What a way to end the financial year! It feels more like the 89th of March, rather than the 31st. We’re sorry if you haven’t heard from us already but we’ve been overwhelmed with some clients struggling to keep up with booming sales while others are facing the very real pain of not surviving this. If isolation boredom has kicked in, you might actually be “looking forward to” getting your end-of-year tax records sorted and, if that’s the case, you’ll find a list of what to send us below. Another boredom buster you should be doing today is writing off your bad debts and doing your stocktake. If your inventory software isn’t reliable then a physical stocktake should be your first priority when lockdown ends.
Take care & stick together but obviously at a distance! ❤ [Checklist on Page 2]
You’ve got to hand it to the tax department … welcoming you back to work by taking a nasty bite out of your bank account. And they’ll be back for even more if you don’t pay on time so please don’t forget to pay your IRD bills today.
If there’s one thing in business that really takes a painful chunk out of your bank account, it’s tax. Yes, it hurts but I can assure you not paying hurts even more. Choose your ‘hurt’ wisely and don’t forget to pay today!
Bad news folks! I guess Xero needs to pay for that flashy new building because we’ve just received word that both standard and premium plans will increase in price by $5 per month, from 28 September 2018. Standard subscriptions will go up to $60 a month, while premium pricing increases to $75 a month (excluding GST). This pricing includes one active Xero Expenses user with subscribers paying an additional $5 per additional active user. To help keep your price down, we’d discourage you from using Expense claims.
Remember, many of you are still eligible for our 30% discount on Business Edition plans. This requires us to act as the subscriber with you maintaining your own billing account, only available if payment is on direct debit or credit card, and is subject to a positive credit history with us. Alternatively, rather than having the Partner act as Subscriber to the subscription, you may act as the Subscriber for Xero Business Edition subscriptions and invite the Partner into that subscription as an invited user (although our discount will not be available to you in this scenario). The Subscriber to the subscription has the ability to control access rights and may be required to retain ownership of the file for insurance purposes.
It’s not often angry accountants are newsworthy but they’re certainly het up and hitting the headlines this week! Why do they care so much, you say? Well most accountants work on hourly rates and aim to keep their fees to the absolute minimum so spending forever fighting the IRD computer is the last thing they want their lovely clients paying for. It’s all a bit of a ‘hoot’ really unless you’re the one footing the bill.
“If you liked it, then you should’ve put a ring on it”. Well, it seems, here in New Zealand, the government doesn’t like it and are about to stop it by putting a ring on it. What am I alluding to? I’m talking about the proposed tax changes which, if they go ahead, will mean you’ll no longer be able to use losses from your rental property against your other income such as salaries and wages.
Ring-fencing is simply the technical term, used by chartered accountants and tax-boffins to describe this approach. In practical terms, for many people, it may be the end of receiving tax refunds from some of the tax paid on their wages. Anyone who’s been using these tax refunds to help fund rental property cash-deficits may get a little ‘Antsy’ about all of this but it’s unlikely to be anywhere near the doomsday the media is making it out to be and here’s why:
Some would say the main hit has already been taken because the proposal isn’t entirely dissimilar to the changes which were made to depreciation not so long ago. Prior to that, the depreciation claimed on buildings boosted many a tax refund and when the claim was no longer available, there was a significant downsizing of tax refunds for rental property owners.
Ring-fencing doesn’t mean your losses suddenly go ‘poof’ and disappear, never to be seen again. Generally, the losses will simply accumulate until you’re ready to use them when the rental property becomes cash-positive and profitable. Often, standard tests are required to maintain losses but thankfully losses don’t come with an expiry date. It’s simply a matter of timing.
Finally, don’t forget the big picture. From a commercial perspective, the tax position of capital gains remains unchanged. Ring-fencing is unlikely to have any negative bearing on the capital gains made from selling the rental property. Typically capital gains have been the primary factor in property investment and in many cases, these will still significantly outway any changes brought about by the proposed ring-fencing reforms.
There’s an old Frank Sinatra song that says “if you can make it here, you can make it anywhere”. As a Chartered Accountant, I like to change this up a bit and turn it into “if they do it there, they can do it here”. Something they’re currently doing over there (Denmark, in this case) and which I strongly suspect will soon start happening here, is Airbnb giving the IRD full details of your Airbnb earnings.
The platforms are already in place here and the banks have been doing it for ‘yonks’. Banks readily give the IRD full details of your interest and RWT deductions without you even knowing it. Typically the information sharing goes the other way with the IRD having the ability to give your details to some government agencies including Statistics New Zealand. On top of this, there’s been an incredible amount of activity in the area of overseas reporting obligations lately which is basically a way of sharing your information between countries. America is particularly hot on this right now with the Common Reporting Standard coming into effect and although this may seem like something that couldn’t possibly effect you, you may well get caught if you’re an unsuspecting beneficiary of a family trust (even a discretionary one).
Thankfully, the IRD gives relatively clear direction on how to return your Airbnb income so it shouldn’t hurt too much unless you’ve somehow fallen into something incredibly complex like the GST regime or if you need to ‘fess up’ to the IRD through the Voluntary Disclosure process.
Happy new tax year!
And you know what that means, don’t you? Time to get your books sorted and into us. Thanks to technology, the days of sending us paper are well and truly gone. And what a relief that is because one of the worst jobs of my career was having the most enormous box of paper bank statements dumped on me. It wasn’t the size that frightened me but the smell. It absolutely reeked. I spent the next week locked in my cubicle trying not to breathe in the toxic stench, while the other accountants treated me like I was contagious.
This was twenty-something years ago, in one of the big old prestigious firms and junior accountants were barely permitted to speak, let alone complain. There were more than sixty accountants crammed into my section of the office and I swear every single one of them passed by my desk (keeping a safe distance, mind you) giving their unwanted opinion on the origins of the aroma. To this day it remains a mystery but I suspect a pet (now potty-trained) is out there somewhere laughing at me still.
And on that note, we look forward to receiving your ‘smell-free’ records soon.
You’ll find a checklist, of everything you need to send, by clicking here.
Picture credit with thanks to Interior Design Magazine
If you like things to look nice, this one’s for you. It’s about adding your business logo to emails when you send them directly from your Xero accounting software. I don’t know about you but I was starting to get little jabs of jealously every time a business emailed me their invoice with their logo right there in the email itself (not just on the invoice). Being a busy business owner, I’d devoted all of two seconds to ‘making this happen’ before giving up in a huff but with a clearer head this morning I found a few options and this one’s the easiest: Continue reading How to add your logo to Xero emails
Is the new tax option right for you? Probably not! Yes, I’m serious. This new pay-as-you-earn option of paying your provisional tax almost got it right, but not quite. The concept is good but it’s really not a whole lot different to the ‘Ratio’ method which crashed and burned a few years ago!