Elevate CA Blog

We are looking for a Xero-savvy accountant to join our team.

You will need to have a “can do” attitude and at least two years using Xero and preparing financial statements in an NZ Chartered Accounting business.

If this sounds like you, read on …

We are Chartered Accountants with a difference.   We are small enough to be nimble – and we are a relaxed team but very focussed on providing fantastic value and service to our clients. And we’re a very long way from the traditional accounting “factory”. We embrace innovation and change as a positive, we are marketing focussed – and we are always looking for opportunities to connect our business clients with each other. If you’re completing PCEI or PCEII, we are an ATO and we have a registered mentor on the team.

What is the position?

This is a full time position based in our CBD Whangarei office, with plenty of client contact. You’ll be preparing financial statements, tax, GST and PAYE returns using iFirm and Xero – and playing a key role in managing our relationship with clients, other professionals and the IRD.

What to do from here?

If you have at least two years preparing financial statements using Xero in an NZ Chartered Accounting business – and you like what you see on this website, email your CV to goingUP@elevateCA.co.nz now. We want to know about your CA experience, where you’re working right now, the kind of work you’re doing – and any questions you may have. You will hear from us straight away to acknowledge receipt of your CV – and to arrange interviews where applicable. Start date will be to suit – and you’ll be very busy from day one!

Thank you for taking an interest in joining the Elevate CA team!

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The Elevate CA office will close for the Christmas break on Friday 18 December – and will reopen Monday 11 January.

If you do need to get in touch Dean, Rebecca and Fraser will be checking emails from time to time.

Wishing you a safe and enjoyable Christmas break.  Thank you for your support in 2015 – and we all look forward to working with you in 2016 to help bring your business goals to fruition.

Migration to New Zealand is breaking records in 2015 – many of whom are Kiwis returning from long stints in Australia having acquired one or more rental properties during their time there.  So what are the tax implications of such a move?

Here is a common scenario of a returning Kiwi with rental properties in Australia managed by an Australian domiciled property management firm receiving rental income of say A$15,000 – and with no other Australian sourced income.

New Zealand and Australia are party to a Double Tax Agreement (DTA). This DTA outlines which country has the sole right to tax specific types of income. The tie-breaker test in this DTA (to settle circumstances where you are considered tax resident in both countries) states that you will be a resident where a permanent home is available to you.

Australian Obligations

The income required to be returned in an Australian income tax return is the rental income (or loss) from Australian rental properties. The tax rate on non-resident income in Australia is 32.50%. Using a total amount of Australian rental income of A$15,000, there would be tax payable in Australia of A$4,875.  Remember that Australian Capital Gains Tax will continue to apply to the eventual sale of the properties regardless of the residence of the owner.  An Australian tax agent would be required to give more detailed and specific advice – and to prepare and file the Australian tax returns.

  

New Zealand Obligations

As a resident in New Zealand for tax purposes, worldwide income of the individual must be included in the New Zealand income tax return.  However, there may be the ability to claim a credit for the tax paid in Australia. In New Zealand (using an exchange rate of 0.9597), the income to return would be NZ$15,629 – with foreign tax credits of NZ$5,079 for the amount of tax paid in Australia.

We will use a New Zealand marginal tax rate of 30% for this income. The tax payable is NZ$4,688 – but because NZ$5,079 is available as a tax credit having already been paid in Australia, there is no further tax payable on this income in New Zealand.  The rental income has now been correctly taxed in Australia – and isn’t taxed again in New Zealand. 

A couple of things to note:  1)  The calculation of income or loss relating to the Australian property must be in accordance with New Zealand tax rules; and 2)  The foreign tax credits are available only up to the amount of New Zealand tax payable on this Australian income, and cannot be used to offset income tax on other types of income such as New Zealand sourced income.  Thus in this example, NZ$391 of Australian tax credits are not able to be utilised in this country.

If you are in this situation, please do not take this article as specific advice – but give us a call at Elevate CA to discuss your specific situation so we can assist you in meeting your tax obligations properly.  Every situation involving a New Zealander returning permanently from another country is distinct and different.

Q: When is a payment tax deductible to your business but tax free in the hands of your employee?

A: When the payment is for hurt and humiliation caused by the employer.

This may seem at first glance like an opportunity for tax arbitrage – notwithstanding the high price in terms of your reputation as an employer.

The IRD has confirmed in Public Ruling BR Pub 06/05 that genuine compensation for humiliation, loss of dignity, or injury to feelings is not taxable to the employee. It matters not whether the compensation is determined by the Courts or is an out-of-court settlement agreed by the parties.   Regardless of the payments being non-taxable to the employee, they are likely to be tax deductible to the employer.

Due to this one sided tax treatment, payments for hurt and humiliation have become an area of focus for the IRD. It is well worth having some background knowledge to the tax treatment of payments to employees who have a legitimate personal grievance.

Payments for lost income, redundancy entitlements, or exit inducements are taxable and are subject to PAYE just the same as ordinary salaries and wages are. Simply reclassifying a payment as being for hurt and humiliation and getting the settlement agreement signed by an independent mediator does not make the payment non-taxable.

In order to stack up as genuine compensation for humiliation, loss of dignity, or injury to feelings – and as such be legitimately non-taxable to the employee, the parties would need to be able to demonstrate to the IRD the following: 

1. That the employee had a genuine personal grievance , and;

2. That the amount paid to the employee was reasonable based on the level of compensation awarded by the Courts in similar scenarios.

The onus for getting this right is with the employer. If the IRD were to later investigate the transaction and deem that there was no genuine personal grievance – or that the payment was excessive, they would likely seek to “gross-up” the payment to calculate the PAYE liability. As a result, the employer would be assessed for the unpaid PAYE – plus penalties and interest.

Although the employee may be highly motivated to have payments classified in a not taxable manner, the costs of getting it wrong fall entirely on the employer’s shoulders – so care must obviously be taken in this area. Because of the asymmetrical tax treatment and opportunities for abuse, payments for hurt and humiliation will likely continue to be an area of focus for the IRD.

Do you need to know the value of your business?  If you’re doing any of these things, the answer will be “yes”:

• Your business is insured with a buy-sell agreement;
• You’re transferring shares to your family trust;
• You’re transferring your business into a company;
• You have a shareholder entering or exiting your business;
• You’re focussed on maximising the value of your business for an eventual exit;
• You’re in a matrimonial dispute or a dispute with your fellow shareholders.

The first step is to determine what exactly is being valued:

Business Assets and Goodwill:  Often this approach is used when a business owner is contemplating a sale, as typically a purchaser will buy assets and goodwill leaving debtors, creditors, term loans, tax liabilities, shareholder current accounts and often some company vehicles behind to be dealt with and wound up by the vendor.

Shares in the Company:  This approach is often used for periodic valuations for buy-sell insurance purposes, where a new shareholder is being introduced to an existing company, where an existing shareholder is selling out or where shares are being transferred to a Trust.

Minority Interest:  Depending on the company’s constitution or shareholders’ agreement, a minority shareholder may have little influence in matters like dividend policy or remuneration of directors.  This may make a minority shareholding worth significantly less than a controlling interest.   

Majority Interest:  On the other hand, the shares that give a shareholder a controlling interest may attract a premium.   But often a “fair value” approach is stipulated, in which case it might be appropriate to ignore differences in value between minority and majority holdings.

A valuation can form the basis of strategic planning for your business. It is a powerful starting point to establish the value of your business today and devise strategies that will increase value over time.

Business Valuations typically fall into two categories:

Indicative Valuation:  The appropriate information is considered and a robust written valuation opinion is provided.

Independent Valuation to Chartered Accountants Australia and New Zealand standard AE2:  This requires full independence and a more robust level of verification and investigation.

If a valuation is to carry weight for example as evidence in court, an Independent Valuation will be required – otherwise an Indicative Valuation tends to be sufficient for most other purposes.

Elevate CA are Chartered Accountants and professional Business Valuers, and we can meet your business valuation needs. There is no need to disturb your relationship with your existing accountant as we can work with them to gather the necessary information.   We also provide peer review services for Chartered Accountants who may wish to sanity check their own opinions with an independent party.

We are happy to discuss your business valuation needs and give you an estimate of the likely cost – just contact Fraser Hurrell to start the ball rolling.