Governance Archives - BDS Chartered Accountants

In the context of Christmas parties, gifts, and staff bonuses, various taxation rules come into play, namely the entertainment rules, PAYE, and FBT.

The entertainment rules place a 50% deductibility restriction on certain expenditures related to recreational events, such as Christmas parties or corporate hospitality. This limitation is grounded in the recognition that there is typically a private enjoyment aspect to such events. Both on-site and off-site consumption of food and drink can fall under the purview of the entertainment rules.

FBT (Fringe Benefit Tax) comes into play when non-cash benefits are provided to employees as part of their employment. While there is some overlap with the entertainment rules, the latter generally takes precedence over FBT, except in cases where the employee can choose when to enjoy the benefit or if the benefit is enjoyed outside New Zealand and not in the course of employment duties.

PAYE (Pay As You Earn) rules apply to monetary compensation provided to employees, covering bonuses, gratuities, and reimbursements for personal debts. The PAYE regime captures direct payments by employers for personal expenses incurred by employees.

Scenarios and Examples:

Christmas Event Costs:

Expenditures related to off-premises Christmas events, including venue hire, food, and drink, fall under the entertainment rules, allowing a 50% deduction. This also applies to incidental costs like glassware, waitstaff, and music.

Employee Vouchers:

If an employer gives vouchers for a restaurant meal as a gift, and the employee can choose when to use them, the cost of the voucher falls under FBT. However, reimbursing employees for meals would be subject to PAYE.

Gifts to Employees:

Most gifts, including gift baskets with food and drink, are subject to FBT as they can be enjoyed at the employee’s discretion. Some benefits subject to FBT may qualify for exemptions, such as the de minimis exemption.

Staff Cash Bonuses:

Cash bonuses paid to employees are taxable under PAYE, and they should be taxed at the ‘extra pay’ rate. These bonuses are considered payments made in connection with employment.

Company Vehicle for Personal Travel:

FBT arises when a company vehicle is available for personal use by an employee. If an employee pays for their petrol and provides evidence to the employer, these costs may be deducted from the taxable value of the fringe benefit, reducing the FBT payable.

Gifts to Clients and Customers:

Oddly, the entertainment regime is considered to apply not just to food and drink consumed at a function but to any provision of food and drink. Inland Revenue specifies that certain items in a gift basket may have different tax outcomes, with some being fully deductible and others only 50% deductible.

Still Confused?

In case of any confusion or questions, it is recommended to consult with usual advisor.

Great business leaders come in many different forms, from visionaries like Apple founder Steve Jobs to big personalities like Virgin’s Richard Branson and diversity champions such as former Facebook executive Sheryl Sandberg.

A business leader should bring people together, have staff working towards a common goal, and keep people updated about where a company is heading. They should also keep staff energised in good times and bad.

While there’s no single secret to becoming a brilliant leader, there are steps you can take to develop a great culture, keep people inspired, and strengthen your relationship with your team.

Here are five ways to take your leadership to the next level:

Create a shared sense of purpose and be clear about where the business is going.
Explain your decision-making. Show how your actions benefit your employees and the business. Make sure you’re honest and have nothing to hide.
Always treat people fairly — give credit where it’s due and take responsibility when things go wrong.
Let employees know you appreciate their work. Be accountable when things go wrong and hold your hand up when a plan hasn’t come to fruition.
Accept you have a moral duty to everyone impacted by your business: your staff, their families and the community.
Business owners don’t operate in a bubble. Remember your actions will impact employees, their families, and the local area.
Motivate staff through continual development and learning, and help them flourish.
Encourage staff to upskill and learn more about their roles. That way you can boost employees’ self-esteem and add valuable new tools to your business.
Show trust in your staff and treat them with respect.
The more you can trust your employees, the more they will trust you and your leadership. Trust builds confidence, creativity, and high performance.

There is a wealth of resources available to help company owners fine-tune their management skills. Talk to your business adviser or accountant about options to enhance your leadership.

Yes, here is how:

Research & Development Funding
If you are a small company investing in product development, check out what is available through Callaghan Innovation.

Business advisory services
The Regional Business Partner Network can back small businesses, with advice, support, and access to funding for business growth initiatives.

Capability development vouchers
If you employ fewer than 50 employees, you could be eligible for co-funding for management training through the Management Capability Fund.

Overseas expansion
Looking to grow your overseas customer base? NZTE can help. Co-funding options are available to support ambitious Kiwi companies.

There are so many upsides to running a family business: working together as a close-knit unit and sharing the good times together. However, being in charge of one can be complicated as you juggle company interests with those of your loved ones.

Family is loyal and dedicated, but problems can arise when emotions get in the way of business, or when family members have conflicting interests. Running a family company is never simple. Here are some of our tips to getting it right.

Communicate effectively and early on to establish what each family member wants out of the business. Open dialogue is the best way forward.
Don’t wait for an event or trigger. Have processes in place to deal with issues as they arise.
Pass on knowledge from one generation to the next.
Involve family members from a young age so they understand the business.
Be aware of the influencing factors (history and generation).
Be mindful of company culture — family businesses can lack proper governance structures.
Be logical, not emotional.
Clearly define the roles each family member plays in the business.
Establish a family advisory board with independent board members

Whether you’re running a small family business or one that employs dozens of people, defining roles and governance is vital for any SME. The basic roles in a company include ownership, governance, management, and operational. Setting out a clear structure can bring long-term benefits and prepare your company for growth.

Ownership, aside from literally owning the business, these are the people responsible for setting out an effective governance structure and protecting the company’s future. Owners need to have a succession plan and ensure that a transition happens as smoothly as possible.

Governance refers to the people in charge of a business’s long-term strategic planning and objectives. While the owner has the final say on where a company is heading, having a structured governance process ensures the owner’s wishes are being met.

Management runs your business day-to-day, working towards quarterly, monthly, or annual goals. They focus on bills, cash flow, and play an integral role in hiring and training. Management doesn’t have to be part of the family — some business owners choose to have non-family members in charge, or choose an outsider to train younger family members into future management roles.

Operational refers to the non-financial side of the company, for example, the people out labouring on the farm, or meeting clients every day. Many family businesses view experience at this level as essential before moving up to a management role. Clearly defining these levels can help business owners manage career progression.

Setting out job roles and a clear structure is hugely beneficial for every business owner: it ensures everyone in the business knows what they are doing and what is expected of them. It can help businesses work out their strategic and management goals and put together long term plans.

Every business, large or small, deserves to be run as professionally as possible. By setting up the right structure you can give your family business the best chance of success.

While the family knows your business inside out, it can be helpful to have independent parties on hand to provide an external perspective. A family advisory board can offer fresh insight and perspective, giving your enterprise the edge.

A family advisory board can include family members, anyone with an interest in the company, and independent advisers. There are significant benefits to setting a family advisory board up:

Bringing younger people into strategic management and retaining the experience of founding generations.
Adding specialist expertise, for example, sector-specific advisers, accountants, legal counsel.
Defusing family tensions — an external facilitator can keep discussions on track.
Taking the pressure off “mum and dad” by ensuring decision-making responsibility is shared.

From 1 April 2022, the minimum wage rate increases from $20 per hour to $21.20. Communicate the change with your employees in writing and if you have staff on salary, make sure their total remuneration meets the requirements.
The Holidays Act is getting revamped bringing new ways of calculating holiday pay and other leave entitlements and the ability for employees to take annual holidays in advance. Jump on MBIE’s website for more information.
This year sees the addition of a new public holiday, Matariki, to be marked on Friday 24 June.
We expect to see a fair pay agreements Bill introduced this year. People will have an opportunity to comment on the Bill during the Select Committee process.
Dependent contractor protections are under review by MBIE with measures expected to include extending statutory minimum entitlements for leave and ensuring dependent contractors have the right to bargain collectively. Watch this space!