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Elevate CA Blog

Welcome to the Elevate CA blog - a mixture of interesting and useful observations from our team.

Is sitting at your desk killing you?

 

The benefits of a physically active lifestyle are well proven.  No surprises here, right?  We all know that regular aerobic activity reduces the risk of all sorts of chronic disease.

But here’s something new that goes one step further than what we already know:

On 26 March 2012, a fascinating piece of medical research was published in the journal “Archives of Internal Medicine”. For three years, Australian researchers studied 222,497 participants from the New South Wales’ population aged 45 and older. 

That’s a serious sample size, which makes up around 11% of the state’s population from that age group.

 

Check the commentary out here >>>.  The results show a strong relationship between sitting time and mortality amongst the 222,497 people studied – even among participants with relatively high levels of physical activity. The association between sitting and mortality remained strong after adjusting for the likes of age, sex, educational level, urban versus rural residence, physical activity, body mass index, smoking, pre-existing conditions and disability. 

 

This is bad news for many business owners and their crew who spend the majority of their day sitting – in meetings, driving or in front of a computer screen.  The results even sound a warning for those who make a conscious effort to build regular excercise into their routines – but who also spend a large proportion of their working day sitting.

The researchers conclude that reducing total time spent sitting may be at least as important as increasing participation in physical activity.  “To put this in perspective, 30 minutes of physical activity is as protective an exposure as 10 hours of sitting is a harmful one.”

Prolonged sitting time is a reality for many of us in today’s world, right?  So what’s to be done?

Well here’s our solution – “The Elevate CA Standing Workstation”.

 

We had a prototype built a month ago now – and I have been using it ever since.  You can see the original desk underneath – and the new 150mm high unit is placed on top, bringing the entire desk to a standing height.

So what is it like standing up all day to work?

Well one month on, it works just fine for me.  For the first couple of days I did go home with sore feet – not that I admitted that to the rest of the Elevate CA team!  But otherwise, standing all day at the desk really does feel good.  It seems to keep the blood flowing and the metabolism up so I’m always focused and alert.  No slouching in the chair, no mid-afternoon yawning – and no looking for an excuse to get up and stretch my legs every hour or so.  And who knows, it might even add a year or two to my life expectancy.

The additional unit can be lifted off at any time if I have a change of heart and decide to go back to a sitting posture at the desk.   But after a  month of standing all day, I know I won’t be wheeling the chair back into the office any time soon.

If you’d like to check it out and see how natural it feels to stand at the desk, just stop by and give it a try!

 

 

 

Budget 2012 – as it unfolds

 

As usual at Elevate CA on budget day it’s all ears on the live stream as Bill English reads Budget 2012.  Here are our first impressions and some initial comment around the tax related aspects of Budget 2012 …

  

2:05pm

Bill English is explaining the theme of Budget 2012.  This budget will be about getting the government’s books back to surplus by 30 June 2015.  Mr English has used the words “confidence in uncertain times” to sum up the budget we’re about to hear.  Over the next hour, we’re likely to hear a budget that sets out our own brand of European-style austerity.  It has been well signalled that any new initiatives will be funded from cuts to existing programmes rather than with new spending.

Sounds predictable so far.

“Back to surplus by 2015” has been the mantra since the government returned to power 18 months ago – so it’s no surprise that this is the central theme for today’s budget.

The fiscal austerity message does resonate with many Kiwi business owners and households who are uneasily watching the situation in Europe from the side lines.  There is a sense that without restraint and proper economic management, we could end up in the same situation as some of the Southern European countries.

But as in Europe, fiscal austerity does bite hard on those who rely on government spending – including the many businesses that provide services to government agencies, and those further downstream.  So there is bound to be criticism and calls for the opposite approach – increased government spending to stimulate growth.  But this is clearly NOT what we’re about to hear.

 

2:16pm

Bill English is outlining the plan for achieving a surplus and telling us how well the government has been managing the economy over the past four and a half years. 

Much rhetoric and more spirited applause from the house, but no detail as yet.

 

2:19pm

The Inland Revenue Department has been allocated an additional $78 million for new audit activity, which is predicted to net a $423 million return over the next four years. 

The IRD have been given significant increases in funding in the past two budgets – and this has proven to be a short term winner for the government with considerable returns – and fast!  So no surprises here.   For a government that is politically unable to increase taxes – and has limited scope to cut spending, it is logical to seek to generate more revenue from existing taxpayers.  So we can expect to see a further ramp up of IRD audit and debt collection activity.  More work for accountants – but not as we like it!

 

2:20pm

Mr English is confirming the announcement earlier in the week to disallow owners of holiday homes and boats from achieving a tax deduction for the period of time the asset is “available for rental”.  

Until now, a bach or boat owner who personally used their asset over the Christmas holidays and some summer weekends – for say 36 days of the year – could potentially achieve a tax deduction of 90% of the costs of owning the assets providing they were “available for rental” for the remaining days of the year.  Regardless of whether or not the assets were actually rented for much of that time.  The changes just announced seem to mean that if a bach or boat is actually rented for 36 days in a year, only 10% of the costs of ownership can be treated as a tax deduction rather than 90%.  This seems fair and reasonable, although it might be unpopular with highly leveraged boat and bach owners. 

We might see an influx of boats and holiday homes on the market – the ones that are only bearly affordable to their owners because of the generous tax refunds they create. 

 

2:26pm

Some changes are being announced for KiwiSaver now.  Bill English is telling us that from next April, KiwiSaver fund managers will be required to report performance, fees, costs, liabilities, liquidity and conflicts of interest.  This will be reported in a standardised form which will allow investors to more easily compare performance and fees.

More transparency for the fund management industry has got to be a good thing.  Many an investment in this industry serves only to pay the fees of the fund managers involved – often in return for adding little or no value.  So a better mechanism to compare apples with apples  and expose the poor performers has got to be a good thing in my opinion.  I applaud this change.

 

Also announced is the deferral of KiwiSaver auto-enrollment.  Auto-enrollment would have meant every working person over 18 who was not already a KiwiSaver member being automatically enrolled – but with the ability to opt out only if they proactively did so within a limited time. 

Auto enrollment of non-KiwiSaver members would have been expensive in terms of increased member tax credits, so I’m not at all surprised to see this postponed indefinitely.

 

2:31pm

This is not a tax related announcement, but I did prick up my ears as Bill English announced an additional $65m for prisoner rehabilitation and reintegration programmes.  This, we are assured, will help meet the goal reducing reoffending by 25 per cent by 2017.

Great.  Surely this is a big part of the role of government – to make investments that might take a generation to generate a return – but which will ultimately improve the quality of life for Kiwis.  I applaud this.  I’m guessing this new spending is a concession to a certain coalition partner. 

 

2:35pm

Mr English is announcing that student loan repayment levels will be raised – and that student allowance rules will be tightened.  Masters and pHD students will not be able to access student allowances.

I’m still puzzled as to why student loans remain interest free?  This seems like a massive incentive for students to borrow to the max – which just adds to their debt later.  I’m never likely to be in cabinet – or even in politics at all, but if this was my budget I’d start charging interest on student loans and plough the extra revenue back into education.  Perhaps by reducing fees and making tertiary education generally more accessible.  

 

2:38pm

Three tax credits are being scrapped – the income under $9,880 tax credit, the childcare and housekeeper tax credit and the tax credit for the active income of children.  The line is that these are “no longer fit for the purpose for which they were set up” – and are “poorly targeted”.

 

 Predictably, there is a stark difference of opinion on the impact of this “zero budget”.  Yesterday David Shearer stated that “a zero Budget means zero growth in our economy”.  But today Bill English referred to forecasts showing an average of 3% growth per year over the next four years, with 154,000 net new jobs created. 

Only time will tell who is correct – but just as it’s doing in Europe I’m sure this relative austerity will cause some pain in some sectors.  But I think this will be largely accepted as necessary medicine, and I don’t expect to see pitchfork wielding demonstrations on our streets as a result of these announcements!  

 

All in all rather predictable and not as dramatic as the last couple of budgets. 

Feel free to comment below …

 

Take a very quick client survey

We are very grateful to the fantastic clients who we are fortunate to serve.  Without your continued support, there would be no Elevate CA.  We don’t take your support for granted – so we’d very much like to know what you really think about your relationship with Elevate CA.

So we have designed a very quick survey, with ten easy multi-choice questions which you can answer right here without leaving this page.

 

Create your free online surveys with SurveyMonkey, the world’s leading questionnaire tool.

A huge thankyou from the crew at ElevateCA for sharing your feedback!

Tips ahead of the Financial Year End

The end of the financial year is fast approaching for the majority of businesses. Here are a few areas you may wish to look at now which will help us minimise your tax bill.

1. Trading stock

We’re not talking about livestock here, but the general rule is that inventory must be valued at the lower of cost or realisable value. A general adjustment for obsolescence will not cut it with the IRD. Any business that carries more than $10,000 in inventory must perform a physical stocktake at year end – and you should take this opportunity to dispose of obsolete stock or write it down to its net realisable value.

2. Repairs and Maintenance

It may be worthwhile to bring forward repairs and maintenance before the end of the financial year, as this will also bring the tax deduction forward by a year.

3. Retentions

Retentions on building contracts are generally taxable in the year the contractor becomes legally entitled to receive them. Building contractors should be mindful of this at year end.

4. Employee Expenses

Expenses such as holiday pay, bonuses, long service leave or redundancy payments can be claimed as a tax deduction in the year ended 31 March 2012 as long as they are physically paid by 2 June 2012. Keep this in mind when planning these payments.

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 any receipts – and to reimburse yourself from the business so there is a clear paper trail.

6. Bad debts

Where you write 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, so now is the time to consider this.

7. Fixed Assets

Now is a good time to review last year’s fixed asset schedule, as the book value of assets can be written off as a tax deduction where they are no longer used by the business and the cost of disposing of the asset is likely to exceed the value.

8. Prepayment of expenses

Most expenses cannot be fully claimed as a tax deduction if you choose to prepay them just before the end of the financial year. But there are some potential exceptions like stationery, postage, courier charges, vehicle registration, road user charges, rates, journal subscriptions or accounting fees which can be paid in advance and claimed as a tax deduction. No, we’re not fishing for payment in advance for this year’s accounting fees – but I’m sure you can see some possibilities here.

And for those few clients who have not yet provided their records for the year ended 31 March 2011, do it now! The final deadline for most clients for filing with the IRD is 31 March 2012 – and there will be almost no chance of us getting your work completed on time unless we have your records before the end of February!

 

To Fix or to Float – that is the question.

For a week or so back in July, we figured it might be time for those with floating business or residential borrowing to fix the rates on say half of their debt.  At that time we were seeing June 2011 quarter annual inflation figures well above expectation – as well as higher than expected economic growth.  The writing seemed to be on the wall for floating rates to edge upwards sooner rather than later.  Floating residential rates at that time were around 5.75%pa – and although three year fixed rates were up close to 7%pa, it seemed reasonable to hedge against those floating rates rising.

Then we saw bad economic news in Europe and North America swamp any fragile recovery in New Zealand – and with it any likelihood that floating rates would rise.  So most people whose business or residential borrowings were floating back in July are probably still floating today.

But things are changing again.  Floating residential mortgage rates with most banks are still around 5.75%pa – unchanged from where they were last July.  But fixed rates have edged down over the last few weeks with three year rates now down around 6.1%pa at the major banks.

So although the chances are not high of the OCR increasing any time soon, perhaps it’s time to consider paying a little extra for the security of locking in the historically low three year fixed rates currently on offer?  You can be sure that when the masses start jumping from floating rates to fixed, the banks will bump fixed rates up quickly – and today’s opportunity will be lost.

So will one be better off riding the nice low floating rates for a few more months – or paying a little more today in return for locking in today’s nice low three year fixed rates?

The answer to that question depends on how soon the Reserve Bank starts to lift the OCR.  The general consensus amongst economists is that this will occur around the end of 2012.  If the Reserve Bank acts a little sooner, then fixing now will in hindsight look like a rather smart move.  But if rises in the OCR are delayed into next year, riding the floating rates will have in hindsight seemed the smarter move.

But now that the margin between floating and three year fixed rates is much smaller than it has been in recent times, the certainty from fixing now comes at very little cost.  If – like 63% of Kiwi businesses and households – your borrowings are on floating interest rates, I’d urge you to give this some serious thought.