GoFi8ure features on Top Reviews NZ website

GoFi8ure features on Top Reviews NZ website

GoFi8ure are excited to be featured on the Top Reviews NZ website as #7 in their Best Accountants in Wellington review. What an honor and privilege it is to be listed – thanks so much for the nomination. You can visit our review here.

GoFi8ure – your go to accounting specialists. #youdidn’tgointobusinesstotackleyourtaxbutwedid

 

Sick leave changes

Sick leave changes

When: From 24 July 2021

What: The number of sick leave days employees are entitled to will increase from five to 10. Employees will get the extra five days when they reach their next entitlement date – either after being employed in a job for six months or on their sick leave entitlement anniversary (12 months after they were last entitled to sick leave).

Employees who already get 10 or more sick days a year will not be affected by this change.

Why: To ensure that employees have enough time to recover from sickness or injury, making the workplace healthier and more productive.

What you need to do:  After an employee has been working for you for six months, or when an employee reaches their next entitlement date after 24 July 2021, they will be entitled to an extra five days paid sick leave a year.

This means everything else remains consistent but there are slight variations to what you need to do.

You must:

  • Allow for employees to accumulate up to 20 days of sick leave. This means employees can carry over 10 days of unused sick leave into the next year.
  • Ensure that payroll systems have been updated to reflect the increase in sick leave.
  • Update employment agreements to align with employee’s new sick leave entitlements where necessary. The new minimum entitlements will apply whether or not an employment agreement is updated, but updating the agreement is best practice.
  • Be aware of the changes and communicate with employees.
  • Allow employees to use sick leave to care for a sick or injured spouse, partner, dependent child or any other dependent individual.
  • Pay a sick employee what they’d get if they’d worked a normal day, including bonuses, overtime, etc.

You can:

  • Let employees who’ve worked for you for less than six months take sick leave in advance.
  • Choose to let employees carry over extra sick leave, beyond the 20 day requirement from year to year.
  • Offer more than 10 days sick leave a year.

This also applies to casual workers if, after six months, they have worked

  • an average of at least 10 hours a week and
  • at least one hour a week or 40 hours a month.­­

Minimum sick leave increase(external link) — Employment New Zealand

Sick leave entitlements(external link) — Employment New Zealand

Investment property changes

Investment property changes

When: 27 March 2021

What: For properties acquired on or after 27 March 2021:

  • Legislation has passed that extends the bright-line test from five years to 10 years on residential property.
  • The Government intends for the bright-line test to remain at five years for new builds and will be consulting on what a new build is soon.
  • Legislation has passed that introduced a ‘change of use’ rule. If the sale of your property is subject to the bright-line test, and you don’t use the property as your main home for 12 months or more, you will be required to pay income tax on a proportion of the profit made through the property increasing in value.
  • If you sell a property within 10 years of acquiring it (or five years for a new build) and it was your main home for the entire time you owned it, you will not pay tax under the bright-line test on any gain in value.
  • Any gain in property value that is considered taxable income (including under any of the bright-line tests) will also affect any other obligations or entitlements you have based on taxable income, such as student loan repayments, child support payments, and Working for Families.

For properties acquired before 27 March 2021:

  • The previous bright-line test for five years will continue to apply for properties acquired before 27 March 2021.
  • The Government has proposed that interest on loans for investment properties acquired before 27 March 2021 can still be claimed as an expense, but the amount will reduce each year until it’s completely phased out by the 2025-2026 tax year. A consultation will be held about this.

Fact sheet: Proposed changes to bright-line test(external link) — Inland Revenue

Why: These changes have been put forward with the aim of increasing housing supply and housing affordability

Investment property: law changes and tips for maximising returns

What’s the difference between financial accounting and management accounting?

What’s the difference between financial accounting and management accounting?

You’re running a business, so you know the legal requirements around producing accounts and submitting tax returns. But do you truly know WHY you’ve engaged an accountant? And do you understand the value that a good accountant and business adviser can add to your company?

As a business owner, managing director or CEO, there are three main areas of the accounting proposition that you’re probably most interested in:

  1. Compliance work – this is the bookkeeping, financial accounting and tax work that’s legally required for you to be compliant with the law. On the whole, this compliance work looks backwards at your numbers from the past (your ‘actuals’), showing you where you have been, rather than where you are going.
  2. Financial performance work – this is the work that aims to improve the financial health of your business. It includes the cashflow, cost management and funding work that helps you to strengthen your balance sheet, manage your working capital and become a more stable financial proposition. The work is based on your historic actuals but also has an element of forward-looking forecasting and projections.
  3. High-value advisory work – this is the forward-focused, high-level strategic advice that helps you look to the future and plan out your business. This can include helping you to define your personal and business goals, create a 5-year business plan, manage your company strategy and focus on growth, value and an eventual exit strategy etc.

How does a management accountant differ from a financial accountant?

To make a success of your business, and to get the best value from your accountant, you need an adviser who can deliver in all of these three areas. But not all accountants are the same. As we’ll see, it’s important to understand the difference between a financial accountant and a management accountant

At the most basic level, these are the key differences:

  • Financial accountant – in general, a financial accountant focuses on the basic compliance work, with a small amount of financial performance work thrown into the mix. They make sure your bookkeeping is done and dusted, will file your tax returns and use your historic numbers to produce statutory accounts. They’re ‘bean counters’, making sure you have a clear record of all the beans you’ve produced.
  • Management accountant – a management accountant, however, looks forwards rather than backwards and has a greater focus on the future. They will usually provide the compliance work too, but will delve deeper into the financial performance and high-level advisory work. Rather than just ‘counting the beans’ they help you choose the right beans, decide how to plant them and make sure you nurture and grow these beans to bring in a better (and more profitable) harvest.

How does a management accountant deliver more value?

Looking to the future is a far more productive way of managing your finances than just counting what’s in the bank. A management accountant will empower you to understand your business, and will give you the tools and the knowledge to make good, well-considered decisions.

This additional help can be invaluable. With an experienced management accountant working alongside you, your financial thinking can be completely revolutionised.

For example, you will:

  • Stop looking backwards – your focus will be all about looking forwards to what you can change, not just recording your past transactions (the things you can’t now change, even if you wanted to).
  • Know your numbers inside out – you’ll have a far better understanding of your regular finances, thanks to the detail included in your regular monthly management accounts.
  • Get in control of your cashflow – you’ll be able to drill down into your cash inflows and outflows and, by doing so, improve the liquid capital and cashflow in the business.
  • Streamline your financial processes – you’ll refine and improve your internal accounting procedures, so you’re more efficient and more productive.
  • Refine your pricing strategy – by reviewing your pricing model, you’ll be able to enhance your margins, boost revenue and make the whole company more profitable.
  • Stop unnecessary expenditure – you’ll analyse your overheads, expenses and cost base to reduce the money that’s leaking out of the business.
  • Bring more money and investment into the business – with more robust accounts and projections, you’ll have better access to funding and to private investment.
  • Get a firm grip on your business data – with meaningful metrics being tracked and monitored through your cloud accounting platform, you’ll greatly enhance your business intelligence and the evidence behind your decision-making.
  • Improve the quality of your advice – you’ll have an adviser on hand at all times, giving you access to your management accountant’s knowledge, experience and advice.

Talk to us about the benefits of management accounting for your business

If you’re ambitious and keen to grow, switching to the benefits of management accounting could have a huge impact on your future destiny.

A financial accountant looks backwards, while a management accountant looks forwards. And it’s this key difference in focus, ability and oversight that makes partnering with a firm of management accountants so rewarding.

Get in touch to talk about switching to management accounting.

 

Why employee onboarding is so important

Why employee onboarding is so important

Even before you start recruiting for a position, you should be prepared to make a new employee’s introduction to the business as smooth and comprehensive as possible.

Onboarding (also known as induction) is a broad, structured process to provide a new team member with all the tools, information, and insight they need to quickly become an effective contributor, while at the same time integrating them with the company and its culture.

Sure, you could set the person up with tools they need, give them the company handbook, and tell them to get cracking on some initial tasks, but don’t expect great results.

Onboarding is an investment in the long-term development of your people and your business. So let’s look at the main reasons you should have a thorough onboarding process for all new employees:

  • Gets them up to speed faster – a structured approach fully prepares an employee for their position and provides support as they grow into it, which minimises disruption to the business.
  • Higher employee engagement – successful onboarding gets the employment relationship off to a solid start, boosting confidence, job satisfaction, and ongoing engagement.
  • Better staff retention – Research has proven that employees who complete a structured onboarding process are far more likely to stay with the company, which saves time and money in the long run.
  • Teaches about company goals and culture – successfully establishing a new employee while showing them how they contribute to the business’ wider goals helps connect them to the company and the existing team.
  • Supports good hiring decisions and recovery from poor ones – induction is a crucial time for new workers to decide if the job matches their expectations and it also quickly shows employers if the person is right for the position.
  • Sets a base for further learning and development – initial job training lays a good foundation for ongoing growth and helps the business find out about a new person’s aspirations, so you can design a development plan to build their skills.
  • Better customer satisfaction – research shows that positive employee experience leads to better customer experience, which improves overall business profitability.

This article provides more reasons why every organisation should take onboarding seriously.

Property and Tax update 2021

Property and Tax update 2021

On 23 March 2021, changes to tax rules for investment properties took investors by surprise. There has been widespread commentary with more to come as the detail unfolds.

In overview:

  • The bright-line test has been extended from 5 to 10 years for properties purchased on or after 27 March 2021
  • The current exemption for the main home changes for properties acquired on or after 27 March 2021, making them subject to a ‘change of use’ rule
  • From 1 October 2021 property owners will not be able to claim interest on residential investment property acquired on or after 27 March 2021, and interest deductions on borrowings for residential investment property acquired before 27 March 2021 will be phased out over the next four income years.

Bright-line extension

Different rules apply for different scenarios:

  • For properties purchased from 27 March 2021, the bright-line test period is 10 years.
  • If you already own a rental, and, the old rules apply:
    • a 5-year bright-line test if you purchased the property on or after 29 March 2018, or
    • a 2-year bright-line if you purchased the property from 1 October 2015.
  • If it’s a new build, the proposal is that it will be subject to a 5 year bright-line test.
  • If you’re in the middle of buying a residential rental property, it’s more complex. Generally, if you entered into a binding contract to purchase a property before 27 March, you are within the old rules and the 5-year bright-line test applies. However, depending on variables around when the offer is accepted or the exchange and timing of counter offers, the 10-year bright-line test may apply. Talk to us if you’re in doubt.

‘Change of use’ and the main home exemption

Under the current rules, if the property has been used as the person’s main home for over half of the relevant bright-line period, there is a complete exemption from tax under the bright-line test. Under the proposed changes, properties acquired on or after 27 March 2021 will be subject to a ‘change of use’ rule. If a property switches from being the owner’s main home for more than 12 months, then a proportion of the sale profits of a property sold during the bright line period will be taxed, based on the ratio of time that the property was and wasn’t used as the main home. The existing main home exemption rules continue to apply for residential property acquired on or after 29 March 2018 and before 27 March 2021.

Interest deductibility

The rules are graduated depending on when the property is acquired:

  • for residential property acquired on or after 27 March 2021, taxpayers won’t be able to claim deductions for interest from 1 October 2021
  • for properties acquired before 27 March 2021, interest on loans can still be claimed as an expense. From 1 October 2021 – 31 March 2023, the amount claimable will be reduced to 75%, reducing by 25% each following income year, until it is phased out completely from 1 April 2025.

The Government is also consulting on whether an exemption for new builds acquired as residential investment property should apply. Property developers and builders who build properties to sell will still be able to claim their interest expenses.

Short-stay Accommodation

Residential properties used to provide short-stay accommodation, where the owner does not live in the property, will be subject to the bright-line test and cannot be excluded as business premises.

Our Recommendation

Some of the proposals are subject to consultation. If you have the opportunity to comment, please make it clear how the changes affect you. If you own a residential rental or one used for short-stay accommodation, or if you are considering buying a second property, please contact us, to discuss the tax implications.

The 39% tax rate – Your questions answered

The 39% tax rate – Your questions answered

New Zealanders earning over $180,000 a year will now pay a 39% tax rate, which came into effect on 1 April 2021. If this includes you, are you aware of how your tax obligations change when it comes to shares, property, FBT, superannuation tax, or trusts?

The 39% tax rate and trusts

From now on, you’ll need to disclose a lot more information to Inland Revenue in your annual trust tax returns. The additional information will provide the Government with information on how trusts are being used, particularly with the introduction of the new 39% tax rate. As part of their annual income tax return, trustees will now have to disclose:

  • Financial accounting information, including profit and loss statements and
  • balance sheet items
  • Loans to related parties
  • Information on distributions and settlements made during the income year
  • Names and details of settlors from prior years
  • Names and details of each person who, under a trust deed, has the power to appoint/dismiss a trustee, to add/remove a beneficiary, or to amend the trust deed.

The 39% tax rate and beneficiary income from a trust

If you receive beneficiary income from a trust, let us know if you’d like to know more about your tax position.

The 39% tax rate and property or shares

If you are looking to purchase assets such as property or shares, or already have such investments, it would be prudent to assess your overall investment strategy so that it meets your commercial and personal goals, including your tax profile. Such investments are able to be held in companies or a trust, which have tax rates of 28% and 33% respectively, however on distribution to individuals in most cases the individual’s tax rate will effectively be applied. A strong note of caution – the main reason for any restructuring should not be due to any perceived tax benefits arising out of the restructure. Any restructuring should be focused on achieving key objectives such as successful commercial, risk, succession, and asset protection outcomes. We can review and assist you with planning to meet your objectives.

The 39% tax rate and superannuation contribution tax

Time to check whether you have employees whose Employer Superannuation Contribution Tax (ESCT) and Retirement Savings Contribution Tax (RSCT) rate threshold exceeds $216,000. The tax rate for these have risen to 39% (as of 1 April 2021).

The 39% tax rate and fringe benefit tax

A new Fringe Benefit Tax (FBT) rate of 63.93% will apply for all-inclusive pay above $129,681 and the single rate and pooling of non-attributed fringe benefit calculations. The 42.86% rate for non-attributed benefits will no longer apply. Talk to us about your current FBT profile and we can review it together.

The 39% tax rate and additional employment income

The tax change applies to all employment income over $180,000 a year, including bonuses, back pay, redundancy, and retirement payments. As an employer, take account of when additional remuneration to employees may affect their tax obligations and make sure tax is deducted correctly.

The 39% tax rate and RWT and RLWT

  • If you earn interest, this will be taxed at 39% (RWT) from 1 October 2021.
  • If you’re selling property covered by the bright-line test, residential land withholding tax (RLWT) will increase from 1 April 2021 to 39% (except where the vendor is a company).

Getting back to business

Getting back to business

It goes without saying that change has been a theme of late. Much of the change we’ve experienced has been out of our control. However, if we focus on what we can control, such as our response to change, we can regain some control and plan to maximise outcomes.

Five things within your control that will have the biggest impact on your business:

1. Working on your business, not just in it.
It’s hard stepping back from your operational role. Many of us have been in ’crisis mode’ for an extended period – running on adrenaline and coffee… but it’s still essential to set aside time to focus on your plan and review it regularly. After all, working hard will only pay off if we’re working on the right things. Block out two hours each week to step out of your business and ensure your plan is executed. If this is something you struggle with, ask someone to hold you accountable.

2. Your product/service mix.
It’s likely you’ve already made changes to your product or service offering. This may have happened under pressure and without a proper plan. Take time to thoroughly review your offering. Which products or services have the highest margins? Which products or services haven’t been performing well? Are there new products or services you could introduce which complement your current offering? Do you need to review your pricing?

3. Marketing and communication.
Have you updated your Marketing Plan to reflect changes to your business operations? Clearly communicating with customers and prospects is essential in these times as they need to know when you’re open, that you’re taking their health and safety seriously, and any changes to your offering. You also want to be front of mind as customers look to support businesses.

4. Human resources.
It’s likely that your human resources department took a hit over the last year. While government support helped save some jobs, for some businesses, they had no choice but to reduce the size of their team. Have you spent time reviewing your organisation structure to identify resourcing gaps and areas where you’re over-resourced? You must ensure your team is the right size for your business with the right people on board.

5. Your finance, profitability and cashflow.
You may feel this part is out of your control, however, there are steps you can take to regain control of your finances. If you haven’t already, revise your personal budget and identify areas you could reduce your spending. Then update your business budget, ideally, you’ll review and update this monthly. If you’re struggling with cashflow, we can help you identify improvements you can make to your processes to manage your cashflow.

In Covid times there’s a lot you can control and it’s crucial for morale and progress that we focus on these things to get our business in the best possible shape. Even if your business stayed open during lockdown or you’ve been back to business for a while, use these simple strategies for continuous improvement.

Success in 2021 will look very different from previous years. What does it look like for you and your business? If you need help developing a plan, improving your profitability and cashflow, or just want someone to bounce ideas off, get in touch.

“Success is not final, failure is not fatal: it is the courage to continue that counts.” – Winston Churchill

The low-value asset threshold (of $5,000) for depreciation ends on March 16th

The low-value asset threshold (of $5,000) for depreciation ends on March 16th

The temporary increase to $5,000 for the low-value asset threshold for depreciation ends March 16th. For assets purchased on or after 17 March 2021, the new threshold will be permanently set at $1,000. Talk to us for more information.

The temporary increase to $5,000 for the low-value asset threshold for depreciation ends March 16th

This means if you buy something now, you could write off the whole amount against your taxable income this year.

Depreciation spreads the cost of assets that you buy for your business, by claiming a deduction from the IRD in your tax return.

In March 2020, the NZ Government introduced legislation to temporarily raise the threshold for depreciation on low-value assets from $500 to $5,000. The aim of this change was to stimulate the economy during the Covid pandemic by encouraging people to invest in their businesses.

The change to the $5,000 threshold ends 16 March 2021

What does this mean for you?

  • Businesses (including landlords) can deduct the entire cost of an item (under $5,000) in the year it was purchased, instead of spreading the cost over the life of the asset.
  • The distinct asset must be bought between 17th March 2020 and 16th March 2021.

The raised threshold change is only available until March 16th 2021. For assets purchased on or after 17 March 2021, the new threshold will be permanently set at $1,000.

In order to claim you will need a proof of purchase to support your records. Note that there are some terms and conditions in the rule which apply to the threshold:

  • If you bought multiple assets at the same time from the same supplier and it cost $5,000.00 (noting that it has the same depreciation rate), the threshold applies across all the assets acquired.
  • The “cost” pertains to GST exclusive for a GST registered and GST inclusive for a non GST registered.
  • If the asset is being acquired in the form or part of another asset, the deduction is immediately not applicable.

Contact us for further information.

The minimum wage increases on April 1st 2021

The minimum wage increases on April 1st 2021

From April 1 2021, the adult mimimum wage will increase from the current rate of $18.90 per hour to $20 per hour.

There are 3 types of minimum wage — adult, starting-out and training.

The adult minimum wage – applies to employees aged 16 years or older.

The starting out minimum wage – applies to workers who are:

  • 16 and 17 years old and have been with their current employer for less than 6 months
  • 18 and 19 years old:
    • have been paid a benefit for 6 months or more
    • haven’t worked for 1 employer for longer than 6 months since being on a benefit, and
    • have been with their current employer for less than 6 months
  • 16 to 19-year-olds whose employment agreement requires them to do at least 40 credits a year of industry training.

The training minimum wage – applies to workers who:

  • are 20 years or older
  • under their employment agreement, have to do at least 60 credits a year of industry training.

The training and starting-out minimum wages will also both increase. The new rate from April 1 will be $16.00 per hour, remaining at 80% of the adult minimum wage. This is a rise from the current minimum rate of $15.12 per hour.

Talk to us about how this will impact your business.