BDS Chartered Accountants

Paying your Taxes

Peter Taylor — Thu, 31 Jul 2014 23:25:52 +0000

Do you file and pay all of your GST, PAYE and FBT returns electronically?

If not, to encourage you to do so, Inland Revenue are changing the long-standing practice of treating payments as being received on the date the envelope is postmarked to when they arrive at the IRD. The proposed changes mean payments by post will need to be received by Inland Revenue on or before the due date to be considered ‘in time’.

This means that you will need to take into account possible postage delays as you can no longer rely on putting an envelope into the post box on the day the payment is due. This combined with NZ Post’s proposed change to a three-day postal service will add a fair bit of uncertainty to posting anything to Inland Revenue. How many days before the due date would you need to send your payment to be completely confident it will get there on time?

What does this mean if you get it wrong?

Making Payments:

Use of Money Interest (currently 8.4%) is charged on any amount not paid by due date
An initial 1% late payment penalty will be charged on the day after the due date
A further 4% penalty will be charged if there is still an amount of unpaid tax (including penalties) at the end of the 7th day from the due date.
Every month the amount owing remains unpaid, a further 1% incremental penalty will be added.

Filing Returns:

Late filing penalties ranging from $50 to $250 can be imposed if a return isn’t received by the due date, although these will not be imposed if you haven’t had any other late payments in the prior two years.

For return dates that fall a weekend or Public Holiday the status quo will remain and these will still need to be received by the next working day. Although IRD are proposing to change this rule for provincial anniversary days so that returns and payments need to be received on or before the anniversary day.

All of the returns and most of the payments we process for you as your tax agent are done electronically so there will be no change to the timing of our processes. For clients still making cheque payments we will be in touch with you about what needs to happen.

These changes are proposed to apply from 1st October 2014. So if you are currently using the post for the filing of any returns you will either need to start posting them earlier or move to electronic filing.

Most returns can be filed electronically through the IRD website and most banks have a section for making IRD payments readily available in their internet banking. If you have any queries about electronic filing or payments give us a call and we can help you through the process.

We will continue to give you as much notice as possible regarding your returns but if you are ever unsure about when they are due, have any issues with making a payment or have any outstanding amounts due give us a call and we will help you out.

Budget 2014 – Things you need to know

Peter Taylor — Thu, 31 Jul 2014 23:25:10 +0000

The Government has had to deal with unforeseen challenges, notably the 2010-11 Canterbury earthquakes. The rebuild is generating an economic boost, which along with the continued economic growth in Asia particularly the resilience of the Chinese economy, now New Zealand’s biggest trading partner, has New Zealand outperforming most of our traditional trading partners.

It’s not all about the silver lining however. External and internal risks could still throw the New Zealand economic story off its track. Externally, the global economy is still frail and an Australian economy coming off the boil will be of concern. Internally, New Zealand households’ still high levels of indebtedness, and the impact on interest and exchange rates has been a persistent worry.

Budget 2014 represents a turning point for the National-led Government with a surplus of $372 million forecast for next year, with increasing surpluses in the following years. Gone are days of the “Zero Budgets” as the Government’s focus has moved from managing the country out of recession to managing a growing economy, and creating a sustainable growth.

Accident Compensation Corporation

Budget 2014 indicates ACC is on track to provide further levy cuts of around $480 million in 2015/16. These cuts will be for motor vehicle levies, along with the possibility of a levy reduction for employers and the self-employed. The Government will make its final decision after ACC’s public consultation. Depending on the outcome of the consultation, the average levy for a private motor vehicle could reduce by about $130 a year from 1 July 2015.

Economic Developments

Budget 2014 will boost NZTE’s trade presence in China, South America and the Middle East to help more New Zealand firms break into these growing markets.

Tax

Cheque duty to be abolished

The five cent duty on cheques will be abolished from 1 July 2014. This duty currently raises about $4 million a year. Repealing the tax will benefit those who still use cheques, and it will also reduce compliance costs for banks and printers of cheques.

Suspension of import duties on certain construction materials

Anti-dumping duties on plasterboard, wire nails and reinforcing steel bar will be suspending temporarily for three years.

Zero concessionary tariff on residential construction materials

A zero concessionary tariff will be introduced on residential construction materials.

This will cover approximately 90 per cent of the materials in a new home and is expected to save around $3,500 on the construction of a standard home.

Allocation of $132 million to assist Inland Revenue’s tax compliance activities

Inland Revenue will receive $132 million over the next five years to assist with its tax compliance activities and chasing taxpayers’ unfiled tax returns. This allocation will consist of $48.6 million in cash, and the remaining $84 million to cover tax being written off where Inland Revenue is unlikely to recover payment from taxpayers.

It is estimated that $295.7 million will be generated in gross revenue for the Crown over the next five years as a result of the new funding.

Transport

$375 million to accelerate Auckland transport projects

Budget 2014 provides $375 million of new capital funding for the New Zealand Transport Agency (NZTA) to accelerate $815 million worth of Auckland transport projects which include:

$800 million for projects on the Northern Corridor, Southern Corridor and State Highway 20A.
$10 million to further investigate the East-West Link over 2014/15.
$5 million for the Panmure to Pakuranga phase of the Auckland Manukau Eastern Transport Initiative.

The $375 million will be transferred to NZTA as an interest-free loan, to be repaid to the Crown by funding currently allocated to these projects in the National Land Transport Fund up to 2026/27.

Other

Canterbury Earthquake Recovery

Budget 2014 provides an additional $50 million to the Canterbury Earthquake Recovery Authority. This brings the Government’s total spending and commitments to rebuilding greater Christchurch to $15.4 billion.This package confirms multi-year commitments of $313.8 million operating funding over the next four years and $150 million in capital funding to continue land acquisitions in the CBD and to deliver the anchor projects outlined in the Christchurch central-city recovery plan.

Environment

$20m for freshwater and environment initiatives

The Budget 2014 will invest in environmental initiatives to help the management of New Zealand’s natural environment. This will improve the quality of fresh water and lead to the productive and sustainable use of freshwater resources.

The Budget 2014 provides:

$12 million to help councils and communities improve the way they plan and make decisions about managing their local freshwater resources.
$5 million to the Te Mana o te Wai Fund, in partnership with the Māori Party to restore local freshwater bodies over the next two years.
$3 million to implement Resource Management Act reforms

Summary of Budget

For our part, BDS believes that New Zealand’s economic and social policy settings are heading in the right direction. The Government has taken the lead in paying down debt and living within its means. On the social policy front, core services have largely been maintained, with a focus on helping the most vulnerable in our society.

For the Government, today’s Budget is about consolidating the gains from its policies to date, as well as maximising the opportunities from a growing economy. The challenges ahead will be in navigating the ups and downs of this path, balancing external and internal risk that could throw New Zealand’s economic story off its track.

Please note that this is a short snippet of the budget 2014 New Zealand, should you be interested in understanding the social and economic policies within the Budget 2014, please click here.

Family Trusts – Pros and Cons

Peter Taylor — Thu, 31 Jul 2014 23:21:42 +0000

The pros and cons of Family Trust

Having a trust gives you confidence that there will be assets left to those who are important to you, structure your affairs effectively for tax, prevent unwelcome claims against your assets, and help maintain the confidentiality of your affairs. You transfer legal ownership of the assets to the trust while continuing to use and enjoy them.

A classic example, is a family home within a trust. If the family home is in a trust, you no longer personally own the house – but you could still live in it if that’s what the trust deed states.

The format of a trust is idea for sole-traders, or professional that may unintentionally place personal liability on a guarantee on a product/project. Builder that may extend personal guarantee on the quality of the work, but find themselves liability personally at a later as a result of an expressed “life time” guarantee on work.

Benefits of a family trust

People usually set up a family trust to get some benefit from no longer personally owning an asset. A family trust may be useful in:

Protecting selected assets against claims and creditors – protecting your family home from the potential failure of a business venture
Set aside money for special reasons
Ensure your children, not their partners, keep their inheritances.
Avoid unwanted claims on your estate when you die – such as from a former partner.

The Parties involved in a trust:

Settlor: The person or company who creates the trust
Trustee: The people who manage the trust. Note that a settlor can also be a trustee. It is also a good idea to appoint an independent trustee like an accountant.
Beneficiaries: The people who benefit from the trust i.e Members of your family or yourself.

Often there is more than one trustee, and, similarly there may also be more than one settlor of a trust.

It is important to note that the settlor has the power to appoint, and remove trustees, and also transfer to someone else in your will. Interestingly, a trust does not necessarily end with your death – it can last for a maximum of 80 years from inception, and span many generations.

The process involved in setting up a trust:

Assets to be transferred into a trust, at their market value. Examples are: Family home, shares, bank deposits, cash and more.
The ownership of these assets will then be transferred to the trust and the trust in return owes a debt back to you, the settlor. This debt can be ‘forgiven’ through a process called gifting.
A trust deed is formally used to set up the trust. It will appoint the trustees, list the beneficiaries, and state various rules for the administration and management of the trust.

Gifting:

Before October 2011 there was a limit of $27,000 that you could gift in one year without paying a tax called gift duty to Inland Revenue. However gift duty has now been abolished and there is no limit to how much you can gift in one year. However, it’s always best to seek legal advice before proceeding. Note that gifts are still included in your assessment for a Residential Care Subsidy.

Cost and Risks:

Family trusts can be complex and time consuming to administer. It costs money to set them up and there are generally ongoing legal and accounting fees.

You also need to think carefully about who will be the trustees, as they will be responsible for managing the trust properly. Typically, trustees of a family trust are independent parties such as accountants or lawyers.

Risk of Trusts:

If a trust is not set up or managed well, there can be considerable inconvenience and cost. You could also run the risk of having the trust declared a ‘sham’, which would mean that the assets are not really the trust’s but are in fact still yours.

If the trust is a sham you may lose all of the advantages that you were hoping to gain from it, and you may be penalized as well.

Once you put your assets into a trust, you no longer personally own or control them. Instead, ownership passes to the appointed trustees who must act under the terms of the trust deed in the best interests of the beneficiaries.

There have been cases of family members suing other family members for a breach of the trust’s provisions. The courts treat claims of this sort quite seriously and they will normally be expensive to resolve.

Forming a trust is a big decision. If you are going to form one, make sure that it is established properly, for the right reasons, and managed well.

The New BDS

Peter Taylor — Thu, 31 Jul 2014 23:19:59 +0000

As many of our clients have seen through the various social media channels, we at BDS have recently undergone a rather dramatic change, with more expected in the coming months. With our new branding, and commitment to ensuring we deliver on our promise to add value, we have realigned our services and our support to you, in enabling providing more opportunities for growth with enhanced support to do that.

What this means for you:

A greater level of commitment on creating value for you through value creation, business improvement and more.
An open interactive platform through Skype, social media and greater involvement and value add to your business.
Quality assurance, process improvement and a greater commitment to developing a relationship with you and your stakeholders.
A more diversified service offering to provide to enable you to work on your business and not in your business. To grow your personal wealth without the stress associated with it.
Our Contacts are your extended network – We identify business opportunities to build a beneficial relationship through our vast affiliation with trusted advisers, and alliances.

Thank you from the team at BDS, and look forward to the working more closely with you.

Again a big thank you from the Team at BDS, and look forward to us being integrated part of you business.

Let us be the building block to your Success.

The Team at BDS

info@taxmaster.co.nz

Insights from your Profit and Loss account

Peter Taylor — Thu, 31 Jul 2014 23:19:14 +0000

Most small business people would agree that their Profit and Loss account (now more correctly called a Statement of Financial Performance) is among the easier – if not the easiest – financial document to understand. It’s typically presented in two parts.

The top half of the statement reveals the various sources of income the business has received for the period covered, such as a quarter, half year or full financial year. After subtracting the cost of producing your goods or services, it shows your gross profit figure.

The bottom half of the account lists all the relatively fixed running costs (business overheads) such as rent, power and communication costs you need to pay each month regardless of sales levels. When these costs are subtracted from the gross profit the result is a net profit figure (before tax).

So far, so simple, but you can learn more.

How well is the business performing?

These two results enable you to work out two key performance indicators (KPIs) that offer important insights into how your business is performing.

The first, your gross profit margin, is the gross profit expressed as a percentage of sales.

To work this out (if your accounting software doesn’t do this automatically), you divide the gross profit figure by the sales total and multiply by 100 to get the percentage.

Here’s an example:

Gross profit: $80,000

Sales: $400,000

GP %: 80,000 divided by 400,000 = 0.2 x 100 = 20%

Multiplying by 100 allows you to study the gross profit margin as a percentage, so you can easily compare this result with previous margins, irrespective of fluctuating costs or sales levels. Has the margin improved? If not, it’s time to investigate the causes. For instance, has there been an increase in the cost of materials or production labour?

You can now compare your gross margin to similar businesses, because turning the result into a percentage overcomes any differences in size. Regardless of whether they are smaller or much larger businesses, it’s the gross profit percentage (GP %) that tells the performance story.

Depending on which sector you operate in, we can help find the average GP percentage for your industry. Your aim should then be to at least equal the industry average, and preferably do even better. You can also aim to improve on your previous gross margin results.

How profitable is your business?

The net profit margin reveals how profitable your business is when your overhead costs are deducted from the gross profit. It’s worked out using a similar formula. For example:

Net profit: $50,000

Sales: 300,000

NP %: 50,000 divided by 300,000 = 0.166 x 100 = 17%

This KPI empowers you to spot trends before they become disasters. If your net profit margin has fallen, you need to dig for the causes. For example, you may find your marketing costs have blown out with no increase in sales. The lesson here would be to measure your marketing and advertising to see what is actually working, so you can drop any unproductive tactics.

Three tips

Use your gross profit and net profit margins as benchmarks to set improvement goals. Try to improve both on internal benchmarks (your current performance against previous results) and external benchmarks (the average for your industry type).
Don’t rely on just an annual profit and loss account. You can’t effectively drive your business forward using a rear view mirror that reflects dated data – you need more up-to-date figures. Use your accounting software to generate more frequent profit and loss accounts, such as monthly or quarterly statements. These enable you to take prompt action to fix any negative trends before they do serious damage to the business.
Remember to you can always get in touch with us to interpret trends in your results so you can take the right corrective action.

10 more quick growth tips for small business owners

Peter Taylor — Thu, 31 Jul 2014 23:18:28 +0000

Help grow your business through collaboration, expansion, improved marketing and some of the following quick tips.

1. Improve your customer service

Businesses with good customer service retain consumers and attract new business through word-of-mouth. Even if you think you’re already providing good service, make it a priority to provide refresher training to frontline staff at least once a year. Alternatively, hold regular meetings to discuss any issues as they arise.

2. Try out new products

Even if you have multiple products selling well, be on the lookout for opportunities to expand your product line and satisfy customer demand. If you’re unsure how well a product will sell, order a small amount first. Just remember to update your marketing material to let customers know about your new offerings.

3. Rejuvenate your marketing material

Holding on to old, outdated marketing material can make your business appear out of touch or even unprofessional. Review your marketing material at least every 12 months. If you’re on a limited budget, focus on producing basic material that is stylish but functional.

4. Enhance other people’s good ideas

Be aware of great ideas, or new ways of working, from other businesses and think about how you could adapt them to your own business. The best ways to find out about new ideas are to research the latest trends in your industry, subscribe to industry publications, attend conferences and keep up-to-date with your competitors’ websites.

5. Team up with another business

Joining up with another business to promote a special deal or offer is a great way to get your business into new markets with new opportunities. Another option could be getting your business listed on another business’s website, or in an industry directory.

6. Test your marketing ideas

Before you implement a marketing campaign, test it on a limited basis and fine tune it before a full-scale rollout. The easiest way to do this is to target selective customers and see if you receive a response. Ask your best customers for feedback before implementing any marketing ideas.

7. Create regular customers

Keep a record of client names and details for future marketing material or special offers. Starting up an e-newsletter is also a good way of keeping in touch with clients – just make sure you have their permission before hitting the send button.

8. Consider expansion

Think about whether your current premises will meet your needs over the next five years. If you’re looking to target new customers, will your current location appeal to your new target market? Keep an eye out for competitively priced lease arrangements, or deals on neighbouring properties that could enable you to expand at your current location.

9. Guarantee your products and services

If you want to build future sales through repeat customers, you need to make it clear that you stand behind your offerings. A good start is to offer a money-back guarantee for any product sold, or to back up big sales with after-sales support.

10. Pay attention to your customers

Take any feedback from customers seriously and make an effort to thank them for sharing their thoughts – even if they are raising concerns or making a complaint. If you have a regular customer who isn’t happy with a new marketing strategy or product line, listen to what they have to say – there’s a chance that other customers might share their concerns.

Don’t be afraid to try new ways of generating growth. Consider the tips above and decide whether they can help enhance your overall product or service.

Good luck and let me know how you get on.

10 quick growth tips for your small business

Peter Taylor — Thu, 31 Jul 2014 03:59:39 +0000

Small businesses can grow in boom times as well as periods of difficulty by working smarter and taking advantage of opportunities. Put these following effective tips into practise to help grow your business.

1. Utilise new technology

Modern technology can save you time, improve productivity and reduce your operational costs. Make use of Facebook, Twitter, Google+ and other social media tools to market your business.

Dropbox is a cloud-based service that can be used for document creation and sharing, while Skype is commonly used for calling or video conferencing.

2. Communicate better

Always take a friendly but professional approach to any form of customer interaction including written invoices, quotes and emails. Create guidelines for dealing with customers in writing and over the phone. Reply to messages as soon as possible. If you take too long to return a call or email, you may lose a potential customer to a competitor.

Try writing a blog or column about your chosen industry. Think about sponsoring an event or gifting your products or services to a local sports team, community group or school.

3. Become more innovative

Even if your products and services are selling well, always look out for new ways to refine your business. Organise regular brainstorming sessions and invite staff to share their ideas on ways to improve products or services.

4. Tighten up your credit policies

For any orders, make sure your customer completes a credit application and that they understand your terms of trade. Encourage your customers to clear payments quickly by emailing or posting invoices and giving clients a clear time frame to pay. Revisit your terms of trade and make any necessary changes if need be.

5. Improve your record keeping

If you’re selling products, keep a record of every product sold and ensure you’re aware of how much stock you have. There are free or low-cost point-of-sale (POS) computer programs that can manage stock inventories and provide a record of each product sold. Create a database for future follow-ups by recording clients’ names.

6. Join business associations and organisations

Business associations and organisations give you access to industry leaders about current innovations and developments within your chosen market for an annual membership fee. They hold regular events, seminars, short courses and networking evenings which can be incredibly valuable for meeting business owners, identifying investors, and learning more about your industry.

7. Develop a website

If you’re a well-established business, potential customers will be searching for you on the Internet – often before they pick up the phone or walk through your door. An effective website needs to be functional, communicating what you offer and your point of difference.

8. Manage your time more effectively

Take note of where your time is going each day. Some tasks could be consolidated, or completed at a dedicated time each week. There are free or low-cost time management tools such as Toggl and Google Drive that monitor your daily workload and can generate weekly reports.

9. Buy good quality business cards and use them

Take any opportunity to hand out your business card when you meet new people – even outside of work.

10. Generate referrals

There are many ways to create referrals and grow your business. For example, you could pay for them per lead, write a blog, attend trade shows, or simply advertise through various media.

Your small business will need to harness a variety of methods for it can grow sustainably, so take the time to plan ahead and try some new approaches.

Good luck and let me know how you get on.