Inland Revenue has commenced consultation on what topic should be covered in its next Long-Term Insights Briefing (LTIB).

For some, the increase in the trust tax rate from 33% to 39% has prompted them to ask the question – should we wind up our trust?

As businesses expand, a common decision is whether to create new companies to accommodate new ventures, risks, products and/or acquisitions.

A common complaint made by employers is that the amount of time it takes to meet their FBT obligations is disproportionate to the amount of tax it actually generates.

The depreciation rate for non-residential buildings has been reduced to 0%, effective from the 2024 / 25 income year. However, commercial fit-out remains depreciable. This makes the distinction between the two important because it is the difference between not being able to deduct any depreciation at all versus being able to claim a good proportion of a building’s cost as ‘fit-out’.

Over the past 18 months there have been a number of businesses fall over – which in and of itself has not been surprising given the recent economic climate. However, one element that serves as a warning for us all is the flow on effect of those failures. Not just in a tangible sense, where suppliers or ‘subbies’ are left out of pocket and can’t survive, but where acquaintance businesses can be tarred with the same brush.

We get it! We understand that these are challenging times, and businesses are finding it increasingly difficult to receive payments for their services. With this in mind, we've implementing the Ignition proposal for services. 

Daniel's encouragement to renew your Audit Shield policy.

What was a temporary tax concession relating to donated trading stock has now become a permanent one thanks to the enactment of the Taxation (Annual Rates for 2023–24,Multinational Tax, and Remedial Matters) Act 2024 on 1 April 2024. Prior to March 2020, in most cases, if a business donated trading stock it resulted in deemed income equivalent to its market value. This resulted in a business being taxed on a deemed profit margin, even though no cash was received.

BAU is a phrase that is used to describe “business as usual”. It is a good barometer of whether anything strange or unusual has occurred or whether things have
been BAU. Invariably, non BAU transactions will occur: an insurance payout, a large asset purchase, a fine or a penalty. This then leads to the question of what
the tax treatment is of that non-BAU transaction.

For businesses that trade through a company, circumstances might arise in which the shareholders consider selling a minority stake in the company to a key employee or group of employees.

This could be to ensure that key talent is ‘locked in’ for the long term, as a means of succession if the existing shareholders are looking to wind-down or simply as a means to link effort to reward.

The pros and cons of transferring shares to key employees through an Employee Share Scheme (ESS) need to be carefully weighed because the devil is in the detail.

It is important to regularly ask whether you are providing the products that your customers want and whether there are any new products that you could provide to ensure you are evolving with changing times as you look for the next income stream.

After a relatively quiet few years through the Covid pandemic, the Inland Revenue Department’s (IRD) audit activity has slowly started to increase over the past few years.

It comes as no surprise that since New Zealand entered an official recession in December 2023, individuals and businesses have been forced to take steps to cut costs to survive the impact. Having not experienced a recession since March 2008, many New Zealanders might not remember the 18-month downturn that finally came to an end in June 2009. However, one key lesson is that recessions eventually end, and businesses need to adapt to market conditions to survive. So, what strategies can business owners use to ride this wave?

Check if your business cashflow is healthy or not.

When it comes to managing cashflow in your business, there are a few key areas to look at. These tips will help you figure out if your current processes are draining your cashflow or actually helping to improve it:

A recent technical decision summary (TDS 24/02) issued by Inland Revenue involves a dispute with a taxpayer that purchased several residential rental properties. Soon after purchasing, the taxpayer conducted renovation work on the properties to various degrees, such as replacing kitchen units and
carpet, adding dishwashers and heat pumps, and cleaning and repairing roofs.

All too often we get into a routine without stepping back and considering why we are doing things. The same goes with our accounting systems and
processes. Your finance team is probably busy keeping on top of their day-to-day workloads but has consideration been given to how productivity can be
improved through the use of readily available software?

Reconnecting with Our friends from WE Mana Chartered Accountants

We've had the pleasure of working with WE Mana, and their outsourcing team in Samoa, for over a year now. It's been a fruitful experience, and we look forward to many more successful collaborations with them in the future.

Recently we reconnected with our business colleagues and friends from WE Mana. Wyndi, Eli, and the team, when they were in town for an ICAANZ event and enjoyed a kai and a catch up. 

Dan and Tui recently participated in The Gap Master Class held in Auckland. This leadership team development is part of our ongoing strategy to build Yorke Stone's Mana and reputation in the business world.

In March 2023, legislation in relation to the platform economy was passed, affecting the GST treatment of services made through an electronic marketplace
from 1 April 2024. We saw something similar back in 2019, where the GST rules on imported goods were amended to treat operators of online marketplaces
as liable for returning GST, as opposed to individual sellers. Now the rules are being expanded to include listed services, such as accommodation, ride-
sharing services and food delivery services.

Rates are rising across the country, with a recent economist’s report showing an average expected rise of 15%. This is the largest rise the country has seen
since 2003, which begs the question, where is all the money going?

Along with changes to the interest deductibility rules, legislation has been passed which repeals the current bright-line tests, replacing them with a new
(or old) 2-year test.

With the new Government now firmly settled in, legislation has been passed which reverses the interest deductibility limitation rules that were introduced by the previous government in 2021.

As previously introduced, the rules phased out the ability to deduct interest on loans drawn down before 27 March 2021 to purchase residential property over a period of five years. For loans drawn down after 27 March 2021, no interest deductions were allowed unless the property qualified as a ‘new build’. 

The UK’s tax collection department (HMRC) has been sending letters to tens of thousands of taxpayers, demanding they pay large outstanding tax obligations.
The letters have come as a surprise to many and have allegedly been linked to 10 suicides.

We had our Yorke Stone business planning session 24th April 2024 with Mark Jenkins from 2020 Business Dynamics who is also one of the founding members of The Gap. The Gap is a modern accounting firms business advisory portal. We have been a member of The Gap since 2020. 

If you rent out the family bach through Bookabach or Airbnb or do some driving on Uber for extra income or more generally, if you earn income through online platforms that put together service providers with customers, there are more tax changes you need to know about.

After the introduction of the Trust Disclosure rules in March 2022, in November 2023 Inland Revenue released a high-level summary (in the form of a 40-
page report) of insights from the first year of reporting.

While tax advisors and clients alike may have begrudgingly completed the disclosures initially, the statistics may prove to be interesting.

The stated purpose of the trust disclosure rules was to provide insights into the way trusts are used, and to ensure compliance with the 39% individual tax rate. The information gathered included reporting on details of settlors, individuals with powers of appointment, beneficiaries, and various financial information.

The concept of what is a “dividend” is very broad and starts with the default proposition that any transfer of value from a company to a shareholder is a dividend.
That concept includes the simple scenario of an interest free loan to a shareholder or a person associated to a shareholder; which can also include loans between companies.

For 99.9% of the time, New Zealand companies are incorporated to operate a business and derive income. On establishment, the focus tends to be on items such as:

•  whether a company is the appropriate vehicle, e.g. does limited liability protection warrant it;
•  who should own the shares, e.g. in personal names or in a Trust; and
•  who should be appointed director.

As increasing interest rates have bitten and with industry sectors such as retail and construction not performing as strongly, some businesses are struggling.

As the end of the financial year approaches, now is a good time to assess whether any of your accounts receivable need to be written off as ‘bad’. This is because, in order to claim a tax deduction, a bad debt needs to be physically written off as bad within the income year.

The Working for Families Tax Credit (WFFTC) is a notoriously complex scheme when it comes to determining eligibility and quantifying entitlement. This leads you to wonder how well the scheme is policed by Inland Revenue, and whether fraud is able to ‘fly under the radar’.

Accordingly, it was heartening to see a case brought before the Taxation Review Authority in October of last year regarding a taxpayer making false claims about their de facto relationship.

Sitting back at your desk after a month of busy family time or relaxing beach days, business owners and executive teams should start to think about not only
the year ahead, but the long-term viability of their businesses.

Here in New Zealand, we value simplicity and we call things as we see them. A spade’s a spade and a marshmallow is confectionary.

However, over in the UK, things are a bit more complicated. Value Added Tax (VAT) is charged on goods and services (like GST is in NZ) but is subject to a number of fiddly and somewhat subjective exemptions.

In today’s workplace environment, expectations around employee benefits are changing, with the norm shifting in the employee’s favour.

For many, the days of a 9-5 workday and mandatory workplace attendance are a distant memory, to the point where flexible hours and working environments are considered a bare minimum.

As the war for talent has evolved, so to have employee expectations and what employers are willing to provide to not only meet, but also exceed those expectations. It is also being acknowledged as not only a means to attract talent, but also as a way to increase productivity in the workplace.

As business owners, it's often easy to get caught up in the chaos of running your business and lose sight of our personal well-being, however, it's crucial to make time for ourselves and indulge in activities that bring balance to our lives. 

As many of our business owners know, this time of year can bring unique challenges and stress. We’ve certainly seen many business owners struggling with wellbeing this year, and have felt the same at times ourselves. 

As we approach the end of the year, it is crucial to assess your cash flow requirements for the upcoming four months and ensure you have the necessary financials and forecasts in place. To illustrate the importance of proactive financial planning, here's a case study from one of our clients.

Over the past six months we have been carefully nurturing and formalising a number of collaborations. An intentional step towards our business growth strategy alongside offering more value to our client experience as part of the Yorke Stone Whanau. These alliances we believe will help all of us strengthen our businesses.

A standard data policing check completed by Inland Revenue is to review taxpayer GST filing patterns to identify taxpayers that are GST registered, but
perhaps shouldn’t be.

In order to qualify for GST registration, a taxpayer needs to be conducting a “taxable activity”. This comprises a continuous or regular activity that involves making a supply of goods or services for consideration. This is a different test to whether a person is operating a “business” for income tax purposes, as it does not require an intention to make a profit.

Last year, the Green Party hit the headlines for suggesting banks, fuel companies, supermarkets, building products suppliers and energy generators/retailers should pay tax on super profits.

So, as we go into the election, we should give some thought as to whether some new innovative taxes are warranted.

The buoyant covid subsidy funded days are behind us, and New Zealand has entered a ‘technical’ recession. This was reinforced by the recent announcement that New Zealand’s corporate tax paid was almost 11% down in the 11 months to May relative to Government expectations.

"Yorke Stone assisted me in purchasing the building for my business, which was one of my three year goals, much sooner than I had expected"

"Through an organization called Wharariki, I met Nancy and Daniel when I was in search of an accountant who could help me achieve my goals and provide proactive, helpful, welcoming, and understanding services.

Read more here

Here we look at the recent legislation that has been passed around retention money and what this means for subcontractors.
Retention money relates to money owed to a subcontractor that is retained by a head contractor, which is usually a percentage of the contract value, to ensure work is completed as per the contract. Read the full article here.

The leaky homes crisis represents one of the most severe problems faced by New Zealand’s property sector and continues to cause stress and anxiety for those affected. Adding to the uncertainty for rental property owners has been the question of whether repair costs are immediately deductible as ’repairs and maintenance’ Read the full article here.

With the upcoming elections, this article on the Tax policies may be of interest. 
Given that either Labour or National are likely to enter into coalition agreements of some form with the Green Party and Act, respectively, and the tax policies of the two main parties are more ‘vanilla’, it is worth reviewing the tax policies of the two minor parties as this is where unexpected change may come from.

One of the ways Yorke Stone helps business is working with the Pasifika Business Funding. If you or a business you know might be eligible contact us for a discussion. Here Crawford Joinery share their story of the effect this has had on their business.  

 

Andrew and the team at Ultra IT have been on a massive trajectory in the past year, most recently purchasing Biz IT.  

Andrew is an excellent example of someone who uses the core value of collaboration within his business. Here we share some feedback from Andrew on how Yorke Stone and The Alternative board have helped him on his business journey.   

Inland Revenue recently issued a draft interpretation statement regarding bright-line and its application to certain family and close relationship
transactions.

Using a trust to manage and protect a family’s business and personal assets has been a common practice in New Zealand. However, with the recent increase in the amount of information required to be supplied to Inland Revenue, and now the Government’s decision, as part of its 2023 Budget, to increase the trust tax rate from 33% to 39% from 1 April 2024, many will be rethinking their position. 

Inland Revenue made the headlines end of April 2023 with the release of its report on the amount of tax paid by our high-wealth individuals (HWIs).The findings were that HWIs’overall effective tax rate when taking into account all sources of income, including unrealised capital gains, is 8.9%.

Yorke Stone are very humbled and proud to be in a position to assist Waitomo with helping the Tai Tokerau community through their mahi. This is a practical example of how we've used innovation to work with a client. 

The tax treatment of residential rental investments has increasingly become a tangled web of complexity due to changes in legislation over the past few years.

In response to the adverse weather events that hit in January and February this year, a number of tax concessions were released on 14 March 2023 in an attempt to provide some relief to those who were impacted.

The call for action regarding climate change and mitigating man’s negative impact on the planet is not new. However, there has been a shift in the last few years. It has moved from being a focus of ‘greenies’ and the ‘young’ to being accepted by the mainstream population as something that can no longer be ignored

One of the fundamental director’s duties within the NZ Companies Act 1993 (‘the Act’) is to act in good faith and in what the director believes to be the best interest of the company. This has traditionally been interpreted to mean decisions should be aimed at maximising shareholder returns. In September 2021, an amendment was proposed to make it clear that directors of companies can consider a wide variety of factors.

Nancy's invisible puppy is a story of how our lovely, kind-hearted Nancy got scammed, and a few tips to safe guard yourself from the same fate!
 

In New Zealand the provisional tax regime is designed to help taxpayers manage their income tax obligations, by requiring certain taxpayers to pay tax in instalments throughout the year, instead of one large lump sum at the end of the year. This regime applies to taxpayers who have residual income tax (RIT) of greater than $5,000 in a tax year – RIT is the amount of income tax payable by a taxpayer after deducting tax credits (e.g. RWT, PAYE).

A provisional taxpayer has four different options available when determining the amount to pay at each instalment:

The labour market is tight at the moment and seems to be getting tighter with each passing month. What this means, is that recruitment for staff is taking much longer, with a reduction in both the number and skills of applicants. Getting the right staff is imperative for your business growth. 

This article aims to give some background on why this may be happening. 

The Pacific Business Village initiative was launched in Tauranga by the Minister for Pacific Peoples, Aupito William Sio on 29 April 2022 and a large number of Pacific Networks, Providers and Businesses were in attendance.

With the rate of wage inflation being a hot topic at the moment for New Zealand businesses, we have done some forecasting as to what the the marginal tax thresholds may look like, and the potential financial impact it may have on you.
 

The 31st of March year end can be stressful for businesses. With this in mind, we share some top tips for making this time of the year a little easier.

The Inland Revenue are making it clear that its interpretation of donations to schools has changed.

Colm is one of the first Pacific Business owners we are mentoring through the Business Village funding from the Ministry of Pacific Peoples.

As Covid restrictions at home and abroad start to ease, a feeling of normality begins to surface; gone are the mandates, the scanning in and selected compulsory mask wearing. Life starts to feel good again, as if the last two years were just a fever dream. 

The third round of the Kick Start program took place at The Hub in Whangarei on the 3rd of May 2022. Nancy and Steve delivered Yorke Stone’s component of the five-week program. 

This is the 3rd trip Dan and Nancy have been on, to work on their business. Yes, they practice what they preach.

Yorke Stone is part of a group of 7 accounting firms from across New Zealand that meet every 3 months with their coach, to work on how we can serve our clients better. 

The Institute of Chartered Accountants New Zealand put on an event 3rd of May to celebrate the academic and community achievement of accountants in Northland. 

Two changes have recently surfaced in relation to trusts and the disclosure of trust information.

Introducing Tui Yardley our new Client Services Manager. Tui was born and raised in Kaipara then she moved to live, study and work in Whangarei from the age of 17yrs.

On 30 March 2022, the Taxation (Annual Rates for 2021-22, GST and Remedial Matters) Act 2022 received Royal assent. Its passing into law brings with it the extension of the residential bright line period from 5 to 10 years and denial of interest deductibility for residential investment properties. 

Download our end of year checklist.

Kia Ora team, It has been a while since our last newsletter and like many of you we are navigating our way through the diff erent challenges of being in business during this time.

It is inevitable that at some stage a person will undertake a transaction where the applicable tax treatment is complex or unclear. 

From initial fears of a prolonged economic slump due to Covid-19, the global economy has seen a resurgence led by unprecedented demand.

The summer break is a time for reflection on the year that has been. For business owners, this break is an opportunity to evaluate their future strategy and consider whether it is time to exit, or conversely, grow by purchasing someone else’s business. Whether buying or selling, it is a demanding exercise.

Over the last two years most of us have had to deal with working from home in some way, shape or form, and for those who are parents, added difficulties arose with trying to entertain and educate children whilst also fulfilling employment duties.

For those of you who prepare and file FBT returns on behalf of a GST- registered employer, you will be familiar with the GST on FBT adjustment that forms part of the FBT return.

The link below will take you to the government website that has the most current Active Government Response Package at a Glance:
https://treasury.govt.nz/information-and-services/newzealand-economy/covid-19-economic-response/package

In addition to the tax loss carryback scheme, the New Zealand Government has introduced a number of other tax changes to assist businesses and individuals to get through COVID-19. Currently, if an asset is purchased for less than $500 it does not need to be depreciated.

When you need the best electricians in Whangarei, Mr Electri City are the team to call.

Tracey & Jerrie bring a fresh new approach to electrical services around the Northland district, offering quality work you can rely on.

As New Zealand moves down the COVID-19 alert levels businesses face a long transition period from the unknown to the ‘new normal’.

Social distancing, strict health and safety guidelines, restricted international and regional travel are amongst numerous practises that will likely continue to apply for as long as COVID-19 remains a global threat.

Buying or selling a business is a significant decision, and commonly involves vendor and purchaser negotiations on many aspects of the transaction.

The Yorke Stone Team hasn’t stopped since Covid-19 hit and we are taking this time to stop, get our energy levels back up and rest. 

We are back nice and fresh from the 6th of July 2020. Accountants: part time robots but mostly human. We thank everyone for understanding.

We all know how Covid-19 has impacted our economy and our businesses. Some businesses have experienced a growth, others a downturn and the struggle to keep staff employed and the business open is very real for others.