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 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.
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
Yes, it’s true. The IRD has started giving away free all inclusive holidays with your room, meals, beverages and even some sports activities included. To be eligible, you’ll need to stop filing tax returns and start specialising in cash-jobs. The most recent “winners” were in the building sector but that doesn’t mean they won’t open this up to your industry too.
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!
Being an exacting accountant, with all those horribly strong type-A personality traits, it almost hurts me to say this but one of the biggest mistakes I made when starting out was not realising that business isn’t about doing a great job or working incredibly hard. Yes, those things are really important but not the most important.
What I’ve come to realise is that business is more about the stuff in between; the keeping everyone happy stuff! From explaining to customers why you’re worth it to tactfully dealing with incompetent staff and suppliers (because let’s face it, the good ones take care of themselves, don’t they). Communication skills and relationship building are huge. It’s almost as if you have to become a professional Happy-Maker!
One of the best things about being an accountant (yes there are some) is the ability to get up close and personal with some of the best businesses on the planet. What’s not so great is being a messenger for the IRD. Early in my career, I had an incredibly uncomfortable meeting with an elderly gent who just wouldn’t believe it was illegal to claim his glasses and hearing aid, even though he needed them to do his job. It was quite the battle, I can tell you, so instead of boring him with legislation I told him about the court case where a personal trainer was sentenced, to home detention, for claiming running shoes and that even plain clothes police were taxed on their clothing allowance.
Now, I’m not saying it’s fair. Personally, I’m on your side but is there a way around these laws? The answer is advertising. I don’t know how you feel about having your business branding plastered all over your designer jeans but it’s one way to make them tax deductible. Without advertising, most clothes fail under the scrutiny of a ‘brown-trousered’ tax investigator (unless they’re uniforms or health and safety wear). We’d hate you to get caught out so why not quizz yourself to see if you can pick what’s deductible below?
“Life, as a business owner, isn’t perfect but your outfit can be”