Winter 2011 Newsletter

Georges' Views
Trial Client Survey
Employment Law Changes
Family Trusts Targeted
Client Achievements 
Welcome Sarah Anderson
Tax Talk
Work for Families Rules Toughened
MFT Planning Day 
Paul Harris Fellowship Award - Hugh McIntyre  

George's Views

2011 is now half over and we are on the downhill slide to Christmas. Apart from the last couple of weeks we have come through winter relatively  unscathed with only a handful of frosts.  I’ve got a feeling that we are going to pay for the mild start to winter later on into spring. It would be fair to say that things are pretty tough out there in retail and hospitality but hopefully most of you are getting through the winter okay. 

On the office front we have had a change on reception with Holly leaving to go to Christchurch to be with her partner. Her replacement is Sarah Anderson, and those of you who have met her will agree that she is a great person to have as the first point of contact for our firm. 

Kathryn Cook, one of our accounting technicians will be taking Maternity Leave from the start of  September. We wish Kathryn and her partner Nick well for what will be a life-changing experience for them both.   Kathryn will return to us in the New Year after our Christmas break. 

Our compliance work is well under way and our accounting technicians are very busy catering to all our clients’ needs. The scheduling of client work is going reasonably well, although there are still a number of clients that are bringing their work in and “dropping and running”. 

The main focus of the scheduling exercise is to ensure that we can be more efficient by making certain that all the relevant information is at hand before we begin the job. This is the most cost   effective way to avoid the pick-up and put-down issues that, at the end of the day, add cost to your fees. 

 Our preference is that we will contact you in the first instance to have your information sent in, at which point we will check all the information to  ensure that everything is at hand. However, we do recognise that we need to be flexible, as invariably there are times when your financial information is required on a more urgent basis. So thank you for your patience in this regard and we appreciate that it is going to be a learning process over a couple of years. 

At the end of May we completed all our reviews of LAQC Companies in the office and if you were  involved in this process you should have received a letter from us with our recommendations for your Company.  We have asked you to sign the letter sent out, if you are in agreement with these recommendations and return to us.  A reminder to those of you that haven't returned these, can you please do so, to enable us to complete the process.

There have been a couple of technical developments which came into effect from the 1^st April 2011. There are some new rules around the private use of assets, such as motor vehicles and land use that we think are quite complex and  involved. We will be looking out for any instances where these new rules need to be applied and will go through the detail on a case by case basis as required.  This is covered in more detail in our Tax Talk section of the Newsletter. 

 Another change on the 1^st April was that there is now the ability to zero rate land transactions where both the vendor and purchaser are GST registered This is also covered in our Tax Talk section,   however just a reminder that if you are thinking of carrying out any type of land transaction in the  future you should always seek professional advice around the tax consequences of doing so. 

 All the best for the next quarter.

Trial Client Survey

On the 28th of June we sent out our first online Client Survey.  This was limited to around 150 clients to see how it worked.  It’s taken a long time to get there and when we  finally sat down and concentrated, it was surprising how easy it was.  We have asked questions mainly about the quality  of service you experience and we also explore some areas where your needs may not be being met.

We would encourage those who received it to complete it, it will take all of about 5 minutes unless you have a long story to tell us about what we are or are not doing right.

Once we assess the results of this one we will be looking at another perhaps in September. We will also report on the current one.

Coping with employment changes (again) 

In our Special Employer Alert in April, we highlighted major changes to the Employment Relations and Holidays Acts that came into force on 1 April 2011.  Of particular concern to us is the requirement for employers to maintain employee personnel files from 1 July this year.

We understand all too well the administration that comes with being an employer.  To make our employer clients’ lives easier, we’ve developed a simple Employer Documentation Kit, which you now have the opportunity to acquire. The it includes almost 50 checklists, forms and letters as well as a detailed procedure that guides you through its use.  The kit covers recruitment, induction, trial & probation, remuneration, training and career development, performance management, leave and sick leave, resignation and termination.  (Please note that we have not included an Employment Agreement template in the kit, simply because there are a number of recognised agreement providers).

If you would like help with individual Employment Agreements, we suggest you contact Paul Checketts who is our designated Employment Specialist.  

To acquire our Employer Documentation Kit you can also contact Paul 03 448 8060 or email him paul@mftca.co.nz 

 Family Trusts

Family Trusts - The story continues
The Law Commission’s review of Family Trusts continues.  A paper on Trustees’ duties, the office of Trustee, trust administration, and trustees’ powers is due out shortly, with the final analysis - on trading trusts, the potential registration of trusts and the obligations of trust advisors - to be delivered to Government in approximately 3 months’ time.

It appears we are heading for a major shake up on the entire manner in which trusts operate and are administered.  As your accountants (and for some of you, your professional trustees) we’re on a mission to ensure your Family Trust’s administration processes are robust.  If you haven’t heard from us yet, you may well soon as we commence a review of our trust clients.

This may have significant outcomes for some trusts, while for others it may well be relatively minor. We will be talking to you, your fellow trustees and your lawyers as we work through the process.

 Client Achievements

Congratulations to Bruce & Jo Davidson at Davidson Honda on their recent award from Honda for winning the Honda National Dealer Award for Best Dealership Presentation

Congratulations also go out to Roger Hill at Hill Automotive.  Roger recently was recognised by the Central Otago Motor Trade Association as Supervisor of the Year,  in recognition of his commitment to training his top apprentice Brad Thomas. 

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  Our New Receptionist

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Tax Talk

Sales of land now zero rated
In the past, whether GST should be added or not to the sale of land, has sometimes been a complex matter.  From 1 April 2011 these transactions will be zero rated, as long as the following apply:  

1. The purchaser declares in writing that the property is to be used for a GST activity, and
2. The purchaser is GST registered

Private use adjustments on cars
As of 1 April the rules for calculating private use adjustments on vehicles for sole traders and    partnerships have been simplified... sort of. 

By way of example, if you expect business usage to be 80%, then you simply claim 80% of the GST on the cost of the car and any running expenses.  Sounds logical, some would say obvious (accountants have been suggesting this to Government for years).

That was the simple bit.  If you underestimate your private usage by 10% or more, or if any GST over-claimed due to such underestimating comes to more than $1,000, an adjustment (not so   simple) has to be made.

But wait… there’s more.  There’s a wash up calculation when you sell the car and it’s complicated.  In fact, we won’t bore you with the details in this newsletter.  To talk through your situation, give us a call or email us info@mftca.co.nz and we’ll provide you with the math!

Substantial depreciation allowances still available
While depreciation allowances on most building structures ended on 1 April this year, depreciation can still be claimed on a wide range of commercial and industrial building fit-out assets. 

Just before Christmas, legislation was passed confirming that depreciation will continue to be allowed on building services assets such as lifts, air conditioning systems, plumbing and electrical reticulation in commercial buildings.  The legislation recognises the practical reality that fit-outs in commercial, retail and industrial buildings suffer significantly higher wear and tear when compared to residential property.

Those clients who have never separately itemised the building fit-out assets acquired at the same time as the building can now take 15% of the building’s adjusted tax value (that’s the original cost price of the building less any depreciation claimed so far) less the adjusted tax value of any  separately itemised fit-out assets acquired subsequent to acquisition of the building, call it fit-out and depreciate it at the rate of 2% for the 2011-12 year onwards.

For all new property purchases, building and fit-out assets should be properly segregated at acquisition date.

Talk to us about shareholding changes
We’ve recently experienced two cases where clients have decided to make shareholding changes in their companies, have gone online to the Companies Office website and Bob’s your Uncle, shareholding changes updated! 

Actually, it wasn’t such a smart idea as it turns out.  Changing shareholding in your company  without talking to us first can have dire tax consequences.  These consequences can be far reaching.  Continuity of losses carried forward can be affected, imputation tax credits can be lost forever, and under the new Look Through Company regime the flow of losses will be affected.

Moral of the story?  Talk to us when you’re contemplating share changes.  Even better, get us to be your Registered Office.  In fact, we do this for most of our clients.  We’ll file your annual return for you, and we’ll make sure you comply with all of your statutory records requirements under the Companies Act. 

 Working for Families Rules Toughened

As of 1 April 2011 clients will no longer be able to use investment losses such as from rental properties to reduce their income for Working For Families (WFF) Tax Credit. 

The definition of income will also include an extra nine types of income:

1. Attributable trustee income
2. Attributable fringe benefits
3. PIE income other than registered superannuation schemes such as KiwiSaver and retirement benefit schemes
4. Passive income earned by children (includes interest, dividends and rent).  Amounts over $500 per child will be included as family income
5. Worldwide income received by a non-resident spouse
6. Tax exempt salary or wages under specific international agreements
7. Income equalisation deposits made by you, your trust, or a company controlled by you or your trust
8. Certain pensions and annuities – includes 50% of payments from life insurance policies or a superannuation fund (excludes NZ super)
9. Other payments received from any sources that are used for your family’s day-to-day living expenses (but only if the total amount from those sources is more than $5,000).  An example of this might be board received.

In future, when you apply for WFF tax credits, you’ll need to let IRD know about amounts from any of the above sources. 

For those clients who receive or are entitled to WFF credits, when we prepare your 2012 tax  return, we’ll need to request the above information.  Good communication will be essential.

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 Training Day!

On Friday the 10th of June we went to Wanaka for a Team  Planning Day.  After a successful morning sitting around the boardroom table, we stopped in at Have A Shot on the way home.    A good day was had by all.

Paul Harris Fellowship Award - Hugh McIntyre!

Congratulations Hugh! On Friday the 24th of June, Hugh McIntyre was awarded the prestigious Paul Harris Fellowship by the Rotary Club of Alexandra.  This award was presented in recognition of the significant amount of charitable work carried out over a number of years by Hugh within the Alexandra Community and the Rotary Club of Alexandra.  Rather remarkably Hugh was left almost speechless at receiving his award.

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