TAX XAT TAX!!!

GOVERNMENTAL CHANGES

 

 Working for Families Adjustment

 Ministerial Statement

 

“The Tax Working Group also reported that anomalies arise through the use of taxable income as a means of determining eligibility for certain Government assistance.  Taxable income may not always be a good measure of true economic circumstances.

 

As an initial step, from 1 April 2011 investment losses will be added back to taxable income for the purpose of determining a family’s eligibility for Working for Families assistance.

 

Further changes of eligibility for Government assistance, including student allowances, covering areas such as distributions from trusts and income from cash PIEs, will follow after the Budget.  Officials will release a paper setting out the issues and proposed solutions later this year for implementation from 1 April 2011”

 

Editorial comment

 

The change to the rules on eligibility for Working for Families assistance is likely to be uncontroversial.  Eliminating the impact of investment losses may rightly be regarded as conferring a more accurate entitlement to the assistance.

 

As part of the revisions to Working for Families, the Budget papers also announce that indexation of the  Working for Families tax credit abatement threshold will be removed.  No further details were supplied.

 

The second aspect of the Budget Statement announcement is perhaps not so clear-cut.  There is plenty of room to speculate on the meaning of reviewing the use of trusts and cash PIEs in the context of eligibility for “certain” social assistance programmes.  Vague language of that kind readily leads to speculation about the social assistance programs that will be affected by the proposals.

 

Speculation is also likely about the meaning of trust distributions and their impact on entitlements.  A benign view of the Budget announcement is that a distribution of trust capital, along with a distribution of trust income, may be taken into account in determining entitlement to the relevant social  assistance programme.

 

The Budget papers go on to indicate that additional forms of financial benefit may be taken into account for the purpose of measuring entitlements.  Along with trust distributions and income from cash PIEs, eligibility may also be based on “income from non-resident spouses and certain fringe benefits”.

 

Property tax changes

Ministerial statement

 

            “… the Government is not convinced that all buildings actually         depreciate.

 

Allowing tax deductions for depreciation provides an unfair tax advantage for these assets.

 

Accordingly, the depreciation rate for most buildings with an expected life of 50 years or more will set to zero from the start of the 2011/12 income year”.

 

Editorial comment

 

Where a building does not depreciate, clearly no depreciation allowance should be available.  However, it is likely that many buildings with an expected life of more than 50 years (the default life for most buildings other than those made of “temporary” materials such as portable buildings and hothouses) do in fact depreciate.  The Government has left open the opportunity for building owners to apply for a depreciation rate of other than 0% for such classes of buildings.  We can be confident, however, that one class of building that will not get a higher rate is residential dwellings – the unstated but obvious target of the reforms.

 

The changes come into effect from the start of the 2011/12 income year and, unlike most previous changes to the depreciation regime, apply to the existing assets, not just those acquired after the new rules came into effect.

 

Building owners will still be able to claim deductions for repairs and maintenance, to maintain the condition and value of their properties.  They will also still be able to claim depreciation deductions for “fit outs” not considered part of the building.  According to the Inland Revenue Policy Advice Division, the Government “intends to review the treatment of commercial ‘fit out’ and, if necessary, amend the rules prior to 1 April 2011 to address any uncertainty in this area”.   Given recent interpretation statements issued by the Commissioner of Inland Revenue in respect of fit out of residential properties, it is likely that any legislative resolving of “uncertainty” will be a mechanism to reduce the types of assets that can be separately depreciated and to increase those that need to be treated as part of the building (and, under the new rules, not depreciable).

 

The other big change on the depreciation front is for assets other than buildings.  The 20% depreciation loading will no longer be available for any asset purchased after 20 May 2010.  The loading was introduced in 1992 (originally at a rate of 25%) to encourage investment in new assets.  The current Government has decided that such a subsidy is no longer warranted and that the $3,120 million of revenue expected to be saved from the combined depreciation changes can be better spent elsewhere.

 

 

Loss attributing qualifying companies (LAQCS)

Ministerial statement

 

“Many investors hold property through Loss Attributing Qualifying Companies, or LAQCs.  After a short period of consultation, legislation will be proposed so that from 1 April 2011 all LAQCs will be taxed as limited partnerships.

 

The main impact of this change will be to ensure both profits and losses are assessed at the marginal tax rate of the investor”.

 

Editorial comment

 

In the lead-up to the Budget, there was some speculation that the days of LAQCs were numbered and that property losses would be ring-fenced in the vehicle making the investment.   Although the proposed loss ring-fencing rules are not comprehensive, the new regime will limit the amount of the loss that can be passed through from an LAQC to the shareholder, to the amount the shareholder has invested in the LAQC (in much the same way as losses of limited partners are restricted).  The shareholder’s investment (or “membership base”_ would include the initial equity invested, along with undistributed earnings of the LAQC and the share of any debt guaranteed by the shareholder.

 

The new rules will also mean that where investors what to be able to access the losses at their own personal tax rate by passing through the losses in the bad years, the must also pay tax on the income in the good years at their personal rates.  With the removal of depreciation on residential properties (still the major use of LAQCs), there are likely to be more income-generating years relative to loss years going forward.  Investors may need to reconsider whether an LAQC is still the appropriate vehicle to hold such an investment.

 

TAX AVOIDANCE

Penny & Hooper Case – Contracting Tax Avoidance

The recent land mark Court of Appeal ruling in the Penny and Hooper case has raised alarms within professional circles and amongst small business owners.  The case involved two Christchurch orthopedic surgeons who previously operated their practices as sole traders.

 

However, around the time when the top personal tax rate was raised to 39%, Mr. Penny and Mr. Hooper incorporated their businesses.  In each case the surgeon was employed by their company and paid a salary of $100,000 and $120,000 respectively, although both companies were deriving profits circa $700,000.

 

Remarkably, both surgeons admitted during the case hearing that the salaries paid were less than the market rate they would have accepted from a third party.  The result was that the tope income tax rate of 39% was applied to a minimal amount and most of their profits were taxed at a lower company or trust tax rate of 33% and then distributed to the trusts.

 

Ultimately both surgeons and their families were receiving substantial additional income without attracting additional income tax liability.

 

What distinguishes Penny and Hooper’s decision from other tax avoidance cases is that the judges adopted a “look through” approach to the taxpayers’ arrangements to determine whether the combined effect amounted to tax avoidance, where in the past each transaction was tested separately.

 

Amongst other concerns within the business community, a key concern is whether Inland Revenue’s focus is on professional people only, (such as doctors, dentists, accountants) who structure their professional services through companies and trusts, or whether the Penny and Hooper decision might be applied to any tradesman operating through a company.

 

In an attempt to clarify the Commissioner’s position the Inland Revenue has released a Revenue Alert.  The Revenue Alert states that “where a service business relies mainly on an individual’s personal skills to generate income, than contribution to the business should be properly reflected in the income returned by that individual”.

 

In his comments on the Revenue Alert Craig Macalister, NZICA’s tax directors, noted that in the context of the Revenue Alert “it is hard to distinguish, for example, between a medical practitioner, an electrician, a company director, or anyone that relies mainly on personal skills to generate income”.

 

However, the Inland Revenue accepts that there are genuine commercial reasons why profits may be kept in a company and “would not expect that remuneration would be paid where there is little or no profit genuinely being generated in economic reality, such as in a start-up phase or in difficult trading conditions”.

 

The Inland Revenue accepts “that income can be properly retained for major expenditures or provisioning” and their “concerns are not with non-payment of remuneration or with retention of earnings inside an operating business entity, where these are for genuine commercial or economic reasons.  In such circumstances, it is unlikely that there would be other distributions of profit from the business to the taxpayer and his or her family”.

 

From 1 April 2011 the difference between the top personal tax rate and the company tax rata will fall to 5%.  However, the 5% tax benefit will be merely a timing difference.  When the income is paid as a dividend the difference will need to be paid by the shareholder. 

 

Looking for something SPECIAL?

 

Hamilton CBD Lions – Fundraising Project

You maybe aware that I am involved with Lions International.  Our Club is one of the organizing clubs to raise $3million for the development of the new Cancer Society’s Lions Lodge located at the old Braemar site.

 

The Brick 4 Life Campaign which is designed to provide ongoing support for the refurbishment at the Lions Lodge is one of the projects I am involved with.  You can either purchase a number of bricks for $50 each or alternatively you could look towards Gold or Platinum sponsorship which is $5,000 and $10,000 respectively.  The sponsorship can be paid over a 12 month period, so for example if you wish to have a Gold sponsorship you would commit to 12 equal installments of $417.  The contributions are paid to a Charitable Trust are deductable for your tax rebates.

 

A Gold sponsorship will receive a plaque recognizing the contribution to the appeal for the 2010 year and a Platinum sponsorship will have their individual or companies name put on a piece of artwork that has been commissioned by the Cancer Society and be located at the Lions Lodge.

 

If you would like any further information in regards to the Brick 4 Life, please contact me or otherwise you can log on to the website www.brick4life.org.nz

FACEBOOK!

Matley Financial Services now has a Facebook page.  Its a work in progress, but you can find our mission statement and photos of the team on the page.  Its always nice to put a face to the voice on the end of the phone!

Check it out here:

http://www.facebook.com/#!/pages/Matley-Financial-Services/122662821113446?ref=ts

 

 

 

 

 

Budget Commentary

In what was widely anticipated as a aggressive budget announcement yesterday, the Right Hon Bill English has presented his second budget as the Minister of Finance and the purpose is now to summarise some of the key points that will affect you going forward.

GST Rise

As anticipated the GST has risen to 15% from the 1st October.  This would indicate according to the Government Actuaries, resulting in a $2.46 billion tax increase by the year ended June 2014.  The finer details of how the implementation of debit and credit notes will of course come in time, but at the moment many businesses will need to gear up for the rise in GST commencing 1st October.

Tax Rates

Tax rates will drop from 38% to 33% from 1st October for the top tax rate and also the Company tax rate has dropped from 30% to 28% from the 1st April 2011.  This of course makes New Zealand more competitive than Australia as Australia is looking to introduce the 28% tax rate for Companies in four years time.

We all knew that property was in the gun on the budget radar and as widely anticipated the use of Depreciation claimed against rental income will cease and there is a new rule being introduced that will affect LAQC's.

Under the current rules, shareholders and LAQC's have been able to rather than retaining them or having them taxed at the lower company rate, effectively creating what is known as a tax abitrage.  Instead of having the losses assessed by a LAQC the profits and losses are assessed at the marginal tax rate of the investor.  In effect this means that there will be a 28% tax on Company profit and losses as opposed to the tax back in the hand of the shareholder.

It is intended that the property investors who have more houses will be worse off comparatively speaking to what they were, and while it is most probably in the most desirable benefit of the investor, the reality is it could have been a hell of a lot worse.

The important thing at the moment is not to panic, but rather to digest the examples that the IRD and Government will be issuing in due course finalising details that have come out in the budget and determining what the best course of action going forward is for rental properties.

We have until 1st April 2011 which means that there is ample opportunity to reconsider some restructuring that may take place to maximise the tax efficiencies of the rental companies and to see whether it is better to maintain properties in personal names, transfer through to trusts, or a host of other options that may be available.  We will be watching the development of the details closely and will report in due course when more is known.

Key Changes Announced

• Cuts to personal tax cuts at every threshold level, with the top personal tax rate falling from 38% to 33%; tax on income between $48,000 and $70,000 falling from 33% to 30%; a new 17.5% rate for income between $14,000 and $48,000, down from 21%; and 10.5% on income up to $14,000.  Two-thirds of the tax returned by the package goes to income below $48,000, English says.
• A rise in the rate of GST from 12.5% to 15%, with a 2.002% compensating increased for beneficiaries, pensioners and recipients of Working for Families tax credits to offset the rise on October 1;
• An end to depreciation allowances on buildings deemed to have more than a 50 year life, to net around $1 billion a year in additional tax;
• Abolition from yesterday of the 20% automatic depreciation loading available for newly purchased assets;
• A change to the tax treatment of loss attributing qualifying companies to become "flow through entities", similar to limited partnership, expected to raise around $65 million a year;
• A cut in the rate for portfolio investment entities (PIEs) to 28%, to align with the new company tax rate, kicking in from October 1 for PIEs taxed at investors' marginal tax rates, and 2001/12 for other savings vehicles;
• Abolition of tax benefits relating to capital contributions for the purchase of capital assets;
• GST base-broadening to prevent so-caled "phoenix" scheme frauds, where GST is reclaimed by an entity which liquidates before paying GST owed
• An end to the redundancy tax credit from October 1.

Further changes, covering areas such as distribution from trusts and income from cash PIEs will follow the Budget, for consultation and implementation by April 1.

Practical Thoughts on the Proposed Tax Reforms

 The worse kept secret has been the government indicating a rise in the GST rate to 15%. If past reforms are anything to go by, the rate increase could be effective from as early as October 2010. While the implications of a rate increase seem simple enough, there are a number of practical issues to consider. How will the GST increase be transitioned?  What rate of the GST will apply to contracts that are contracts that are conditional or unconditional on the date the GST rate changes? What happens if I have a fixed price contract made at the 12.5% rate but it doesn’t settle until after the 15% rate applies – do I have to pay the extra tax, and if so can I recover it from the other party? These are just some of the practical questions that spring to mind.   

 While the details of any changes will not be finalised until after the budget announcement, it is likely that GST cut-off date will be set (say 1 October 2010) and that the time of supply date will be the trigger point of determining whether supplies are subject to GST at 12.5% or 15%. Whether time of supply has been triggered will therefore become a crucial consideration, particularly for a big ticket items or large adjustments such as a change in use adjustment or deregistration.

 The time of supply is generally at the earlier of the invoice or payment, however there are some exceptions to this such as supplies made between associated persons (the time of supply when the services are provided or goods are made available). In the case of a land contract where the GST portion can be significant, we recommend reviewing your contracts with additional care where the contract is to span the GST rate increase.

 What about fixed price contracts? You are allowed to increase the purchase price and recover the additional GST from the purchaser where the contract has been entered into within 3 months of the rate change coming into force, not where the contract specifically prohibits an increase or where the parties have already contemplated the rate increase in agreeing the fixed price. Case law has held that where a contract is “GST inclusive”, the parties have contemplated the rate increase. We recommend that fixed rate contracts are reviewed carefully in the lead up to any change in the GST rate. Clearly whether a supplier on-charges the additional 2.5% to its customers may be a commercial decision, however for the large purchase spanning the GST rate increase it may be worthwhile to consider whether specific additional clauses should be included to ensure you do not incur an unexpected GST cost.

 In the case of the voluntary registrations, consideration should be given to deregistering prior to any rate change should registration no longer be required.

 Another issue to consider is where you may be considering purchasing second hand goods from a non registered vendor. A GST input tax claim is available in relation to second hand goods (subject to the usual limitations) equal to one ninth of the purchase price. Delaying an intended purchase of second hand goods until after any GST rate increase would mean a GST input tax claim could be made at 15% (purchase price x 3/23). The GST portion on the same $100,000 purchase price would be $13,043.

 If any of this applies to you please feel free to contact us..

 

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IRD shifts approach on GST applied to land

 Inland Revenue has signalled a further shift in its approach on GST when applied to land sales.

 It is aiming its guns at “phoenix” property companies which claim GST rebate for inputs but which end up “at the bottom of the harbour” by the time the Department comes to collect a the other end of the GST process.

 In November, Inland Revenue proposed a “domestic reverse charge” by which the obligation to account for the GST on land and other transaction on assets worth more  than $50million is put onto the buyer rather than the vendor.

 Submissions on that closed just before Christmas and Inland Revenue has now gone back to submitters with further refinements to the proposals. 

 These include a wider definition of the land and a proposals that Inland Revenue have greater powers to “deem” people GST registered.

 The New Zealand Institute of Chartered Accountants (NZICA) has broadly endorsed the new proposals although it says the extension of the definition of land may not be needed.

 The new proposals extend then reverse charge: they still zero rate the vendor and pick up the GST from the purchaser.

 It will apply to all GST registered persons involves in selling land or transactions which involve a missed supply if land and another component.

 Vendors will have to establish that the purchaser is a GST registered before a transaction can be zero-rated: if it is not, and the purchase goes ahead, Inland Revenue will have the power to deem the purchaser GST registered and to claim the GST off them.

 The NZICA says this may not be necessary and that there is a risk of “legislative overshoot” – it could potentially catch leases, which are not part of the issue Inland Revenue, is trying to address.

 To protect purchasers from unscrupulous vendors who may represent themselves as being not registered for GST, the NZICA suggests some way for recipients to be able to check whether a vendor is GST registered, and also a provision allowing the Department to pursue the vendor if a misrepresentation has been made.

 The NZICA also suggests including a “checkbox” on GST to record if the taxpayer had made a zero-rated land transaction.

 “This is suggested with the thought that Inland Revenue may be interested in the undertaking audit activities to know who is undertaking zero-rated supplies of land.”

 

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What’s it worth?

 When a business is offered for sale, or is being valued on the basis of Fair Market Value, the terms and conditions relating to the potential sale can have a significant impact upon the value of the business. Some valuers apply one single earnings multiple to an industry whiteout considering the difference that these term of sale (and other value modifiers) can have on the value of a business.

 Case Study: 

 Two businesses with similar public practices are offering their practice for sale – But with markedly different sale terms: 

Business ‘A’   Terms   Full Payment on settlement date. Vendor assistance – minimum of 20 hours per week @ $90 per hour. Vendor assistance – Maximum period 6 months. Restraint of trade period 1 year. No Adjustment for lost contracts.

Business ‘B’   Terms   Payment to be spread in equal amounts over 3 years (interest rate on outstanding amount 4.5%)  Vendor assistance on an “as-needed” basis @ $45 per hour. Subsequent assistance on an “as-needed” basis @ $45 per hour for up to 3 years Restraint of trade period 3 years 50% of annual fees for any “lost” contracts deducted from the final payment.

 It is not difficult to see that the offered by business ‘B’ are far more beneficial to a potential buyer than the terms offered by business ‘A’. The spread of the capital payment at a low interest rate, the adjustment for any clients lost in the transfer, the lower hourly rate and greater flexibility of vendor support; all these terms of sale offer much more value to potential purchaser.

 Even though the two businesses have similar turnover and profit, the business offered by business ‘B’ has a higher value – because of the terms and conditions offered.

 

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Why We Want Your Birthdate

Our Business Services Support staff member Jo Reading will be contacting you over the next few months to obtain your birthdates.

 

The reason this is so important is that the Inland Revenue now requires this information on file.  If you do not get the call from us, you may receive it from the Inland Revenue.

We are advising you of this as Jo has already made a few calls, and people have been wary of disclosing this information because of identity theft.  If anyone from our office calls (David, Maggie, Ben or Jo) they can be trusted that any information requested is purely for use with completing your taxes or financial statements.

 

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Tax System Explained in Beer

 People who grizzle about ‘tax breaks for the rich’ should read this:

Everyday, ten men go out for beer and the bill for all ten comes to $100.

They decided to pay the bill by apportioning the total cost of all the drinks in the same way that we, in NZ. Pay our taxes.

This meant that:

•  The first four men (the ‘poorest’) would pay nothing.
• The fifth man would pay $1.
• The sixth man would pay $3
• The seventh man would pay $7
• The eighth man would pay $12
• The ninth man would pay $18
• The tenth man (the richest) would pay $59.

The ten men drank in the bar every day and seemed quite happy with this arrangement – until one day, the owner threw them a curve.

“since you are all such good customers,” he said “I’m going to reduce the cost of your daily beer by $20.

“Drinks for the ten of you will now cost just $80”.

The group will still wanted to pay their bill the way we pay our taxes – so the first four men were unaffected. They would still drink beer for free. But what about the other six men? The paying customers?

How could they divide the $20 windfall so that everyone would get his fair share?’ They realized that $20 divided by six is $3.33. But if they subtracted that from everybody’s share, then the fifth man and the sixth man would each end up being paid to drink his beer. So, the bar owner suggested a graduated price reduction based on what each man was currently paying, so that everyone would benefit. They all agreed that this was A good idea so he proceeded to worked out the amounts each should pay:

•  The fifth man, like the first four, now paid nothing (100% savings)
• The sixth man now paid $2 instead of $3 (33% savings)
• The seventh man now paid $5 instead of $7 (28% savings)
• The eighth man now paid $9 instead of $12 (25% savings)
• The ninth man now paid $14 instead of $18 (22% savings)
• The tenth man now paid $49 in stead of $50 (16% savings)

 Each of the six was better than before. And the first four continued to drink for free. But once they got outside the restaurant, the men began to compare their savings. “I only got a dollar out of the $20.” Declared the sixth man. He pointed to the tenth man. “But he got $10!” “Yeah, that’s right,” exclaimed the fifth man. “I only saved a dollar, too. It’s unfair that he got ten times more than I did!” “That’s true!!” shouted the seventh man. “Why should he get $10 back when I got only two? The wealthy get all the brakes!”

“Wait a minute,” yelled the first four men in unison. “We didn’t get anything at all. The system exploits the poor!”

The nine mean surrounded the tenth and beat him up.

The net night the tenth man didn’t show up for drinks, so the nice sat down and had beers with out him. But when it came time to pay the bill, they discovered something important. They didn’t have enough money between all of them for even half the bill! And that, boys and girls, journalists and college professors, this is how our tax system works. They people who pay the highest tax get the most benefit from the tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up anymore. On fact, they might start drinking overseas where the atmosphere is somewhat friendlier.

 

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CRUISING

David and Maggie are taking a 2 week holiday to celebrate their 5 year wedding anniversary.  They will be out of the office from 24th May to 8th June 2010. 

The office will be run by Benjamin Anderson during this time and if you have any queries, please do not hesitate to contact him as he can contact David and Maggie if the matter is urgent.

Both David and Maggie's mobiles will be left behind.

Bon Voyage!!

 

 

 

 

Hello,

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POSSIBLE TAX CHANGES FOR PROPERTY INVESTORS

- Source, WHK

Proposed tax changes - What's the effect for residential property investors?

The Tax Working Group ("TWG") recently reported on options for changing the tax system.

The report only presented options and the Government will consider these.  Nothing has been ruled out, other than capital gains tax on the family home.  It will take some monhts for the Government to consider the recommendations with changes unlikely before 1 April 2011.

In the meantime it's useful to consider how your residential investment properties may be affected if the options were adopted.

 GST

The TWG recommended GST be increased to 15%.

As a residential property investor you pay GST on rates, insurance, repairs and some other costs.  GST increasing to 15% would increase these costs by 2.5%.

If these totalled $4,000 the increase would be $100.  You'll either need to raise rents to pass the increased on to tenants or pay it yourself.

 Capital Gains Tax

The TWG were not in support of a capital gains tax.  However, land tax is a possibility.

Land Tax

A land tax was suggested.  The report discussed 0.5% of land values.

If you had land worth $200,000, the tax would be $1,000.  This is a cost to you unless rents could be increased to cover it.

It seems likely land tax would be collected in the same way as rates.

The TWG recommended concessions be made for those who would have cash flow difficulties with paying this tax, e.g. the elderly.

Building Depreciation

The TWG recommended that depreciation on most buildings should be removed because evidence suggested that buildings did not actually depreciate over time.

Although the tax saved on building depreciation is often repaid on sale it currently provides a cash flow benefit while the building is owned.

Depreciation on a building which cost $300,000 results in an annual tax saving of about $2,000 to $3,000 depending on how long its been owned.  This tax break would stop.

Risk Free Rate of Return

The TWG liked the idea of a percentage of the equity in land being taxed annually.  If you own a property worth $750,000 with a mortgage of $250,000 there is $500,000 of equity.  If the risk free rate of return was 6% you would have income of $30,000.

If you paid tax at 38% the tax payable would be $11,400.

Actual income and expenses would be ignored.  If your profit was more than $30,000 you would like the risk free rate of return.  If your profit was lower you would have to pay more tax, which might cause you cash flow difficulties.

The TWG recommended that further work be done on this option.

 Ring-Fencing Tax Losses

There has been much talk about not allowing rental losses to be offset against other income, e.g. salaries.  This was not included in the TWG's recommendations.

If this happened you wouldn't receive tax refunds from your property losses.

 Income Tax Reductions

It's not all doom and gloom.  The TWG recognised that company, trust and top personal tax rates would best be aligned at 30%.

If you pay tax at 33% or 38% your tax bill would go down.

 What should you do now?

Most important is not to panic, no decisions have been made and any changes are some time away.

However, you should consider how you might be affected if one or more of the recommendations were adopted.  You might need to raise rents or reduce costs to cover any extra tax.

If you rely on a tax refund to pay property costs you need to work out how you will pay the bills if there wasn't a refund.

Any tax changes may reduce property values, at least in the short term.  You need to consider what effect this might have on your current arrangements.  Lower prices also mean an opportunity to acquire more properties.

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PROMOTION:Profit Optimiser 

 

HOW WOULD YOU LIKE TO KNOW THE FINANCIAL IMPACT OF EVERY BUSINESS DECISION BEFORE YOU MAKE IT?

 ARE YOU PAYING TOO MUCH TAX AND LOOKING TO FIND LEGITIMATE WAYS OF REDUCING THIS TAX BEFORE IT’S TOO LATE TO ACT?

HAVE YOU GIVEN YOUR BUSINESS A HEALTH CHECK LATELY?  LOOKING FOR WAYS TO IMPROVE YOUR CASH FLOW OR YOUR BOTTOM LINE PROFITS?

THINKING ABOUT OBTAINING FINANCE AND WANT TO KNOW IF YOU WILL BE SUCCESSFUL BEFORE WASTING TIME WITH LENGTHY AND COSTLY APPLICATIONS?

 

If you have answered YES to any of these questions, then you should definitely read on to find out more about our exclusive Profit Optimiser services. 

 

An introduction:

 We use an easy to understand, financial modelling software program to provide a critical financial analysis of your business.  Recently, the major banks adopted this very same software for the specific purpose of processing and approving business finance applications.

 Aside from assisting in identifying a businesses ability to meet the banks “hidden criteria” for finance applications, it has been proven to be most beneficial in predicting possible tax liabilities before the end of a financial year.  Even where there hasn’t been a tax problem, this service has been invaluable in graphically identifying the key drivers within a business that can assist in turning a loss making or average turnover business, into an extremely profitable one.

 

What is Profit Optimiser? 

 When you feel physically unwell or lacking in performance, you would usually approach your local doctor for a diagnosis and possibly a remedy to your illness by way of a prescription or referral?  Well in business, it is not dissimilar.  Our Business Fitness & Tax Reviews are essentially a ‘health check’ of your current and future financial positions.  It allows us to diagnose your business and offer recommendations and solutions to potential tax problems, cash flow and profit issues, whilst maintaining a focus on the overall improvement in financial performance.

 So why not see how your business checks out today?  There’s a good chance Profit Optimiser has the remedy!

   

How does it benefit my business?    

 Here at Matley Financial Services, we have heard many positive and negative comments about accountants and their performance over the years and we are not referring to the ones about accountants having personality extractions and the like.

 More often we hear comments like…… “my accountant never tells me how I can improve my business” or “I really want to know how can I reduce my tax”.

Well in short, some of the many benefits you receive are:

• Uncovering the possible causes of current financial difficulties.
• Plotting future directions through goal seeking analysis.
• Creating projections, discovering solutions and averting potential disasters with graphical “what if scenarios” such as - What if sales improve by 10%? What is the financial impact on cash flow if I increase my volume? How can I improve my cash flow from -$325,500 to breakeven and have the answers in a second?
• Find out if your next dollar of sales will have a positive or negative cash flow impact?                    

 Some of the favourable comments we have received from clients following these reviews:

 

• “I have been wanting this from my accountant for years”

 

• “now we have a much clearer picture of where we are heading”

 

• “great, now we know what we need to focus on to turn our business around”

 

• “can we book a follow up review next quarter to review our progress”

 

How long does it take & how is this service delivered?     

            Due to the extremely informative nature of this review, we allow for an hour and a half to visually deliver our analysis and then discuss strategic recommendations based on the priorities we identify with you.

 Although we prefer to deliver these reviews in our own office, we are more than happy to come to your premises, although in order to get the best value for your money, we would recommend you provide a room that is practical in size, lighting and guaranteed free from interruptions.  You will also need to provide a suitable projection screen.

 Profit Optimiser ‘graphically’ demonstrates the analysis and review utilising modern technology via notebook computer and digital data projector.  This allows the directors, partners or key managers of your business to participate in this process without having to crowd around a computer workstation or muddle through mountains of meaningless papers and reports.

                         Do I receive reports or summaries of this review?

 Yes, most definitely.  Shortly after your review has been conducted, you will receive professionally bound reports clearly outlining and summarising both the initial analysis and subsequent goal seek scenarios undertaken during our meeting.  These prove invaluable when monitoring your performance improvements over the coming periods

 What guarantee do we offer with this service?

 We are so confident that we can advise you of ways to either save you the cost of our fee in tax, or improve the bottom line by the same amount that in the unlikely event we should not be able to do either of these, we will provide you with a credit for the full amount of our fee for service! We will also provide a full credit if you are in any way dissatisfied with this service.

 Yes, this is our guarantee to you and we are both professionally and ethically bound to it.  So what do you have to lose or should it be, how much are you going to save?

 

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INTRODUCING....

Matley Financial Services is growing all the time.  Our newest team member is Samantha-Jo Reading (Jo).  She is Maggie's chief side kick and you will most often hear her lovely voice on the end of the phone should you phone the office.

Jo is in the office to balance the male/female feng shui as Ben has started back with us beginning his third year of university studying to become an accountant.

 

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IRD - GIVE AS YOU EARN

A new voluntary scheme called payroll giving will be available from 7 January 2010.  It's an easy way for your employees to support a good cause.

Give as you earn

Payroll giving allows employees to "give as they earn" by making donations directly from their pay.  They'll receive tax credits of 33 1/3 cents for each dollar they donate, for that pay period.  For example, if they donate $10, they'll receive a tax credit of $3.33.

The choice is yours

Payroll giving is voluntary, so as an employer you have a choice about whether to offer this scheme to your employees.  Further detail and resources to help introduce payroll giving in your workplace are also available on IRD's website, www.ird.govt.nz/payrollgiving.

Other changes to volunteer support

Reimbursements for expenses incurred while volunteering are now considered to be exempt income of the voluteer for tax purposes.  Honoraria are now treated as schedular payments, which means PAYE rules apply to the payments and they're taxable.

In April last year the 5% dudction limit on donations made by companies and Maori authorities was removed.  This means they can now claim a deductions for cash donations they make to donee organisations up to the level of their net income.

These changes recognise the significant contribution made by the charitable and non-profit sectors to the well-being of our communities. 

-Source IRD Communication received 19 November 2009.

 

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STRATEGIC PLANNING - What is it and how can I benefit from it?

As another year draws to a close, we will soon be inspired (or not) to make New Year’s resolutions, and set goals to make changes to ourselves, our businesses and our lives.  I believe Strategic Planning can be a useful tool for us to adopt on a regular basis so that we have a Road Map of where too next.  There is no trick to success it is all about Planning, Doing and Reviewing.  We are usually good at one or two of these actions and the one we are weakest at utlising, is often what limits us in achieving our goals.  The other key point is that a Strategic Plan is an opportunity to set goals, but you also need to be adaptable to changing plans, as “Shift” happens!

So in simple language a Strategic Plan is a Road Map of where you want to travel with your business.  

Businesses succeed when you make time to work on your business and not just in it.

Steps to follow in establishing your own Strategic Plan:

1.  Vision – make a statement of about 15 words which is a high level enduring statement for your business
2. Mission – this is the How To achieve the vision (we will work towards our vision by ...)
3. Core Values – list your top 5 core values for the business (integrity, professionalism, empowerment, etc and review how this is incorporated into your business
4. Organisational Culture – write down how you staff your business, your customer service ethos, systems you have in place, marketing/incentive programmes, etc.

SWOT Analysis – this is the processes to identify your Strengths, Weaknesses, Opportunities and Threats.  Review your Mission Statement, Core Values, Organisational Culture to identify areas to include in the SWOT Analysis.  When doing this use a white board or big sheets of paper, felt pens, etc – get creative!  Layout the SWOT Analysis like this:

Once you have completed the SWOT analysis you then need to develop 3 key strategies (goals/actions) to address your Weaknesses and Threats so that they can become Strengths and Opportunities (you do not need to focus on all the Weaknesses and Threats, more the most important to you).  Through this review you also may decide to adopt a strategy to further develop your Strength and Opportunities, although the main focus of this exercise is to be fully aware of your Weaknesses and Threats so that you can turn them into Strengths and/or Opportunities through action plans.  Give yourself realistic timeframes to achieve your strategies and also ensure the appropriate staff member is able to manage the actions required of the new strategy.  Also review your Vision to ensure it does not need updating or developing further, often following this type of exercise the Vision can be very different to what is actually happening in the business.  

To start your strategic planning, contact our office or Sharon Jefferies from Future Directions International on sharon@futuredirections.co.nz. 

 - Source - Sharon Jeffries, Future Directions International Ltd

 

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MONTHLY PAYMENTS

Do you cringe when you receive your annual accounts, just knowing that the accountant's bill is around the corner?

Do you worry where you are going to find the funds to pay the aforementioned invoice?

We can make this easier. 

We have a growing number of clients who choose to have their total accounting fee for the year invoiced out and then pre-paid at a set amount each month. 

This improves their cash flow, and stops the scary  debt collection letters from Maggie about overdue amounts. 

If any further projects are undertaken during the year over and above normal work, these are invoiced separately.

If this sounds like it could be up your alley, please contact us and David will work out your estimated accounting fee for the year.

We send out annual invoices for our monthly paying clients in January.

 

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MATLEY CHRISTMAS HOURS

We are closed over the Christmas and New Year period from 18th December 2009 to 18th January 2010.

If you require to speak to David urgently, please phone his mobile on 029 452 1985 and leave a message.

The team at Matley Financial wish you all a safe and happy Christmas and New Year and look forward to speaking with you in 2010.

Its the beginning of December now, and David has completed his mission....growing a moustache to help men's health.

 

We raised $80 from three people with internet donations (you know who you are), received $20 from one person in cash donations.  If you have sent a cheque directly to Movember, please let us know so we can thank you directly.

 

Here is the final article.

 

Its not too late still to donate.

To sponsor David's Mo, you can either:

•    Click this link http://nz.movember.com/mospace/93953/ and donate online using your credit card

•    Write a cheque payable to ‘Movember’, referencing David's Registration Number 93953 and mailing it to: Movember, PO Box 12 708, Wellington 6144

 

Since the support for David was a lot less than we expected, Matley Financial Services has boosted the funds in support of Mens Health and donated $500 to the worthy cause.

Each year 600 men die of prostate cancer in New Zealand and one in ten men will experience depression in their lifetime - many of whom don’t seek help.

To sponsor David's Mo, you can either:

•    Click this link http://nz.movember.com/mospace/93953/ and donate online using your credit card

•    Write a cheque payable to ‘Movember’, referencing my Registration Number 93953 and mailing it to: Movember, PO Box 12 708, Wellington 6144

 

Now, we thought that we would give you a timeline of mo growth so you can see just how hard David has been working for 50% of the population to keep them healthy and happy....

 

Week One

 

 

Week Two 

 

Week Three

 

 

So far David has raised $20 in cash, and $80 via the website.  Thank you so much for those who have donated, you are truly helping to make a difference.

There is only 7 days left in the month before the end of Movember.  Please, dig deep and donate to a good cause.