McConnell Stafford-Bush & Associates Chartered Accountants

Know entertainment traps

Fri, 07 Oct 2022 02:19:14 GMT

Entertainment and other employee related expenses could be either fully deductible, only 50 percent deductible as entertainment, subject to FBT or PAYE depending on the circumstances. It helps if you know which is which.

XYZ Ltd is a limited liability company involved in the building industry. It is seldom practical to return to the company base for morning and afternoon tea so the directors buy coffee and snacks (light refreshments) for their staff when they are out on the job. The cost is 100 percent tax deductible.

They have also decided to reimburse their workers for the cost of their lunches. The cost would only be 100% tax-deductible if it were a meal while travelling on business. Otherwise, it forms part of wages and would be taxable (see below). The employer also needs to be careful, if paying a regular allowance to cover morning teas and/or lunches, that the payments are not just for tax avoidance. They have to be for reimbursement.

Due to the high price of petrol, a director offers to reimburse one of his staff $20 per week as a contribution to the cost of getting to work. Since this is a cost which she would have incurred out of her tax-paid income, it should be treated as part of her wages The value of the petrol needs to be adjusted upwards for tax before being added to her taxable income. It should be treated as an extra emolument.

Another director has decided as there are two office staff it would be fair to give the other person petrol vouchers of an equivalent amount. So long as the petrol vouchers cannot be redeemed for cash, this is a fringe benefit and is subject to fringe benefit tax payable by the company. However, there is a $300 threshold per quarter for each employee for unclassified benefits like this. Provided the value of the petrol vouchers is equal to or less than $300, no fringe benefit tax has to be paid, assuming the company does not exceed the total exemption for a business, which is $22,500.

One of the staff is leaving so the directors decide to buy him an expensive box of chocolates from a supermarket. This is an entertainment cost and 50 percent tax deductible. However, just before they do this they discover if they were to provide a gift voucher, the cost would be 100 percent tax deductible, so they give a gift voucher instead. The $300 limit for fringe benefit tax purposes applies.

The owner of a construction company (an ordinary company for tax purposes) visits a building site to meet the client. Both of them are away from home on business. The owner invites the client to lunch to discuss the project. Both meals are 50% tax-deductible because this is an ordinary entertainment expense. However, if the owner were to dine alone the meal would be 100% tax-deductible to the company because this is an expense incurred while travelling on business. If the client were a self-employed person, the cost of the meal when dining alone would not be tax deductible because it is deemed a personal cost.

If you incur entertainment expenses overseas, instead of them being 50% tax-deductible they are 100% tax-deductible. Entertainment expenses are only tax deductible so long as they are completely business-related. In other words, the purpose of the meal together is to discuss business.

Non-taxable allowance for transport costs

Wed, 14 Sep 2022 02:00:24 GMT

Some employers provide a non-taxable allowance for their employees who incur additional transport costs.

Inland Revenue is planning to clarify its existing rules for providing a tax-exempt allowance for these costs.

To ensure you pay an allowance, which would be acceptable to Inland Revenue, you need to follow their rules.

This is what Inland Revenue says at the moment:

“You can pay a cash allowance to an employee for travel between home and work. This is tax free if it reimburses their additional transport costs and they:

are working outside their normal hours of work, such as overtime, shift or weekend work
need to carry work related tools or equipment, for example, they might usually take the bus but on a particular day they need to carry a large toolbox
are travelling to fulfil a statutory obligation
have a temporary change in workplace
have some other condition of their job
cannot access adequate public transport.”

The tax free amount is the actual cost of travelling between home and work, less the employee's usual travel costs. “This applies to all circumstances except the lack of adequate public transport.”

You will notice the allowance is the actual extra cost, which means the allowance would change depending on where the employee lived.

Among the proposed rule refinements to the rules are:

the additional cost has to be for the benefit of the employer not the employee
if it is difficult to get to the employer’s premises because the nearest public transport is too far away then an allowance could apply
if it is difficult for the employee to get to public transport from their home because the nearest transport is too far away, that’s their bad luck and no allowance can be paid
the maximum distance an employee can be paid for is 70km (35km each way).

Riding out the tough times

Wed, 10 Aug 2022 03:14:57 GMT

Interest rates are soaring, prices for groceries and fuel are rising, and businesses have unreliable supply and cost pressures.

Add staff shortages because of the lingering effects of Covid-19, and some small businesses are under severe stress. The natural reaction of many businesses is usually two-fold: Earn more, and/or spend less.

Spending less is the easier option, but many businesses are already cut to the bone. If you do look at cutting costs, be careful not to apply measures that affect your ability to earn more.

One example is marketing. During a downturn, more than ever, it’s important businesses do whatever they can to stay top-of-mind for customers. Research has shown the businesses who continue to put resources into advertising, a website and social media are stronger when times improve.

They are better able to take advantage of the opportunities better times bring.

Whatever your marketing message and delivery, through email newsletters, follow-up emails, phone calls, or advertisements, highlight your company’s brand. You’re letting customers and prospects know (or not forget) who you are and what you stand for.

Look at your core business, hopefully the things you do best and make you the most money. Concentrate on that and build it if you can. Don’t put effort into weaker products or services.

Focus on existing customers and look after them like the gold they are to your business. Remember, it costs more to get new customers than to keep existing ones. They’re all likely to be clamping down on their spending, too, so never give anyone a reason to go elsewhere.

If you’ve built a strong relationship with your customers, you will together navigate the tough times and you will have customers for life.

And be the leader of your business. Delegate the “work” if you can so you have time to make the tough decisions and plan for the future.

GST changes afoot for sharing businesses

Tue, 26 Jul 2022 01:48:22 GMT

Many businesses are using the internet to introduce buyers and sellers to each other – Air B&B, for example.

There are many other much smaller enterprises doing the same thing, such as ride sharing.

Inland Revenue is looking at ways to help these businesses pay their tax, which is very thoughtful of it. The department is concerned many of these businesses might be operating below the threshold for the need to be involved in GST. It has been suggested collectively they are sufficiently significant to offer unfair competition to those who have to register.

Thought is being given to lowering the GST threshold for these types of businesses.

One of the challenges for these businesses is determining tax-deductible costs. One proposal is to have a standard cost for those who earn their income in this way. This might be a better alternative to making adjustments for private use.

Review Your Trusts Before January 2021

Sun, 11 Oct 2020 22:00:00 GMT

We are now offering a complete trust review service to help clients get a handle on whether it is worthwhile continuing with their trusts and the implications of doing so.

The first question we ask is, "Why did you set up your Family Trust, and does it reflect your current objectives?"

The robustness of Family Trusts is under ongoing scrutiny as a result of the Law Commission review on the law of Trusts.

Trust Review Service

Our Trust Review service examines the set up of your trust, identifies any administration gaps, and ensures your Trust is compliant with legislation and that Trustees are meeting their obligations.

We've developed a number of resources to help you to understand this sometimes complex topic. We provide this service to ensure your existing Trust reflects your current intentions, using the simplest structure possible, and ensure it meets statutory requirements.

It's about maximising benefits you may be entitled to and protecting your assets from relationship property, family and creditor claims, while preserving value for future generations.

Changes in circumstances and legislation can seriously impact your existing Trust structure. Call us today for a Trust Review.

Benefits of a Trust Review

Trust Deeds are living documents and it is important to make sure they are regularly reviewed and updated. Changes in circumstances and legislation can impact existing Trust structures.

It's likely that you set up your Trust to meet the following objectives:

Our Trust Review service ensures your existing Trust reflects your current intentions using the simplest structure possible and meets statutory requirements.

What is involved?

Initially, we will require a copy of your Trust Deed and associated documents (including Wills) to review. We will then have a meeting with you to discuss what you want your Trust to deliver and make recommendations accordingly. Based on the outcome of the meeting, we will forward instructions to your lawyer for proposed changes, or put forward a more detailed proposal for services if required.

When should I begin using this service?

As soon as possible. All Trustees have a responsibility to safeguard and administer Trust assets properly. Our experience is that many mum and dad Trustees simply don't receive the guidance and support to have certainty that they are doing just that.

Book in a review meeting with Jackie here.

ACC Invoicing Delayed to Support NZ Businesses

Sun, 30 Aug 2020 23:00:00 GMT

ACC recently sent out an update to advise of changes that have been made to help New Zealand businesses through these challenging times.

In addition to a dedicated new website page which contains helpful information about invoicing this year, ACC has delayed its annual invoicing to October and November instead of the usual July statement date.

Following is the ACC announcement...

From October, we will be sending out annual invoices which would have normally been sent in July.

Our CoverPlus Extra invoices that were normally sent in April, were sent from July.

We decided to delay these invoices for three months to help relieve the immediate financial impact felt by many businesses earlier this year due to COVID-19. However, we also realise that the financial impact may only just be reaching other businesses.

We want to provide our customers with some guidance on what to expect and assure everyone we are here to support them manage their invoice payments.

The timeline and information we've set out below is our current invoicing plan. There are still many uncertainties for New Zealand businesses, and because of that we remain committed to supporting businesses where possible and will continue to review our plan in line with any significant nationwide changes due to COVID-19.

The most up to date information about our response and how we can assist, is on our website.

COVID-19 information for businesses

Ensuring the impact of COVID-19 is reflected in your 2020/21 provisional invoice

From now until the end of September we are asking that all employers who believe their 2020/21 liable payroll will be reduced due to COVID-19 provide us with an estimate to use for your provisional invoice. This will help us ensure your invoice is as accurate as possible.

If for any reason your final liable payroll (year ending 31 March 2021) is different to your estimate, this will be reflected when the final invoice is issued in 2021.

There are two ways to provide us with a revised liable payroll estimate:

Note. This isn't applicable for self-employed as they don't have provisional invoices.

Update your liable payroll through MyACC for Business

IMPORTANT BUSINESS UPDATE

Mon, 10 Aug 2020 23:00:00 GMT

O ur offices will be closed to all visitors while we are at Alert Level 3 lockdown here in Auckland.

Our team will be working from home, so please call us (09 238 0699) should you need any assistance, or email us. We will be happy to meet over the phone/skype/zoom etc as we did previously, if you need us.

In the meantime, as we all navigate this territory again, please keep safe.

Regards,

The MSB Team

NZTE Increases COVID-19 Business Advisory Fund

Sun, 02 Aug 2020 23:00:00 GMT

Business owners can access up to $5000 excl. GST per business from the COVID-19 Business Advisory Fund. This funding can be used with a range of providers of registered services depending on business needs. It is 100% funding; no co-funding is required.

How to register your Business:

Already registered with the RBP?

Contact your RBP Growth Advisor or local RBP Partner organisation. Contact details are on the RBP website here .

Eligibility Criteria

Businesses must:

Non-eligible organisations

Funded Services

Businesses can access expert advice and support in one or more of the following subject areas:

We offer the Business Continuity Plan as a funded service through the Covid-19 Business Support fund. Please contact your local Growth Advisor or follow the links above to register and apply for this service.

Your MSB Chartered Accountant client manager is also available to help if you would like to find out more about our Business Continuity Plan service or accessing the Covid-19 Support Fund.

Farmers Getting Results with Online Financial Management Tools

Wed, 22 Jul 2020 23:00:00 GMT

Early adopters of Xero have been reaping the rewards of this online accounting platform for a number of years now. Since integrating with Figured in 2015, farmers using this excellent agri-sector financial planning and management tool have experienced the benefits of both platforms from accounting basics through to comprehensive financial reporting.

Xero/Figured has now recently added crop management and planning functionality to the mix, making this the leading system for farmers and farming advisors to use as a single point of entry. This latest integration now in development with Figured will be a real game changer for the industry, allowing farmers to effectively manage and grow their businesses with tools traditionally only available to regular goods and services companies.

Xero & Figured – a match made in farming heaven

Accurate financial data is about being able to see at any time the financial impact of every decision which is made on the farm as it happens. Being able to forecast the profitability of the farming enterprise and measure the variance to that forecast as the season progresses, modelling the long term impact on profitability of major equipment purchases, or having confidence in decisions to sell or hold livestock .

Xero sets the standard for day-to-day financial management - bank feeds, account coding, and invoicing in Xero is peerless. While Figured is a leader in financial planning, management and three- way financial reporting capability unlike any other.

The new development to the Figured/Xero platform will result in a complete financial and production management technology system for farming teams. This integration partnership will bring the power of precision agri-planning together with real time financial data to give Farmers, Agronomists and Accountants a level of business insight which is unavailable in traditional desktop systems.

Accurate Data Sharing Online

The power of cloud/online technology enables the sharing of data between multiple systems, but more importantly it enables the sharing of data between the many stakeholders who contribute to the management of an operation. At the day-to-day level as a farmer, this means you can check on financial data while out on the field, your accountant can provide support at any time (by just logging into our platform) and any other shareholders as well as the bank team can also be referring to and using the same information – any time, anywhere and on any device.

Figured has always worked closely with agri-accountants, including ourselves providing a platform to enable us to build a valuable, scalable financial advisory service. The new upgrade will provide the opportunity to step into a whole new realm of agri-advisory, by linking farm management decisions with financial data.

Financial advisors will be able to look across the whole farming operation and work with clients to make better decisions supported by accurate financial data previously unavailable to the farming team.

Get involved

Figured is inviting people interested in their latest development to provide some feedback and on-the-ground experience during the testing phases of the roll-out.

Sign up here to join a product beta group and receive updates on the integration work or contact us if you would like to know more.

Xero Provides Covid-19 Support

Sun, 07 Jun 2020 23:00:00 GMT

Xero has fast-tracked the release of two new features on its online accounting platform to help COVID-affected businesses stay on top of cash flow and their business health. As businesses across New Zealand seek relief from government loans and otherwise, accountants and accounting tools remain of paramount importance in getting them through this crisis.

Xero has been working on expanded reporting tools, and accelerated the release of the Business Snapshot and Short-Term Cash Flow features to meet the business continuity needs of its small-business users now.

Business Snapshot, first announced in November 2019, helps businesses compare profit and loss, revenue, expenses and cash balances in different periods through a real-time, single report, instead of needing to generate additional reports or spreadsheets. By delivering a single report for clients, accountants can help their small business clients understand crucial health metrics quickly, providing a starting point for deeper conversations around business performance, and possible risks or opportunities. View the demo here.

Short-Term Cash Flow, first announced in September 2019, enables businesses to project their bank balances 30 days ahead, showing the impact of existing bills and invoices if they're paid on time. This tool in particular was built in close consultation with Xero's small business and accounting communities. The short-term cash flow pilot will be rolled out in the next two weeks. View the demo here .

The two tools are still in development and testing with the broader Xero community, but are now being rolled out for free to all Xero customers in Business Edition plans until August 31, 2020.

New export feature for accountants

Additionally, accountants and bookkeepers using Xero HQ can now download a monthly revenue export of client organizations to get a high-level view of the health of their clients. The report shows year-on-year revenue changes, current cash balances and their primary banking relationships, giving advisors oversight on which clients are impacted most, potential eligibility for banking support packages, and creating a starting point for conversations with those that need the most help. The export forms part of a new COVID-19 support page, with links to supporting resources. View the demo here .

Paying Your Taxes by Cash or EFTPOS at Westpac

Mon, 01 Jun 2020 23:00:00 GMT

Barcodes are usually printed on Inland Revenue returns, statements or letters. You can also create a barcode on the IRD website for printing or presenting on your mobile device.

To generate a barcode go to ird.govt.nz/barcode

Other payment options

The other usual payment options are also available, including:

Find out more at ird.govt.nz/payelectronically