Elevate CA Blog

Changes to Companies Office Annual Return Requirements

From 1 July 2015, we will be requesting some additional information from our clients’ New Zealand incorporated companies before we can file their Annual Return with the Companies Office.  This is because of new requirements under the Companies Amendment Act 2014.  The key dates and the new requirements are as follows:

1 July

From 1 July 2015, all New Zealand companies must provide the following information. Without this information, it will not be possible to file an Annual return:

The place and date of birth of every director.  Note this won’t be available for the public to view.

Details of the ultimate holding company if applicable.

29 October

From 29 October 2015, all New Zealand companies must have at least one director who lives in New Zealand or Australia. If Australia, that individual must be a director of a company incorporated in Australia.

For newly incorporated companies, these changes apply immediately.

Companies that do not comply may be removed from the register – with any company assets then passing to the Crown.

The idea behind these changes is to prevent misuse of the Companies Register – and to provide the Registrar of Companies with some additional information to assist in holding those who misuse the register to account.

As usual on Budget Day, it’s all ears on the live stream at Elevate CA as Bill English reads Budget 2015.  Here are our first impressions and some initial comment around the tax and business related aspects of Budget 2015 …

2:08pm

Mr English is telling us of a more confident and resilient country than the one we lived in seven years ago.  There’s a bit of political and economic spin going on for a few minutes as one expects at the lead in to a budget delivery.

2:12pm

Mr English is glossing over that wafer thin surplus he spoke about this time last year.  Now he is budgeting for a deficit of $684m – and a surplus next year.  The rationale we’re hearing is that spending allowances are being maintained rather than chasing a surplus in this coming year.

Yes, this resonates with me.  The ideological return-to-surplus-on-a-tight-timeframe-because-that’s-what-we-promised didn’t sit well

2:16pm

The Budget provides up to $25 million over three years to support establishment of Regional Research Institutes for regional areas outside of Auckland, Wellington and Christchurch.  As announced previously, there is provision for R&D growth grants for innovative businesses which will contribute 20 per cent of their R&D costs.

Yes.  This is a no brainer.  The free market can’t compete with government assisted innovation in countries like the USA.  We need to take a lesson from them in supporting our best and brightest – and this is a step in the right direction.

2:17pm

Further ACC Levy cuts of $375m across businesses, workers and vehicle owners

This has been well flagged over the last few months.

2:19pm

As announced by Mr Key on Sunday, some measures to clarify tax rules for those buying and selling properties.  Foreign buyers and Kiwis who are buying and selling properties that are not their main home will now have to provide an IRD number when they buy or sell.

This will no doubt make the job of the IRD Property Compliance Unit a little easier in the future.  The idea of regularly buying and selling property without paying tax on the profits is rightfully a thing of the distant past.

2:19pm

Also, as Mr Key announced earlier, if someone sells a residential property within two years of purchase they will now have to pay income tax on any profit they make from the sale.

This will likely catch very few people who should not already have been paying tax on the proceeds of their sales – but this new bright line test does send a clear message.  Of course sales of properties that were purchased with the intention of resale will still be taxable regardless of the two year bright line – just as they always have been.

2:20pm

The Budget also contains a funding boost of $74 million over five years for extra tax compliance and enforcement, of which $29 million is focused on property investment.

No surprises here.  A dollar spent by the Property Compliance Team returns significantly more than that dollar spent, so we have come to expect a little something extra for them in every budget.

2:21pm

The rhetoric has been strong in recent months about Auckland’s housing shortage.  The Government is also a major owner of under-utilised land in Auckland – and Budget 2015 sets aside $52 million to facilitate housing development on Crown owned land.

Also a no brainer.  The idea of government land sitting idle in Auckland seems daft at a time of significant shortage of land for residential housing.

2:22pm

We’re hearing about an additional $210 million for additional investment to bring UltraFast Broadband to 80 per cent of New Zealanders – and $150 million for improvements in rural broadband.

We need to be wired with the rest of the world.  Bring it on.

2:23pm

As previously announced, the Budget also provides $97 million in capital for regional  highways and $40 million for urban cycleways.

Urban cycleways are a no brainer.  Think Amsterdam or Copenhagen.  The savings in fuel, the increases in well-being and the reduction in healthcare costs by leaving the car at home and cycling would seem to make this an excellent long term investment.

2:24pm

Another $37 million to push along the Government’s resource management reforms.

Mr Key’s pet project, so no surprises here.

2:25pm

Mr English is explaining an additional $32 million over four years to increase the number of  labour inspectors and strengthen enforcement of employment law.

Seems like a political response to Pike River and the anecdotal mass exploitation of migrant workers.  So no surprises at all here.

2:26pm

The $1,000 KiwiSaver kick-start payment is axed as of 26 minutes ago at 2:00pm today.

Surprise, surprise

2:30pm

There will be a new Border Clearance Levy from 1 January 2016 so it will cost $16 to enter the country and $6 to leave.

So an exit tax from New Zealand?  “It’ll cost you $16 to get in – and $6 to leave”.  I don’t know why I find that funny.

2:34pm

Here is the thrust of the government’s plan to end child poverty:  From 1 April next year, sole parent beneficiaries will have to be available for part-time work when their youngest child turns three, rather than five as it is now.

I’m sure this point will form the basis of much negative commentary on the budget over the next 24 hours.

2:38pm

So on 1 April next year Working for Families will increase for working families earning $36,350 or less a year – and it will decrease for families earning more than $88,000 a year.

2:39pm

Finally, the health, education and law enforcement announcements:  DHBs will have around $320 million available next year for extra services and to help meet cost pressures and population growth – and an extra $76 million is in the pot for hospices and 60 new palliative care nurse specialists.  An extra $63 million over four years will better assist children with special education  needs including funding for teacher aide support for 1,500 additional  students with special needs.  As well, additional funding for around 240  classrooms around the country.  And $164 million over four years for the Police and $8 million over four years for the Serious Fraud Office.

 All in all, rather predicable, right?  But that’s the budget ethos these days – no surprises on Budget Day.

For most businesses, the end of the financial year is fast approaching. Here are a few areas you may wish to look at now:

 

1. Inventory

If you carry inventory, you’ll be well accustomed to the annual stock take. Some effort at this time of year to dispose of obsolete stock or write it down to its realisable value will pay dividends at tax time. A general adjustment for obsolescence will not cut it – the written down stock must be separately identifiable. Remember, showing a stock value in excess of lower of cost or net realisable value of that stock equals paying too much tax.

2. Repairs and Maintenance

It may be worthwhile to bring forward repairs and maintenance. For example, if machinery or vehicles are due for a service, consider fitting this in before 31 March rather than leaving it until April – thus bringing the tax deduction forward by a year.

3. Retentions

If you’re a construction contractor, you need to be mindful of this at year end: Retentions on building contracts are generally taxable in the year the contractor becomes legally entitled to receive them.   If this entitlement falls in April rather than March, the associated tax bill is deferred by 12 months.

4. Employee Expenses

Bonuses and holiday pay are tax deductible in the year ended 31 March 2015 if they are physically paid by 2 June 2015. If you are considering paying bonuses in relation to this tax year, make sure these are paid before 2 June.

5. Business expenses paid privately

Business expenses paid privately often fall through the gaps – and the opportunity to claim a tax deduction is lost. Now is a good time to gather up tax invoices for expenses paid privately – and to reimburse yourself from the business bank account so there is a clear paper trail.

6. Bad debts

Where your business writes off a debt that has no reasonable expectation of being paid after taking all reasonable steps to recover it, this is tax deductible. The catch is that you must have physically written the debt off before the end of the financial year. Now is the time to write off any bad debts.

7. Fixed Assets

Now is a good time to review your asset schedule. Often obsolete assets have little or no value – and any loss on their sale below book value is typically tax deductible.   If you have business assets that are no longer used, get what you can for them now – or scrap them.   Think of that unused machine in the corner – or that old computer equipment under the desk.

8. Prepayment of expenses

Most expenses can’t be fully claimed as a tax deduction if you choose to prepay them. But there are some exceptions like stationery, postage, courier charges, vehicle registration, road user charges, rates, journal subscriptions or accounting fees. There may be some possibilities to pay these expenses in March thus capturing them in this financial year.

 

We are growing fast – and we are looking for just the right accountant to join our team.

Who we are looking for?

You will need to be up to speed in the CA industry right now with a “can do” attitude and at least two years recent experience in an NZ Chartered Accounting business.

And if you also have a partial accounting qualification – and knowledge of the Acclipse iFirm software, that would be a real advantage.

If this sounds like you, read on …

Who are we?

We are Chartered Accountants with a difference.   We are small enough to be nimble – and we are willing to take a risk to deliver better value and service to our clients.   We are a relaxed team – but highly 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 rather than avoiding it as a threat to “the way things are done around here”.  We have up-to-the-minute IT, we are marketing focussed, and are always looking for opportunities to connect our business clients with each other. If you’re completing PCEI or PCEII, 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 and tax returns from source documents – 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 recent experience as an accountant 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!

 

Should company own the vehicle I use – or should I own it in my own name?

We often field this question. There is no one size fits all answer. The most tax efficient conclusion may differ depending on circumstances such as the value of the vehicle, the running costs, the availability for private use – and the actual private use.

I will provide two worked scenarios using a range of variables to illustrate some of the differences. In each example I’ll calculate the after tax cost for:

1. Owning the vehicle in the company; versus
2. Owning the vehicle privately and receiving a tax free reimbursement for business use.

In each of these scenarios, annual running costs of the vehicle is $8,500, depreciation on a straight line basis is 21%, the vehicle is used 80% for business and 20% privately by kilometre – and an FBT rate of 49.25% applies. 

Scenario One – A low cost vehicle ($28,750 inc GST) which is available two days per week for private use.

In company ownership, the cash cost net of tax in year one is $29,589. This reduces to $4,589 in future years. 

In private ownership, the cash cost net of tax in year one is $33,355 reducing to $4,605 in future years.

Under these circumstances, it is clearly more cost effective for the company to own the vehicle and pay FBT for the days the vehicle is available for private use.

 

Scenario Two – A higher cost vehicle ($97,750 incl. GST) which is available 7 days per week for private use.

In company ownership, the cash cost net of tax in year one is $94,092 reducing to $9,092 in future years. 

In private ownership, the cash cost net of tax tin year one is $99,109 reducing to $1,359 in future years.

Clearly under these circumstances owning the vehicle privately and receiving a tax free reimbursement of actual expenses would be the most tax efficient option.

As illustrated above, no two situations are the same.  The above examples assume a one shareholder employee situation.  However, the variables and outcome will change again with the introduction of a second, third or even fourth shareholder.  To get the best outcome you should sit down with your chartered accountant to evaluate the options.  If you would like to discuss your situation with Elevate CA we can work through your options to arrive at the most tax efficient structure for your vehicle ownership.

 

.