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Summer 2010 Newsletter
- Hugh's Views
- We can be your ACC online agent
- Risk and Reward
- Gift Duty
- The review of trust law in New Zealand
- Death of the LAQC
- M&A - Working smarter in 2010
- Christmas Closing Period
Hugh's Views
Goodbye 2010 and bring on 2011. There is little doubt it has been a tough year for most and a reminder that we have been fortunate over the past few years to be operating in a pretty buoyant economy. Probably for the first time since the Clyde Dam was completed, everyone has had to have a good look at what they are doing and how they are doing it.
I suspect that 2011 isn’t going to be the answer to all our problems and that we are going to have to work hard to maintain our business health. It would be nice to think that the worst is behind us, but talk of “double dip recession” is probably enough to make many of us keep our heads low for a while yet.
Succession Planning
As part of our planning for my “eventual” retirement, I am planning a 4 day working week next year as our succession plan continues with Mark Tait joining as a Director/Partner from 1 April 2011. Combined with working less hours I will also be starting to pass over responsibility for the compliance work for a number of clients.
I am sure you will appreciate that this is not an easy task after dealing with many of you for such a long time. I believe it is important to begin this process now even though I expect to be involved in the practice in some form or other for at least another five years.
We would like to manage the transition so that our clients have the opportunity to build a relationship with George, Mark or Paul over a longer period. One of the good things is that the person who does most of your compliance work, Patti, Sue and Kathryn will remain doing it.
Trusts and LAQC Companies
We will be communicating with clients in the year as we put this process together. We will also be talking to you if you have a Trust or an LAQC company, the reasons for which you will see by the articles within the newsletter.
Another Waitoa
For those of you who were not aware, Sandra and Enoka have added a daughter to their family. Keira was born on the 28th of October and is doing very well. While we are coping pretty well in her absence thanks to some stirling work by Christine and Holly, we are looking forward to Sandra’s return in April.
We Can be your ACC online agent
Being recognised by ACC as your online agent gives us secure online access to your levy information, your cover status and invoices and allows us to work with ACC on your behalf. A simple signed authority from you is all it takes to get this happening.
A number of clients have gone one step further and asked that we just ‘attend’ to all of their ACC cover and premium requirements. We can certainly do this at a very reasonable annual price, so do let us know if this service appeals to you.
Risk and Reward
Shattered buildings, businesses and dreams
Business Lessons from the Christchurch Earthquake
During the aftermath of the major earthquake that hit Christchurch and its surrounding communities we all watched news coverage horrified and saddened at the devastation. Thankfully, there were no fatalities but the extensive damage to homes, offices and infrastructure will be very expensive to reinstate or replace and will take months, and in some cases years, to complete.
A disaster like the Christchurch earthquake can happen at any time, day or night. Our nation sits precariously on islands that straddle fault lines and volcanic vents and eruptions from Mount Ruapehu have at times disrupted businesses, roads and airports. These ‘acts of God’ send a very real warning to both businesses and private citizens to check that
insurance cover is both comprehensive in type and of sufficient value to indemnify losses. Some Christchurch businesses are facing serious financial hardship because their risk cover was inadequate or, even worse, non-existent.
An insurance broker has provided us with the following list of business risks that need to be covered:
- Commercial Building Insurance: Full replacement value including loss of rental income for 12-24 months minimum and landlord liability.
- Stock: Insured for full value and allowing for seasonal fluctuations and multiplelocations.
- Plant & Equipment: Again, for full replacement value at today’s costs.
- Business Interruption: The sum insured should be for the full Gross Profit figure allowing for trends over the next year or two. An adequate indemnity period is vital, 12-24 months minimum
- Marine/Transit Insurance: For stock being transported within the country and overseas.
- Public Liability Insurance: Including Statutory Liability and Employer’s Liability.
The above list is certainly not exhaustive and you should seek advice from an insurance broker or company to ensure your business assets are protected with comprehensive cover of all risks and losses. The unthinkable can and does happen, just remember Christchurch barely two months ago.
Gift Duty
On 1 November Government announced that it will abolish gift duty with effect from 1 October next year. This decision seems quite a sensible one. Gift duty raises a paltry $2.2M each year for Government, when in fact it collectively costs trusts around $70M per annum to file gift duty statements, most of which are for no gift duty to be paid. At last some simplification!
It’s natural to be concerned that the removal of gift duty creates an ‘open slather’ environment, encouraging people to hide assets in trusts to avoid creditors. Not so, says
Government, who suggest that there is plenty of protection in the Insolvency Act to safeguard creditors. For those of you with trusts and gifting programmes in place, we’ll keep you updated over the coming months on how the abolition of gift duty should best be administered.
The review of trust law in New Zealand
Out with the old
The Law Commission has just released the first in a series of papers that aim to review and modernise the law of trusts.In that paper, the Commission first points out that the current legislation (the Trustee Act 1956) has been neglected and that there are concerns about its usefulness and outdated language.
Following on from that, the present law does not have enough mandatory provisions. For example, it is not unusual for a trust deed to include clauses exempting trustees for breaches of trust. The Commission sees a rewrite of the legislation as helping to clarify certain basic obligations that must be adhered to.
Even though the Act is called the ‘Trustee Act’, it contains only one statement about the standard expected of trustees. The new legislation will spell out the duties and powers of trustees, as well as beneficiaries’ rights.
It will be some months before the likely changes become clear. Having said that, we have concerns about the standard of trust administration in a number of our clients’ trusts and we’re continuing to step up our trust administration activities, to make sure those trusts are robust and cannot be challenged by any third party.
Death of the LAQC
Inland Revenue’s policy division has prepared draft legislation to implement far-reaching changes to the Qualifying Company regime. Although the legislation is still in a draft form, it is likely to become final before Christmas.
There are a number of options available for clients who have LAQCs and we will be in regular communication with those clients over the coming months. This is not a case of one size fits all, each situation needs a fresh look. The solution will be straightforward for some clients and complex for others.
Please watch this space.
M&A - Working Smarter in 2010
A significant goal of our practice is to improve the process to obtain the information we need from our clients to complete their financial statements and tax returns. This year (March 2010) was the first time we didn’t mail hundreds of Annual Balance Date Questionnaires out to clients around the end of March and sit back and wait for them all to come in.
We know that many of you just love these questionnaires, we can tell by the number of them that get returned to us without being completed! We also realise that where we are using Banklink or Xero for many of our clients GST work during the year, we already have much of the information that we need, so 6 pages of questionnaire is not only a waste of paper but also very annoying from your point of view.
Our process this year was to complete a questionnaire electronically in our office and then request only the information required along with a request that you sign a declaration. For us this worked reasonably well. We looked at when our clients normally bought their work in and tried to complete the information gathering process in the same month as we have got your work in the past. However quite a number of our clients missed receiving our mail out and were ringing to find out what the story was. Some improvement in communication as to what we are doing is obviously needed.
Next year (2012) we intend to improve the process further. We were late getting under way last year, so we expect to fix that by starting to schedule work in March rather than in April.
We are investing in some software that will enable us to assess our capacity to complete work in each month. This will also allow us to work more accurately with clients in requesting information and then following up on those that do not get back to us. The overall aim is to process your work and get the final results back to you within an acceptable time frame We are aware of others in our industry who achieve this “turnaround” in less than 4 weeks. We have in the past tried to achieve 6 weeks, not always successfully! We will be expecting to achieve closer to 4 weeks than 6 weeks for most of our clients this year. However it does take two and those who are slow to respond to requests for information will be reliant on their actions to speed up the process.
There are of course those of you who are in no particular hurry and we will schedule your work accordingly. Those who need their work in a hurry, for all the obvious reasons will continue to receive priority. Just make sure you let us know if there is some urgency for your work to be completed.
Christmas Closing Period
Our offices will be closed from Thursday 23rd of December, until Monday 17th of January.
To all of our wonderful clients, business associates and supporters, we wish you a joyous Christmas and an exciting and successful 2011.