is contributing to your procrastination, the more groundwork you put in to get an understanding of your needs the easier the agreement will be for your lawyer/accountant and the lower the cost.

Parts of the conversation required can be pretty difficult but the importance cannot be stressed enough. Most people find that when they go through the process they not only learn about their partners priorities but also their own and it helps to clarify why they got into the business and what they want to achieve from it.

Give Peta or I a call and we will be happy to point you in the right direction, help start the conversation or act as an independent facilitator at a meeting of the partners.

We look forward to hearing from you

The forbidden topic of Politics!

At dinner parties they say never bring up politics or religion, the same should probably apply to this blog. But with an election looming it is pretty hard to avoid its effect on businesses in Wellington.

No matter what your politics are, the effects of an election year seem to be felt widely through the Wellington economy.

From the consultants who are uncertain about their contracts, or businesses unwilling to commit to contracts due to uncertainty about changes with the incoming government, to the legislations that didn’t make it through before parliament shut up shop on July 31. Many things go on hold, at least until parliament resits in November, possibly until the start of the new parliamentary term next year.

Examples of this are the changes to the Consumer Guarantees Act I mentioned in an earlier blog and our Chartered Accountants Institutes merger with its Australian counterpart which has the go ahead in Australia but is on hold here.

And this isn’t even taking into account any jitters around proposed changes to tax, minimum wage rates, government funding etc…

For most, these delays will be only minor irritants and business goes on as usual but for others these can have serious effects. So from a business perspective I can see real merit in 4 year terms. So bring on the election, let’s hope coalition talks go smoothly and we can all get back to business as usual as soon as possible.

Make sure you get out and vote (Especially since by not voting it means that you don’t have a moral right to criticise the outcome).

If you have any feedback on any of my blogs I would love to hear it, send me an e-mail on

Multitasking – Are you working smarter?

Have you seen the 100’s of books, courses and apps on time management and methods to improve your efficiency?

Many focus on areas, such as delegation or procrastination, so you may have thought they don’t apply to you.

I am sure many of us still think that all we need to do to be more efficient is to have several tasks on the go at the same time.

Some people claim to be expert multitaskers; others think there is only one gender that has that ability. Whichever group we are in I am sure we all end up juggling tasks trying to get everything done, but is it actually helping us get our jobs done any quicker or more efficiently?

A recent article I read in the accountants magazine had some interesting points and got me thinking about how I work.

Researchers found that your brain simply can’t do two similar things at once e.g. we can walk and eat or walk and talk but if we’re trying to do things that use the same part of the brain it can’t cope and switches off.

We have all thought we could write an e-mail while talking to a customer/client on the phone, or read a text during a meeting but in reality, while you were doing this, how much did you miss of what another person was saying?

The research at the University of Michigan showed that people who think they are good at multitasking were actually slower than those who stick to one task at a time. A prime example is when participants were given a report to write; those with their e-mail open took 50% longer and made twice as many errors.

“Juggling is an illusion…. In reality, the balls are being independently caught and thrown in rapid succession… It is actually task switching.” ― Gary Keller, The One Thing: The Surprisingly Simple Truth Behind Extraordinary Results

So next time you want to start another task think again and concentrate on getting the first task finished.

To ensure we meet our promise of a 31 day turnaround for all your annual accounts we are always on the lookout for ways to improve the way we do things. In line with this, along with other improved processes we are trialling set times for us and our staff to check e-mails rather than having them going all the time. So although we may not be able to reply to e-mails immediately we will be more efficient and accurate when we do.

It is early days yet and the temptation is still there to drop what we are doing to get the little jobs done immediately but we will keep at it, so if you notice us looking a bit more relaxed next time you come in, the new methods are obviously working.

Paper records taking over? Find out what you actually need to keep.

Got piles of paper stacked all over the house?

Even though we are moving more and more to a paperless society it is amazing how much paper we still accumulate in trying to run a business.

How many times have you considered sorting it out or been tempted to bin the lot?

Exactly what are the legal requirements for record keeping?

Basically Inland Revenue require you keep to all your tax records for 7 years. They have authority to access all of these records and all forms of media on which this information is stored so the records need to be maintained in a form that can be retrieved without delay or cost to Inland Revenue.

Tax records include any information or document about:

  • Sales
  • Income
  • Expenses
  • Assets and
  • Liabilities

This is a pretty broad definition and can amount to a fair bit of paperwork so, to keep with the times; the form these can be kept in has expanded to include electronic records such as scanned documents, computer files and files in the cloud. For further details on the requirements see here .

Some of the cloud computing providers such as Xero and MYOB have been given special authority to store the data offshore but this still needs to be readily accessible to Inland Revenue. If you store records offshore and your provider is not on the approved list you will need to apply to IRD for approval.

Here at BW thanks to a great effort from Pete we have scanned and reduced the bulk of our paper records and now have a couple of extra walls that need to be painted. It is a great feeling to clear that much space. You just need to be aware that you are still legally responsible for the storage of your records, so whichever method you choose, looking after them and keeping backups is crucial.

This is particularly an issue for the subscription based cloud computing options. It is fantastically convenient to scan your invoices straight to the system, possibly directly from your phone, without ever having a paper copy, but then what happens if you stop your subscription? As well as saving all the relevant reports and transaction details you would need to retrieve all the invoices that have been scanned onto the system. So like with any of the other methods backups are essential.

After 7 years you can ditch the lot. Although we still recommend keeping important records such as property/business sale and purchase agreements permanently (where you can retrieve them) as they can often be required well beyond the 7 year time frame.

If you have any queries about the records you have and what you need to keep give Peta or myself a call.

Getting the best value from your Accountant

I was reading an article in the Sunday paper about how it is possible to get your Financial Statements done on the cheap using the cloud. This got me thinking about the services we provide and our relationships with our clients.

There are some firms offering cut price accounting services where you will never have any contact with your accountant, in fact many of the deals specifically exclude calling them. As nice at it may sound to not have us calling you at tax time, we see regular contact as an important part our relationship with you. Read More »