Elevate CA Blog

 

 

The Elevate CA office will close for the Christmas break on Friday 19 December 2014 – and we will reopen on Monday 19 January 2015.

In the past we have reopened earlier in January, but we have found that with most of our clients, lawyers, bank staff and many in the IRD still on holiday well into January things were rather quiet.

Last year, we closed the office for a month over the holiday period and no-one seemed to notice.  So this year we’ll do the same. 

So we’ll be camping, sailing, swimming, fishing and relaxing right up to 18 January – and then back in the office fired up for 2015 on Monday 19 January.

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

So wishing you a safe and enjoyable Christmas break.  Thank you for your support in 2014 – and we all look forward to working with you in 2015 to help bring your business goals to fruition!

Cheers … Rebecca, Fraser, Dean, Tim, Emer and Hayley.

 

On Budget Day, we’re all ears on the live stream as usual at Elevate CA as Bill English reads Budget 2014.  Here are our first impressions and some initial comment around the tax and business related aspects of Budget 2014 …

2:06pm

Bill English is introducing his sixth budget as part of his government’s programme to return to surplus – and then reduce debt.  We are, Mr English is telling us, enjoying a relatively strong upturn – with economic growth to average 2.6% over the next five years with falling unemployment. 

Our growth has been fifth highest in the OECD in the past year.  Treasury forecasts show an operating surplus of $86 million in the coming year.  This is of course wafer thin as a percentage of total government budget.

This return to surplus has been something Bill English has been banging on about since his first budget in 2009, so his credibility is on the line to deliver.  I’m sure that come heaven, hell or high water we would have seen a surplus forecast in today’s budget.

2:09pm

We’re hearing now about the importance of avoiding a repeat of the usual Kiwi economic cycles where increases in government spending and an appreciating housing market drive up interest rates then the exchange rate – which in turn nudges us back towards recession.

It’s hard to imagine our exchange rate much higher than it already is.  But I guess anything is possible if our interest rates increase out of step with the rest of the OECD making our currency ever more attractive.  Attempts to manage this cycle seem well intentioned – but are all rhetoric so far.  Most of the forces driving our economic cycles are more powerful than our government has the power to affect.

2:14pm

We’re hearing Mr English allude to an exercise in KiwiSaver auto-enrolment for non-members.  Around 80% of working age Kiwis are currently enrolled in KiwiSaver.

I’m a fan of getting the national savings rate up.  But I have little faith in the funds management industry, so the idea of every Kiwi being compelled to have a relationship with a KiwiSaver provider doesn’t sit well with me. 

2:18pm

Mr English reiterates that the government’s goal is to use surpluses to reduce debt until it is down to 20% of GDP – which he predicts will be achieved by 2020.  We are also hearing that the government has options around increased investment in government services or reducing tax.

No details on these options so far.  Let’s keep listening.

 2:23pm

We’re hearing about funding for NZTE to expand their presence in China, South America and the Middle East – as well as $110 million more funding for research in science and innovation – and centres of research excellence.

 All good for New Zealand Inc.

2:25pm

This is good:  Loss making start-up companies will be able to cash out all or part of their tax losses from R&D expenditure.  And all businesses will be allowed tax deductibility for R&D black hole expenditure that is currently neither depreciable nor deductible.

 At last.  Thank you.

2:27pm

Predictably another $132 million is pledged to the IRD to fund intensified chasing of unfiled tax returns.  This is forecast to return an extra $300 million in tax revenues over the next five years.

No surprises here.  Every year since 2010 the budget has included significant extra funding for the IRD.  And every year that extra funding has paid handsome dividends in extra tax from the hidden economy, the property sector, aggressive tax planners and fraudsters.  Over half a billion dollars of extra tax revenue thus far – as I understand it.  So every extra dollar of funding for the IRD is a good investment for the government.

2:29pm

Mr English tells us that we cannot afford another doubling of house prices as occurred between 1999 and 2008.  To make a difference going forward, he is right now announcing that duties and tariffs will be removed from building materials.

Nice one Mr English.  But I think you’re missing the real reason building materials are 30% higher in this country than they are in Australia.  We are overpaying by international standards because the market cannot operate competitively while dominated by just two companies.  No need to name them.  Tinkering with duties and tariffs is not going to sort this. 

2:32pm

Free doctor’s visits for under 13 year olds will be introduced.  More money to support sexual violence services.  More money for Whanau Ora.   The duty free allowance for tobacco dropped from 200 to 50.  And an additional $878 million for education over four years.  More money for early childhood education.

Targeted early intervention equals better outcomes, which means fewer social problems and a better quality of life for all of us.  Yup, I get all of this.

2:35pm

We’re hearing about new funding of $16 million over four years to support the repair and rebuild of rural housing and the development of Maori social housing providers.  We’re also hearing that reviewable tenancies will be rolled out for social housing tenants.

Families who have no hope of getting their basic needs met (eg warm, dry housing) are unlikely to be able to participate in the New Zealand dream.  There will be the usual libertarian arguments like “my tax dollars shouldn’t be spent on helping those who won’t help themselves” – but it makes sense to me that the most vulnerable in our population is housed properly.   This looks like a nod by Messrs Key and English to the Maori Party.  

2:42pm

The Christchurch rebuild is the topic now.  We’re hearing about a $3,000 payment to each beneficiary who can come up with a full time job offer in Canterbury on the proviso he or she is ready and willing to move there and start working.  There is enough in the budget to pay this amount to 1,000 beneficiaries.

Still in the cause of rebuilding Christchurch, apprentices (preferably in the construction trades) can apply for a subsidy of between $1,000 and $2,000 with employers eligible for an equal payment.  There is enough funding to cover 20,000 apprentices and their employers.

Yes.  We have young Kiwis and beneficiaries without employment or training – and we have a need for a lot more tradespeople.   Unfortunately the first group is not always easily transitioned into the second group – but the Christchurch rebuild is a golden opportunity to get those who are motivated to improve their situation into training that leads to real work.  It seems simple to me:  Getting people trained and employed equals better outcomes for the wellbeing, health and education of the families involved – which equals a more inclusive society with fewer social problems and a better life for everyone.  This in my humble opinion is a no brainer – although I’m sure there will be successes and failures on an individual level along the way.

 So what?

All in all, this seems a moderate budget – especially compared with Tony Abbott’s 2014 Budget in Australia two days ago.  I’m sure many in the media will call it boring or lacking in vision.  That’s probably a bit unfair:  I think the financial vision has been well spelled out over the years with the mantra “back to surplus then repay debt”.  Under a Key and English watch, it seems clear that spending will be constrained and targeted – and increasing surpluses will be used to reduce debt. 

The cynic in me sees a fair dose of election year politics in this budget with Messrs Key and English seeking to perhaps steal the thunder of one or two of Messrs Cunliffe and Norman’s pre-election policies.  In contrast with Tony Abbott’s budget across the ditch, this budget looks rather left leaning.

 

 

It has been five years since we first opened our doors at Elevate CA.  Much has happened, and we have gathered together a great portfolio of clients in Northland and around New Zealand who are doing interesting things in a wide variety of sectors.

So its time to celebrate and to say thank you to our clients and the business and professional community that has supported us and allowed us to thrive.

All our clients and business and professional friends are very welcome to join us on Wednesday 30 April from 5:30pm at the Elevate CA offices – level 4, 35 Robert Street, Whangarei.

Entertainment will be by Tutukaka Coast musicians Dave Meredith and Claudia McLauchlan, and the Elevate CA signature cocktail will be mixing on the door.

Just email party@elevateCA.co.nz if you’d like to join us on 30 April.

Cheers in advance – and thank you for your support over the past five years.

 

 

At this time of year we always get questions from business owners about their holiday payroll obligations.

Many Kiwi businesses – like Elevate CA – close for a period over Christmas.  And for many others, this is their busiest season very much open for business.  Either way, here are the answers in a nutshell to the questions we’re frequently asked:

If your business closes over Christmas, you must give your team at least fourteen days’ notice of the days they won’t be required to work;

Payment of holiday pay should technically be in one lump sum at the beginning of the annual leave – unless the employment agreement says something different.  In practice, many businesses simply continue to pay their team on their regular pay days over the holiday period – but remember your employees are within their rights to have their holiday pay in one lump sum up front.

Generally, entitlement to annual leave doesn’t arise      until after twelve months of continuous employment.  But many employees allow annual leave to      be taken in advance of this entitlement – and where the business closes for      a period, it is a requirement that you pay holiday pay in advance of      entitlement;  

If you don’t      close your business, remember that employees are entitled to take at least      two weeks of their annual leave in a continuous period at some time of the      year;

In      general, holiday pay is calculated at the higher of the employee’s      ordinary pay when the leave is taken and the employee’s average earnings for      the twelve months preceding the leave.       Your payroll software should calculate this accurately;

There are      four statutory holidays over the Christmas / New Year period.  Where one or more of these falls on a      day an employee would normally work, this will be a paid public holiday.

 

Remember      that annual leave lives forever.       Some business owners have been under the misconception that their      team must use their annual leave – or lose it.  This is not the case, regardless of what      a particular employment agreement might say.

If you’re closing down over Christmas, here’s hoping you have a safe and enjoyable break.  And if you’re remaining open, I hope you make some hay while the sun shines!

 

Another year is drawing to a close.  It’s safe to say for most clients 2013 has been a better year than the previous few.  By and large, businesses have been hiring and catching up on capital expenditure, which of course flows through to the economy in general – and further lubricates the wheels of commerce.

In most cases sales are strengthening and gross profits are holding up.  Interest rates are still low – and there is little or no upward pressure on business lease costs.  But despite over 6% unemployment, many clients are reporting difficulties in finding quality staff.  Exporters are battling the high dollar – but of course the many businesses who are net importers are not complaining.  And the dairy and forestry industries are insulated from the high dollar to a certain extent by high commodity prices.  Those sectors are creating opportunities for the many downstream businesses that supply them with goods and services.

On the downside, there are still some difficult industries where an upturn is no-where to be seen – as anyone in stand-alone retail or who leases property to retailers will confirm.  Cash surpluses are still generally reinvested or used to strengthen business and personal balance sheets rather than for retail therapy.  Some industries have fallen flat over the past couple of years due to technology, changes in government funding or online competition rather than economic downturn – and they will never be the same again regardless of any recovery.  Many costs are structurally higher than they have ever been – for example insurance, local authority compliance and energy, so increased profits are by no means a sure thing as sales firm.

We have seen more new ventures in 2013 – and several of these have hit the ground running and are already gaining good traction.  The appetite for calculated business risk is stronger than we have seen for several years.  In general, the story for 2013 has been quietly optimistic for those businesses that have remained relevant – with more expected for 2014.

Here at Elevate CA, a busy year with a good amount of new work and three new accountants joining the team.  When our clients are optimistic, this generally means new and interesting work for us – and that is what has been happening this year.  What gives us a buzz here at Elevate CA is being part of our clients’ success stories – and there have been more of those in 2013, so plenty of work satisfaction for us.

We are excited by what 2014 will bring!