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Where's our economy heading?

 

I went to a really interesting talk by Tony Alexander (BNZ Chief Economist) and his key message was that there is going to be good growth and a positive outlook for Canterbury over the next 4 years.

Although annual growth for Tourism in New Zealand increased by 45% (instead of 4% in previous years) Canterbury has missed out on a lot of the 14.5 Billion that was put into the economy, due to the earthquakes and now as the city is rebuilt and we get more infrastructure it's our opportunity for Canterbury to catch up.

Tony's view is that housing prices in Christchurch will continue to increase, similar to Nelson and it's all to do with supply and demand. Young Professionals with families are more likely to come to Christchurch from Wellington and Auckland as we are the only other city that offers a great lifestyle and cheaper living costs while still maintaining a spot on the professional ladder.

It seems that the rest of the country is experiencing what Canterbury's businesses has had over the last 6 years which is:

  1. Not enough skilled staff means demand is exceeding supply. we are short of skilled staff by net 44% (used to be 19%) and short of unskilled staff by net 29% (used to be 4%)
  2. Low loyalty from employees, the younger generation are trying numerous positions and are not just moving for money but also lifestyle choices, flexibility, type of work which is helping keep wages low.
  3. Customer loyalty is becoming a thing of the past as there is so much easy access to shop around so business owners can't put prices up.
  4. Machinery, tooling and productivity efficiencies are better/cheaper ways of producing and this has been a big factor in the region.
  5. Adopting quickly to change is paramount, this is a part of Canterbury culture now. Even when machinery is purchased, majority know that this machine is likely to be redundant in 5 years or has adaptability capacity.

These factors would normally lead to increased wages and inflation, but it's not and it's got the economists beat. The big message was past cyclical patterns no longer exist, we are living in a new age where things such as interest rate fluctuations cannot be predicted.

My understanding of what Tony Alexander's message about the future of business was that once the minimum wage increases to $20 by 2021 and if a business has inefficient productivity, many are likely to go out of business. This will be good for all the businesses left as they will be able to put their prices up. The businesses still running would have concentrated on:

  1. Working collaboratively with suppliers. (also suffering from understaffing)
  2. Rather than growing in quantity of customers, they have looked after their good customers. (getting rid of the ones that drag them down and are difficult).
  3. Looking after key team members.
  4. Working on internal efficiencies.
  5. Getting a business model that changes quickly.
  6. Having capital to invest in machinery & efficiencies so human labour is not so reliant on.
  7. Having a team that's multi-skilled and adaptable.
  8. Looked at how the business can be environmentally smart and are moving towards the "less is more" philosophy from packaging, electricity, fuels, biodegradables, leaving a smaller footprint wherever possible.

Our outlook nationally is good, key areas include:

  • Increase in tourism.
  • Increased in investment in tourism.
  • Increase in Construction
  • Rise in population (net above 68,000 last year)
  • Increase in healthcare spending.
  • Increase in world growth

BUT capacity will hinder, stop trying to grow (his words not mine), drop bad customers and work collaboratively with better clients.

It was a great talk and I have many other statistics and information so if you would like to talk about this subject more please feel free to contact me.

Next week we will be talking about the Budget and how it affects you.

Warmest Regards,
Louise Neville
Director, Chartered Accountant


We have identified a crucial area in business that gets forgotten yet it's so important – 'Succession Planning' so we have teamed up with key speakers in this field to bring you a Seminar that will really make a difference to your Business's future and wealth. We would love it if you came along!

Succession planning is about clarifying what you want for the future and defining the steps required to turn that vision into a reality, while taking into consideration business, personal and family expectations. The benefits of succession planning include:

  • Helps determine what you want from your business and how to get it
  • When it comes to selling your business, it allows you to transition your business to new ownership in a managed and systematic way, reduces stress while also achieving a greater outcome in the future.
    Achieves alignment amongst owners / family members.
  • Helps clarify the personal, business, financial, legal and taxation aspects you will need to consider.

Have you thought about:

  • Have you looked at 'what if' scenarios?
  • Do you know what tasks and actions need to happen for you to maximise your outcomes?
  • What are your key goals and milestones now through to selling, passing on or simply taking on a more passive role? Taking time to plan this now will benefit all people involved.

Come listen and interact with the people passionate about your future:

David Lang – Partner in Saunders & Co
David will share with us how to best plan now to protect yourself & family and achieve the best outcome upon exiting or taking a more passive role.
Damien Fahey – Partner in Tabak Business Sales
Damien will share with us the pitfalls of what not to do and the keys things to ensure you maximise your sale or transition which starts now, not when you're thinking of selling.
Annabel Shand – Financial Advisor at Craig's Investment Partners
Annabel will share her many years of wisdom on "it's never too late to have a nest egg for retirement" and how to make the most of now and in the future.

Louise Neville - Chartered Accountant & Business Advisor
Louise will share the key issues that you need to think about and start implementing in your Business, also what's involved in a succession plan specifically for you.

It's not just about extracting the maximum value out of your business to provide for your future. Should an unforeseen event occur, lack of planning will cause unnecessary stress and potentially compromise your sale price, client relationships and the overall reputation of your business.

Date: Tuesday 12th of June 2018
Time: 4:00pm
Venue: Accounting Solutions Limited
77 Gasson Street, Sydenham, Christchurch 8023
Price: $25 per person (Incl GST) all proceeds will be donated to Youthline (They support young people who need help with issues such as abuse, mental health, bullying or dealing with many other pressures of everyday life.)

Spaces for this seminar are limited so register today by emailing monica@asl.co.nz or phone Monica on 03 374 9393.

The presentation will finish around 5:30pm, then a great opportunity to network with fellow business owners over drinks and nibbles.

Please don't hesitate to contact us for further details regarding this great learning opportunity and if you have friends and colleagues who are in business, forward an invite on to them as well – this is not to be missed!

Warmest Regards,
Louise Neville

Director, Chartered Accountant


 

The Minister of Revenue announced that a Supplementary Order Paper to the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Bill has been introduced to extend the bright-line period from 2 to 5 years.

 

What does that mean for you?

 

If you are thinking of selling land/property, other than your family home, and have owned this less than 5 years it's likely that you will fall under the bright-line period and be subjected to capital gains tax but you have a small window of opportunity between now and when the Bill becomes an Act (Royal Assent) to sell your property without incurring the capital gains tax (as long as you've owned it for more than 2 years).

This is important for anyone considering selling property (other than the family home) over the next 5 years, please feel free to ring us to discuss your situation. 

 

We think this is a well written article which may be of interest to you. A few organisations have written about these topics but we found that this one is the easiest to understand.

  

• Paid Parental leave extended
• Minimum wage increases
• Equal Pay
• Introducing statutory redundancy compensation.
• Contractors getting increased rights
• Changes to Trail Periods
• Collective Bargaining
• Reinstatement
• Increased scope for minimum standards.
• Fair pay agreements

For more information on these topics and the full article click here

Just a reminder to watch out for any Xero requests for paying bills and to look closely at what email address they are coming from. The phishing scam is still going around.

Here's the link for more information:

https://www.xero.com/blog/security-noticeboard/

Warmest Regards,
Louise Neville
Director, Chartered Accountant

Tenants Must Be Informed of Insulation Status

It's been compulsory since 1 July last year for any new tenancy agreement to include an Insulation Statement. That means landlords must record if rentals have insulation, where it is, the type of insulation and its condition. That allows tenants or potential tenants to make more informed decisions about renting.

Insulating Rentals is now mandatory!

On top of that, if you have a rental property without floor and/or ceiling insulation, you have until 1 July 2019 to install it. If you don't have an Insulation Statement, or your property remains uninsulated from 1 July 2019, you can be fined up to $4000.

The insulation requirements don't apply to in-ground concrete floors and integral ceilings-floors in a multi-storey dwelling.

Note that it's illegal to install or repair electrically conductive insulation, known as foil insulation, in any residence. A breach could cost you up to $200,000.

For this and more information on these new requirements see: https://www.tenancy.govt.nz/maintenance-and-inspections/insulation/

 

R & D Tax Credits Can Boost Cash Flow

Changed research and development (R&D) tax credit rules, which came into effect at the start of the 2016 income year, can help business cash flow.

The R&D Tax Credit regime allows a "cash out" of an organisation's R&D tax losses. The cashed-out amount must be repaid from future income.

In general, a taxpayer will be eligible for the cash out if they:

• Are a New Zealand tax resident company
• In a tax loss position
• Maintain continuing ownership of intellectual property.
• Have a "wage intensity" of at least 20 percent (calculated as total R&D labour expenditure ÷ total labour expenditure).

The "cash-out" is subject to maximum caps and will be clawed back in certain circumstances such as a substantial shareholding change or the disposal of R&D assets.  Only expenditure that doesn't meet the threshold to be capitalised as an intangible asset qualifies for the tax credit. If you think you may be eligible and we haven't already discussed this with you, please contact us.

 

Creditors Get More Protection From Indebted Businesses

A threshold for reportable tax debt has now been proposed by the government, giving creditors greater protection from businesses owing debts of more than $150,000.

The IRD will soon be able to disclose to certain credit reporting agencies, information about companies with significant tax debt. An Order in Council set a threshold of $150,000, so a company's tax debt over that amount may be disclosed.

 

A Tip for Employers - Kiwisaver Contributions

We have noticed on the MBIE (Ministry of Business, Innovation and Employment) Employment Agreement Builder that the Employer's Kiwisaver Contribution can be included in their total pay, rather than as an added benefit. This must be negotiated in good faith and made clear to the employee during pay negotiations so keep this in mind next time you are writing a new employment contract.

For this and more information please see the link below

https://eab.business.govt.nz/employmentagreementbuilder/remunerationandbenefits/kiwiSaver

 

Contractors Get More Tax Choice

The way contractors pay tax changed on 1 April, giving greater choice, and making it easier to get tax right. The rules around schedular payments have changed to allow this, and are compulsory for all contractors hired by a recruiter - or other labour hire business - and those previously under schedular payment rules.Other contractors can opt in if their payer agrees to deduct tax on their behalf.

Contractors already under schedular payment rules
Contractors must complete the new tax rate notification form (IR330C) when starting any new job. On this form, they pick their preferred tax deduction rate. New Zealand tax residents can pick any rate from 10 percent to 100 percent. If you complete the form but don't pick a tax rate, the labour hire business will deduct tax at 20 percent. If you don't complete the IR330C, the no-notification rate of 45 percent will apply.

Self-employed contractors
If you contract directly for any business and do not have to have tax deducted by the hirer, you may choose to have tax deducted from your payments. You and the payer must agree to this approach, and a written record of the agreement should be kept. If you work for several businesses, each must agree to the request. If a payer doesn't agree, you will continue to pay tax for that work as done previously.

Use-of-money interest charges for underpaying provisional tax are also changing. From the 2018 tax year, new rules mean fewer people will have to pay it.

Paying contractors
If your business hires contractors you need to follow the following steps when paying them:

• Check the accounting software includes the option to choose variable tax rates
• Brief the payroll team
• Download the new tax rate notification form (IR330C) and get contractors to complete it
• Add the contractor to your EMS and complete as you would for any other person receiving schedular payments - ignore additional deductions
• If you employ contractors directly, you must record the agreement with them to deduct tax

 

Contractor or Employee? $65,000 Fine for Getting This Wrong

Not correctly disclosing who is a contractor and who is an employee correctly can have serious repercussions on a business.

In a recent scenario two car sales companies with the same director were penalised $65,000 for incorrectly categorising their staff as independent contractors and not allowing them their basic human rights. The owner did not have a written agreement because he believed that as his staff were contractors this was not needed but that wasn't enough to convince the labour inspector.

For more information on the differences between employees and contractors please click here

http://www.ird.govt.nz/payroll-employers/become-employer/ru-employer/emp-become-employer-employee-contractor.html


 

Warning! Xero phishing emails are going around

We have had Notification that there has been some Xero phishing emails going around as "Xero Invoice Reminders" and "Xero Billing Notification" emails.

Please be on the lookout for any emails posing as legitimate emails generated from Xero. Please note that you do not need to be using Xero to potentially be affected by this phishing attempt.

If you receive a Xero Invoice reminder or another type of email that looks suspicious to you, check the following:

  • What email address has it come from? A genuine Xero email will always come from a xero.com domain or sub-domain address, e.g. @xero.com, @post.xero.com, @send.xero.com, @sendau.xero.com, @sendnz.xero.com, @support.xero.com.  If it's not from a xero.com address, be suspicious.
  • Is the company/contact that the email came from someone that you normally deal with?
  • Is the PDF a normal email attachment or link? If it is a link then it is likely to be a phishing email.
  • Is either the PDF link or the bill asking you to allow software to make changes to your computer? If so STOP IMMEDIATELY! This may lead into you getting a virus.

For examples of a few phishing emails that have happened and further information from Xero please see the link below:

http://www.xero.com/blog/security-noticeboard/

 

Warmest Regards,
Louise Neville
Director, Chartered Accountant

What Next? The Future of our Economy

Hi Everyone,

Just thought I'd send you a link to "What Next?" 

I'm thoroughly enjoying & feeling totally out of my comfort zone watching what New Zealand is likely to look like in 2037 (only 20 years away).  University of Auckland, Nigel Latta & John Campbell are presenting every night this week 8.30pm, TV1 finishing Thursday night.

Last night's episode "The Future of Our Economy" was about what the next generation business looks like. 

Click HERE to view the show.

Would love to hear your feedback & how you think this will affect you but more importantly, what will your business look like in 2037?

Should you have any questions at all please call me on 03 374 9393.


Christmas Pays

The public holidays over Christmas and New Year are:

  • Sunday 25 December 2016 (or Tuesday 27 December 2016 if your staff don't usually work Sundays)
  • Monday 26 December 2016
  • Sunday 1 January 2017 (or Tuesday 3 January 2017 if your staff don't usually work Sundays)
  • Monday 2 January 2017

As two of the public holidays fall on a Sunday, this would be observed on the Tuesday following, unless your employee normally works a Sunday in which case you would record the public holiday taken as the Sunday.

We have a great flow chart that can help you work out what public holidays to pay staff if they are either working or not working on the statutory holidays. Just give Jill a call on 374 9393 and she will email you through a copy. 

Calculating Holiday Pay

Holiday Pay must be paid at the greater of either:

  • "Ordinary weekly pay" (the amount an employee receives under their employment agreement for an ordinary working week), or
  • "Average weekly earnings" (an employee's average weekly earnings for the 12 months immediately before the end of the last pay period).

If it isn't possible to determine an employee's ordinary weekly pay, the Holidays Act 2003 provides a formula to use. Click HERE to see the formulas or give us a call and we can help you.

If you have employees working or on call over public holidays, please contact us and we'll help you with the extra requirements.

Employees can ask to take paid annual leave holidays in advance when they do not have an entitlement – either because they have not completed 12 months of service, or because they have used all their entitlement.  Approval of this is at the discretion of the employer, unless it is included in their employment agreement.

The payment of holidays taken in advance is still based on the above rules, the greater of either "Ordinary weekly pay" or "Average weekly earnings". To calculate average weekly earnings where the employee has less than 12 months service, take the gross earnings from their start date until the last pay period before the holiday and divide by the number of weeks worked.


Tax on Christmas Parties and Presents for Clients/Employees

I'm sure a lot of you will be gearing up for Christmas parties if you haven't already had them.  You may be able to claim either 50% or 100% of your party expenses in your GST and income tax returns if the expenses are related to your business (depending on where the party is). Just give Emilie a call on 374 9393 for more information.

Christmas presents and/or bonuses for employees can also be deductible but may fall into the FBT or PAYE rules so again, please contact Emilie for advice on this.

We have a PDF we can email you that breaks the rules down further, just email elyse@asl.co.nz for a copy.

 

Accounting Solutions Christmas Break

We will be closing down over Christmas and New Year for 3 weeks. Our last day in the office will be Thursday 22 December 2016, returning on Monday 16 January 2017.

We hope that you have a wonderful Christmas break and you come back with passion and enthusiasm for a cracker of a year in 2017!

Warmest Regards,

Louise Neville
Director, Chartered Accountant

 

How to Increase Cashflow Over Christmas

Eliminating Christmas Cashflow Crisis

This has been what we have been focusing on with a number of clients over the last month, as the coming three to four months will be tough on cashflow. It's the hardest time of the year on money and planning. The majority of businesses go into negative cashflow, in January more so than in December, unless you're in retail.

With only 3 weeks left to generate the extra cash required to cover any shortfall, a place to start focusing on is sales and output. Plan your selling and production now for your last 3 weeks if you haven't already and definitely for January. Ensure good quality control to eliminate errors and loss of production/time. Watch discounting and waste as this eats into your cash due to reduced profits.

 

Cash Owing To You (Accounts Receivables)

Be diligent this month, this week is your opportunity. Ring now to collect all 30 day or older debtors. On 15 December ring all current debtors, as well, to confirm with your customers that they have received your invoices and that you both have the same amount showing as outstanding for payment.

Follow up and ring all outstanding debtors by 21 December.

Make sure you get all your December invoicing out on time, in fact sending them out early will help. Weekly invoicing could be a good idea for the next two weeks if you don't already do this. Then again on the 16 January ring all outstanding balances & try to get these all collected for 20 January.

 

Cash To Pay Out (Accounts Payable)

The majority of you will close down over the Christmas period for two to three weeks and decisions of what suppliers will get paid will have to be made. 

Make sure you plan out paying your accounts payable. That's why doing a cashflow budget for the coming four to five months is a fantastic idea – if you pay your creditors out before you've received your accounts receivable in, your bank account has to fund the gap, including all the wages and overheads. That's a real pull on cashflow.

 

Tax Due on 16 January 2017

Remember that Provisional Tax and GST payments are due 16 January 2017. If you are unable to pay your Provisional Tax or GST on time, organise a pre-arrangement with the Inland Revenue which prevents penalties. There will still be Use of Money Interest but likely no late penalties. Contact Emilie on 03 374 9393 to arrange this for you before 22 December (we reopen on 16 January 2017).


Tips for Cashflow Over December/January

  • Look at getting a bank overdraft now for over the Christmas break (organise this week if needed).
  • Sell surplus assets or stock at reduced prices – get on Trade Me selling.
  • Get deposits, where possible, for December and January work especially.
  • Be focused, make every minute count up to the final day of work.
  • Watch dates with ordering stock, usually done on or after the 1st of each month, but because of close down watch you order in time and have supplies for the week you arrive back. Remember you can always negotiate with suppliers to extend credit just for December/January.

Awareness and clarity gives you power and knowledge so you can act accordingly to prevent there being a cashflow issue and if there is one, it's managed.

We can work out your cashflow drop through Christmas. I can't give you a quick formula as every business is different, depending on what accounting system you were on last year and any changes in your business this year, so call me on 03 374 9393 and we can discuss your cashflow over the phone.


Coming Back After Christmas

When you come back from your Christmas break, hit the ground running with work already booked in and supplies organised. This will help the team be productive from day one with a smooth, easy start to the year.  Remember to look after your team – say thank you and remember January is hot, it's holiday mode, and not a good month for overtime and extra work.

 

Group Business Mentoring for 2017 - LIFT Wealth

Our first LIFT Wealth & Lifestyle group have just had their third workshop and I have seen the benefits all year from their group. The business owners share advice and provide perspectives, realising their issues are shared amongst the group and they are not alone. It doesn't matter what business it is, everyone is experiencing or has experienced something similar. Talking openly and discussing different options plus implementing their new learnings, they help with accountability and sharing what's working and what's not working. Their goals and business planning that were written down in the first workshop are coming into reality. To get to the end of their year and see the knowledge being utilised and progress being made is rewarding for everyone.

There is an opportunity to join the next Lift Wealth & Lifestyle small group that starts late February and runs for a full year.  Please contact me if you would like to discuss what you could possibly get from this workshop.  Only 4 more businesses can register for this before it's full.

 

Louise Neville
Director, Chartered Accountant

  • "With our previous accountant, I had all this information but didn't really get a grasp of what it meant. Now with Accounting Solutions I understand my overall business and where we are going."
    -Richard Allin, Managing Director, Push Bikes Ltd
  • Accounting Solutions has surpassed my previous experience of a large international accounting firm. An experienced accounting team who can manage complex financial tasks."
    -Phil Bryant, Channel X
  • "We have been clients of Accounting Solutions for over 13 years now. Their proactive approach has helped our business to continue to grow and helped make business simple, profitable and enjoyable."
    -Bernie Hunt, Managing Director, Sydenham Joinery Limited
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