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

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 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.

The dangers of discounting

The dangers of discounting

You might think that offering discounts is a great strategy to use when sales are falling. In reality, you’re likely to be more profitable by holding your price and accepting the reduction in sales volume than discounting a product.Let’s look at an example to show the difference in your gross profit if you discount your selling price by 10% compared to holding the price at $100 and accepting a 10% reduction in sales volume.

If sales are currently at 10,000 per annum at $100 per unit, your sales will be $1,000,000. With costs of $60 per unit, your gross profit is $400,000.Dropping the selling price by 10% might mean sales remain constant at 10,000 with a selling price of $90 per unit, so you’ll achieve $900,000 in sales. Costs remain at $60 per unit, so your gross profit will be $300,000.

If you were to accept the 10% drop in sales but hold your price at $100 per unit, your sales revenue will still be $900,000, but you’ll only have to pay for 9,000 units, so your gross profit will be $360,000.

In other words, holding your price and accepting the drop in sales results in a reduction in gross profit of $40,000 compared to a $100,000 reduction if you offered a 10% discount.

If you look at it another way, you can work out the increase in sales needed to maintain your original $400,000 gross profit if you offer a 10% discount. To calculate the increase in sales required, first calculate the gross profit for each unit: $90 selling price – $60 cost per unit = $30 gross profit per unit. This gives us a gross profit percentage of 33.33% ($30 gross profit / $90 selling price * 100).

To calculate the required increase in sales, multiply the previous sales volume figure by the gross profit percentage. To maintain your $400,000 gross profit, you’ll have to sell 13,333 units (10,000 units * 133%).

Discounting is simply not the answer – it’s a race to the bottom! Look for other alternatives to respond to a drop in sales – starting with what you can do to delight your customers so they keep coming back!

“When you realise how much you’re worth, you’ll stop giving people discounts.” – Karen Salmansohn

If you’re experiencing a drop in sales, get in touch so we can work with you to identify the reasons for this and explore alternatives to offering a discount.

GoFi8ure 2020 Christmas e-book

2020 is finally almost over… we made it!

We’ve put together a short eBook (attached), providing some light reading, reflection activities (to harness any positives from 2020) and a bangin’ cocktail recipe; we hope you enjoy it!

Our office will be closing from the 24th December with skeleton crew back on the 6th of January.

Hopefully, you plan to take some time off to relax and reset for the New Year.  We’re looking forward to working together in 2021, whatever it brings.

Click here to read our 2020 Christmas e-Book

From our bubble to yours, stay safe and have the best break you can!

Take care,

The Team at GoFi8ure

How will the Trusts Act 2019 impact you and your Trust?

How will the Trusts Act 2019 impact you and your Trust?

Trusts are a common thing in New Zealand and the reasons for setting them up vary due to each person’s unique situation. For those of who you are not aware, The Trusts Act 2019 comes into effect on 30 January 2021. Changes to the act aim to make trusts more accessible. There are increased compliance obligations on trustees and duties that ensure greater transparency for beneficiaries.

The changes to the act include:

  • The age of majority (the default age that a person can inherit if not specified) changes from 20 to 18.
  • The maximum duration period of a trust is extended from 80 years to 125 years
  • Obligations on trustees to keep certain information about trusts
  • A mechanism to request the court to review the decisions and actions of trustees
  • Flexible powers for trustees to manage trusts.

Trustee duties

Trustees must be aware of their obligations and duties under the law. These are set out in the Trusts Act 2019. There are mandatory duties that are essentially to ensure trustees take their role seriously. These are:

  • A trustee must know the terms of the trust
  • A trustee must follow the terms of the trust
  • A trustee must act honestly, and in good faith
  • A trustee must act for the beneficiaries of the trust
  • A trustee must exercise the powers they have for a proper purpose.

Optional duties for trustees – The act sets out optional duties that can be changed in the trust deed. If this happens, the advisor must point this out to the settlors.

Duties regarding information keeping and sharing – These duties are regarding the information trustees must keep, and the information that must be made available to beneficiaries (including of trust assets, trustee decisions, and changes to the trust).

The additional compliance duties for trustees within the act may mean that existing trusts are no longer cost effective. Greater transparency may also require trustees to disclose information that they previously did not share.

Get in touch to discuss how the changes impact you.

Understanding your numbers to improve your results

Understanding your numbers to improve your results

Understanding your financial reports, or knowing your numbers, is critical to business success. It allows you to make better business decisions, measure the impact of those decisions, take corrective action where necessary and, ultimately, enjoy better results.

By understanding your financial reports, you’ll:

  • Know if your business is growing or shrinking
  • Discover trends in your business and be able to respond accordingly
  • Compare your actual results to your expectations
  • Identify areas of strength and weakness in your business
  • Understand the value of your business
  • Make better decisions

How to maximise results from your reports:

1. Ask yourself, is the data ‘clean’? This means that all transactions have been coded correctly and bank statements have been reconciled. Do you have monthly procedures to ensure your data is clean?
2. Inspect what you expect. You must have goals for your business, or targets you expect to achieve. Inspect your financial reports each month to see if you’re on track to achieve your expected targets.
3. Know which reports to use. Each report tells you a different story. Your Profit and Loss Statement measures your income and expenses; the Balance Sheet measures your assets, liabilities and net worth.
4. Conduct both horizontal and vertical analysis. This means comparing the current period with previous periods (horizontal analysis) and calculating each item as a percentage of a base item (vertical analysis). For example, comparing this year’s Balance Sheet with last year’s and calculating each expense item as a percentage of Sales on your Profit and Loss Statement.
5. Understand the difference between ‘as at’ or ‘for the period ending’. An ‘as at’ report, such as the Balance Sheet, shows the balances at the end of a specific period. A ‘for the period ending’ report, such as the Profit and Loss Statement, shows the results over a period of time.
6. Choose the correct date range. Ensure you correctly specify the start and end dates for the period you want to measure. Choose a month end date, such as 30 June instead of 15 June, to ensure all income and expenses have been coded and reconciled for the period.

By understanding the fundamentals behind your financial reports, you’ll know more about your numbers and be able to use that information to make better decisions. Whether you want to grow your business or increase efficiency to free up your time, we can help you interpret your financial reports and set goals for improvement.

Get in touch for our complimentary Guide to Your Financial Reports to learn more.

GoFi8ure named ICNZB’s Bookkeeping Business of the Year 2020

GoFi8ure named ICNZB’s Bookkeeping Business of the Year 2020

We have some exciting news! GoFi8ure have been named Institute of Certified NZ Bookkeepers‘s Bookkeeping Business of the Year 2020! We are so proud of the team and what we achieve on a daily basis. Listen to the announcement here.

There are so many amazing Bookkeepers out there and we are honored to have been named a Finalist and then a Winner of this award. Congratulations to all of the Finalists and Winners #hugabookkeeper #communityovercompetition

Maximising your cash reserves

Maximising your cash reserves

The Covid-19 crisis has highlighted the inadequacy of current cash reserves for many businesses. They simply don’t have enough cash to sustain the business in a crisis.

Now is the time to make permanent change to your business processes and cost structure so you can build those reserves. At the same time, business owners need to be part of a world solution, and that means paying our bills on time where possible.

11 strategies to maximise your cash reserves:

  1. Invoice your customers immediately upon supply of products and services. The faster you bill, the faster you’ll be paid.
  2. Shorten your payment terms, e.g. from 20th of the month to within 7 days of invoice. You’ll need to reflect any changes in your Terms of Trade, in key customer contracts, and on your website.
  3. Invoice directly from your accounting software. This can enable faster payment.
  4. Negotiate prompt payment discounts with your suppliers. Don’t be bashful, there is no harm in asking.
  5. Get better at collecting the money you’re owed. Ask nicely to be paid by customers as soon as an invoice is overdue. The fast cash is in the 30-day column, not the 90-day column.
  6. Outsource proactive debtor management to a collection agency. This can be surprisingly cost-effective.
  7. Perform credit checks on new customers and make sure your Terms of Trade give you as much protection as possible if a debt goes bad. For example, put personal guarantees in place.
  8. Develop a personal spending budget and stick to it. This will reduce cashflow pressure on the business.
  9. Take costs out of the business where you can, but only where you should. This is an ideal time to review every line item in your Profit and Loss Statement. The shift to working online may allow you to change spending patterns.
  10. Have clear spending limits for team members who incur expenses on behalf of your business and regularly monitor these.
  11. And finally, prepare a Cashflow Forecast. Know what’s ahead of you and understand how positive changes will improve your cash reserves going forward.

Cash is oxygen for your business. Contact us now so we can help you put a cashflow improvement plan in place.

“The more a business owner knows about their cashflow, the more empowered they become.” – Nick Chandi

Successfully implement change in your business

Successfully implement change in your business 

Research by Kotter International found that more than 70% of change projects within a business fail. Why is this?

The research findings show that employee engagement is the biggest factor. Whether it is a small change to one or two processes, or a company-wide change, it’s common for staff to feel intimidated by it.

So what can you do for successful implementation of change? Here are the principals from Kotter’s 8-Step Program:

1. Get the team onboard

Build support and create momentum behind the changes you are making by communicating the benefits with the whole company early on.

  • Start honest discussions with your team and give dynamic and convincing reasons to get people talking and thinking about the change.
  • Demonstrate what would happen if you didn’t make the change and what else it could affect in the future.
  • Request support from customers in this instance who may love the product, outside stakeholders and others known in the industry to strengthen your argument.

Kotter suggests that 75 percent of a company’s management needs to support a change in order to succeed.

2. Form a powerful coalition from all areas of the business

Share the support you have from all areas in the business (not just the leadership team). Visible support from key people within the organisation will bring others on board and create a sense of urgency. Give these people key roles in the change process to help progress it.

Once formed, your “change coalition” needs to work as a team, continuing to build urgency and momentum around the need for change.

What you can do:

  • Identify the influencers in your organisation for this change, as well as your key stakeholders.
  • Ensure that you have a good mix of people from different levels within your firm.
  • Ask for a commitment from these key people.
  • Work on team building within your change coalition.

3. Create a vision for change

Create an overall vision that helps everyone understand why you’re asking them to do something.

What you can do:

  • Develop a short summary (one or two sentences) that captures what you “see” as the future of your organisation.
  • Create a strategy to execute that vision.
  • Ensure that your team leading the change are all on the same page.

4. Communicate the vision

Embed this in everything you do so it is not lost in the day-to-day operation but a powerful part of this.

What you can do:

  • Talk often about vision and change.
  • Make sure the vision is applied to all aspects of the operations. For example, ensure it’s added to the training and induction program and is encapsulated into the relevant job descriptions and evaluations.
  • Address people’s concerns and anxieties about it openly and honestly.
  • Lead by example.

5. Remove obstacles

Check constantly for processes and structures that need to adjust to allow you to execute the vision and help the change move forward.

What you can do:

  • Look at your organisational structure, job descriptions, and performance and compensation systems to ensure they’re in line with your vision.
  • Recognise and reward people for making change happen.
  • Identify, or hire, change managers whose core role is to deliver the change.
  • Identify areas or team members that stand in the way of change, and find solutions.
  • Take action to quickly remove barriers rather than letting them fester.

6. Create short-term wins

Create short-term targets – not just one long-term goal. Each “win” that you produce can further motivate all the staff especially if it’s a big change requiring a longer process and help keep them on task.

What you can do:

  • Reward people who help you meet the targets.
  • Look for sure-fire projects that you can implement without help from any strong critics of the change.
  • Don’t choose early targets that are expensive. You want to be able to justify the investment in each project.

7. Build on the change

Keep looking for improvements to the system to ensure the long term goals are achieved.

What you can do:

  • After every win, analyse what went right, and what needs improving.
  • Set goals to continue building on the momentum you’ve achieved.
  • Develop a culture of continuous improvement.
  • Keep ideas fresh by bringing in new people to lead the change.

8. Anchor the changes in your culture

Finally, to make any change stick, it should become part of the core of your organisation. Make continuous efforts to ensure that the change is seen in every aspect, giving it a solid place in your organisation. It’s also important that your company’s leaders continue to support the change. This includes existing staff and new leaders who are brought in.

What you can do:

  • Talk about progress every chance you get. Tell success stories about the change process, and repeat other stories that you hear.
  • Include the change ideals and values when hiring and training new staff so it is enforced from the start.
  • Publicly recognise key members and enablers of the change.
  • Create plans to replace key leaders of change as they move on. This will help ensure that their legacy is not lost or forgotten.