Posts

Beyond Covid-19

Well it has certainly been an interesting seven weeks; dealing with level 4 lockdown conditions and then easing into level 3 before finally getting back to a level of normal activity under level 2 conditions. Obviously things will never go back to business-as-usual as it was before Covid-19 raised its ugly head but we are able to get back to business and work on rebuilding our businesses.

Then we had the 2020 Government Budget announcements, a budget designed to make sure as many businesses as possible survive and are able to rebuild in a new economic environment.

Some businesses will never be the same, some will close and others will adapt and grow, taking advantage of the opportunity to revisit how they do business.

We reopen our office on Monday 18th May

with some Covid-19 restrictions in place.

While the office will be open please note Sari will still be working from home for a few more weeks. She is available for Zoom video conference meetings, on her mobile (021-548-489) or by email (sari@savage.co.nz)

Visiting our office

For us our focus will be on helping you as it always has been, the success of our clients is really important to us and to help you we need to make sure we have a workplace that is safe for you and our staff. This means if you do need to come to our office you will notice a few small changes that are designed to meet government requirements for operating under level 2 conditions.

We will have social distancing practices in place, there will be a table at reception for you to leave packages, there will be hand sanitiser readily available, there will be single-use facemasks available for you to use if you are meeting with a staff member and you will be required to register as a visitor to our office for contact tracing purposes whenever you visit, no matter how briefly.

Contact Tracing

We will be using the “I’m Here” contact tracing system, you will need to use your phone to scan a code when you arrive and depart. We have chosen this because it is a simple solution to use, however, our staff will be able to assist if you have any issues using it. There will also be a form to fill in if you don’t have a mobile phone. You can check out the system at www.imhere.nz so you know what to expect when you do visit us.

The Budget

The one Budget item that will have the most impact immediately for many businesses is the announcement of an extension to the Wage Subsidy Scheme.

If your business has suffered a 50% or greater decline in turnover for a two month period then you are able to apply for a subsidy to help you pay staff wages for another eight weeks.

Small Business Loans via IRD

Announced before the budget but included in the overall Covid-19 response package is a loan scheme for SMEs. The scheme (https://media.ird.govt.nz/articles/government-boosts-cashflow-support-for-small-businesses/) for SME’s is to be administered by IRD. This will be interest free for 12 months or low interest for up to five years with no repayments for the first two years if you take the low interest option. It will be administered through IRD and provides for loans of $10,000 per business plus $1800 per employee up to a maximum of $100,000.

While we can’t make the application for you we will give any of our clients up to an hour free time to help you with your application, just email Sari, Anna or Libby to arrange a time to talk.

We hope you are all staying safe and we’re looking forward to talking with you sometime soon.

Covid-19 Weekly Update 20.04.20

As these unusual times continue there are a few things to remember – stay safe and shop local, shop local, shop local!

While we are in this lock down situation together we need to remember to help one another come out of it in as best shape as possible. The best way to do that is support every local business you can.

Various restrictions under Level 3 Lockdown may make it seem like Level 3.75 but at midnight on Monday 27th April some businesses will be able to start operating again, mainly without any public contact but with online or phone orders, contactless payment and similar things only.

Also if you are currently working from home you must continue to do so if it is at all possible. With that in mind we will NOT be reopening our office under Level 3 restrictions.

However Sari and our senior staff will continue to work from home. So far this has been a little frustrating at times but we are getting everything done you need us to do. We are also set up to use Zoom video conferencing so if you want to have some more personal contact then email us to make an appointment for a Zoom meeting. Anna and Libby are available Monday to Friday 9am ‘til 5pm while Neil and Sari are available seven days a week, including evenings if required.

Here’s a link from business.govt.nz for an explanation of various alert levels and operating guidelines for businesses

If you can’t find an answer to your questions here then just email or phone us, we are here to help our clients through the challenging times ahead of us as we work on re-establishing our businesses again.

Things to Remember

  • March PAYE payments were due today
  • GST returns for the periods ended 31 March are required by the 7th of May, however if you will have difficulty in making your GST payment please contact us and we will help you sort out a deferred payment arrangement with IRD. It’s important you put an arrangement in place rather than just not paying it.
  • If you have provisional tax (3rd payment for 2020 year) then this is also due to be paid. On 7th May As a result of recent government announcements about tax relief there has been some confusion around the need to pay this. If you have this due you must pay it as it is calculated on your year end 31 March 2020 figures, not current trading figures.

And of course remember to stay safe, don’t let your social distancing standards relax because we don’t want the community to be forced back into level 4 lockdown, and most of all be kind to each other.

Being kind includes supporting every local business we can so they are here for us to enjoy into the future, so look for local business offering deliveries from the 28th April, buy from them and use other local service providers – shop local!

Covid-19 update – 14.04.20

Well it continues to be an interesting time we are working our way through. The great news is that the Covid-19 lockdown appears to be having a positive effect by controlling the spread of this illness.

While all the signs are good we still have a long way to go, firstly to get through the immediate crisis and then a very long road to economic recovery. We are expecting some of the lockdown restrictions to be eased but not expecting them to be lifted totally for a few months yet.

Today’s Government Announcement re Level 3

The Government has announced general conditions for operating under Level 3 restrictions when they do drop the Covid Threat Level from Level 4 to Level 3.

It appears there will still be strict restrictions on who can open for business and how those businesses operate. The key point is the social distancing 2 meter ‘bubble’ must be retained. We’re uncertain how this will effect Savage & Savage and whether or not we are able to operate from our offices. We are expecting to not be able to operate from the office however we do want to get back as soon as we can and will be seeing if the detail in Level 3 lockdown rules allow us to. Watch this space.

Planning

With that in mind business owners need to start thinking about what their business is going to look like post Covid-19. Some of the things to consider are when will your business be able to be up and running again? Will your business clients still be in business? How will your general customer base have changed? What will your cash flow look like for the next two years? How many staff will you need? What is your tax liability for the next two years? And many other things.

There are many things to consider and every business owner is going to have to do some serious thinking and planning. We can help you with your cashflow forecasting for the next few years so we are happy to offer our clients an hour of time from either Anna or Libby, at no charge, to discuss what you need to think about when preparing a cashflow.  If you’d like us to prepare your cashflow for you we will give you an hours’ free time when preparing it.

Recent tax changes announced

The Government has announced some changes to various taxes and payments, in particular tax carry back changes (tax losses carried forward). When we get exact details about the implementation of these changes we will share those with you but in the meantime you will need to do some panning, both for your cashflow and future tax purposes.

So we can accurately estimate your future tax liabilities it’s important we have the most up-to-date information as possible so please don’t delay sending your annual accounts information to us. By having your tax position for 2020 established we can then look at forecasting 2021 for the loss carry back if you have one. The tax relief measures will be easier to use if books are up to date.

Attached is a factsheet from the Beehive – Supporting small and medium sized enterprises during the COVID-19 crisis. This is a summary of the latest support measures being rolled out by the government.

Annual Accounts

We operate on a first in – first out basis unless there are urgent business needs like refinancing business sale etc so the sooner you get your information to us the sooner we can get your annual accounts finished.

Tax payment relief

When it comes to IRD payment arrangements your tax position needs to be established first, this goes for all tax types. It’s better to get in contact with us to request an IRD payment arrangement rather than just not paying – even though IRD will be lenient and write off interest and penalties it is much better to have a formal arrangement in place.

Payment of our invoices

We understand these are difficult times financially for many businesses and we don’t want this to be a barrier to us doing work for you so if you would like to make an arrangement to pay your account with us over a period of time please contact Neil at neil@savage.co.nz . We want to make sure we help all of our clients as much as we can.

Please continue to think about your safety if you are out and about.

We’re working on how we will operate under Covid-19 Level 3 restrictions when they come into place, hopefully in the not too distant future.

Covid-19 Update – 30.03.20

We certainly hope you are all well and sticking to the rules, everyone doing the right thing now will help businesses get up and running again. Having said that we are expecting the current four week lock down to be extended, to possibly eight weeks, and then restrictions to come off slowly I.E. – reverting back to level three restrictions for a few weeks then back to level two.

We have no definitive evidence of this but looking at what’s happening overseas this is what we expect. The real message here is we are in this very unusual and curious situation for many weeks to come and we need to be prepared for it.

Savage & Savage invoicing and payment

We will be emailing March invoices as usual in the next week, however these will not contain the same level of detail we normally include as we are working remotely and don’t have access to some of the information we use each month due to not being able to get in to our premises. If you require a fully detailed invoice we can send this to you when we are able to return to the office, but do note the totals won’t change.

We also understand it a difficult managing cashflow for many so with this in mind we will work with clients to make payment over time if required. We are in exactly the same position as many of our clients, we are a small business too and are subject to the same pressures of not being able to work at normal levels to generate income.

It is important we all pay our regular invoices on time so the economy keeps ticking over but as I said above, we are very happy to work with clients to arrange payment over a few months. Please just contact Neil and he can make suitable arrangements with you. His contact details are shown below.

Wage Subsidies

Many of you will have applied for and received the wage subsidy. You need to try your hardest to pay employees named in the application at least 80% of wages. If you want and are able to you could give employees the option to top it up to 100% using annual leave or sick leave. If it isn’t possible pay 80% you need to pay at least the subsidy rate. Employers are obliged to retain the employees for whom they receive the subsidy for 12 weeks.

Paying the subsidised wages

When processing the pays in payroll, work out what 80% of their normal hours would be and pay that as ordinary hours. By paying it as ordinary hours PAYE, Kiwisaver, holiday pay etc is calculated as it should. If the employees hours vary you will need to work out an average of the last 4 weeks hours. If the last 4 weeks are not an accurate picture of their usual fluctuations in hours you can average out over the last 12 months. If topping up pays with annual leave or sick leave, use appropriate pay code.

Please set up a spreadsheet or similar to keep track of how much of the subsidy is used each pay as any balance unused is earmarked for wages but can be used for other employees. If you use the full subsidy amount for each employee each pay period, then you wouldn’t need to track it.

Reconciling transactions

Sole trader

The subsidy payment received has no GST. Code to other/sundry income, change to no GST. It is taxable as it is received by the end user.

Companies that pay end of year Shareholder Salary – no other employees

The subsidy payment received has no GST. It is taxable to the shareholder when taken as drawings. As it will be used over a period of time and is a grant earmarked for wages, it should be coded to a liability account called Subsidy with Conditions.  We are more than happy to take care of coding if you’d like. We will then transfer the subsidy out of the liability account as it is used up and ensure correct coding and tax treatment.

Company or partnership with employees

The subsidy payment received has no GST. As it will be used over a period of time and is a grant earmarked for wages, it should be coded to a liability account called Subsidy with Conditions.  We are more than happy to take care of coding if you’d like. We will then transfer the subsidy out of the liability account as it is used up and ensure correct coding and tax treatment. Taxable to employees as wages.

For all employers (Sole traders excluded), the income is not taxable and it is not a deductible expense when paid, we will take care of coding and ensure correct treatment when we prepare your annual accounts.

Rent and Lease Obligations

The impact for this Covid-19 event is likely to be long and lingering,

With this in mind, we recommend you contact your landlord sooner rather than later to discuss your lease and rent situation. Many leases are based on the Auckland District Law Society form and depending on the version of the ADLS Lease form you have signed with your landlord (clause numbers may vary) you should be able to negotiate a reduction in rental to a ‘fair proportion’ of the rent and outgoings as provided under clause 27.5 (No Access in Emergency) of the lease agreement.

  • There exists an “emergency” that prevents the tenant from gaining access to the premises to fully conduct business from the premises because of reasons of safety of the public

27.5 (a)       Access is prohibited

27.5 (c)       Restriction on occupation of the premises is by a ‘competent authority’ (the government of New Zealand)

We believe that lease clause 27.5 can be relied on to enter into negotiations with your landlord.

We have seen a range of negotiated results and it is apparent landlords are prepared to share the pain everyone is experiencing, the question of what is a fair proportion of rent and outgoings is going to vary depending on your business and lease term and conditions but you should be talking with your landlords now.

Please don’t hesitate to contact us if you have any questions.

Residential Loss Ring-fencing

From the 19/20 year onwards losses from a residential rental property can no longer be offset against other income such as salary, wages or other business income.

The loss from one rental property can be offset against other residential rental income if you choose to use the portfolio basis (if you own more than one property the rules can be applied to all your affected properties as a single portfolio).

If you have unused losses at the end of the year they will need to be carried forward and can be used to offset future income from residential rentals including taxable income on sale if the bright line rules are triggered and depreciation recovered (if you owned the property before 2010). In some situations, any remaining losses can be released from the ring fencing rules, but more often than not they will need to be carried forward until the day you receive surplus residential rental income again to offset the losses carried forward against.

Certain properties are excluded from the ring-fencing rules including your main home, farmland, property that the mixed-use asset rules apply to, business and commercial premises, to name a few.

If you are a client of ours holding residential rental property you will hear from us over the next few weeks with more specific information.

If you have any questions, please contact anna@savage.co.nz

Residential rental loss ring-fencing

Many of you will have heard about the ring-fencing of losses made from residential rental properties which applies from 1 April 2019.

Deductions for residential properties are now ring-fenced so they can only be used against income from that property, or sometimes a portfolio of properties.

Deductions that exceed the income from that property/portfolio of properties will need to be carried forward, to offset future income from that property/portfolio of properties.

This means that losses from a rental property, that you in the past would have used to offset against your other income, is no longer available for that purpose. They can only be used to offset future profits from that property/portfolio of properties.  

The rules apply to all entity structures, ie sole traders, partnerships, trusts, LTCs and ordinary companies.

Family homes, farms, commercial rental and business premises are excluded.

We will send some detailed information including going over different scenarios, to those of our clients who have residential properties in the new year.

International Automatic Exchange of Information

New Zealand has signed up to the Automatic Exchange of Information (AEOI) – a global OECD initiative to combat tax evasion.

Inland Revenue has been running an AEOI awareness campaign since 9th June 2018 with a primary focus of this campaign being to generate awareness among New Zealand tax residents most likely to have offshore accounts or financial interests, so they can take steps to determine if their tax affairs are in order and disclose if they identify issues. New Zealand tax residents with complex international tax affairs should contact us for support or advice.

This awareness campaign has included online advertising on relevant websites and via Facebook. These ads include a link to IRD’s campaign landing page.

As part of AEOI financial institutions will provide Inland Revenue with information about foreign tax residents with financial accounts in New Zealand, in line with the Common Reporting Standard (CRS).

IRD are now exchanging information with many other countries so it is vital you tell us about any income or assets you may have in other countries, if you don’t then chances are IRD will find out about it and that may cause you a few problems, something no one likes happening with IRD

The requirement of New Zealand Tax Residents to report world-wide income hasn’t changed, but IRD are now more likely to find out about it even if you don’t declare it. Please make sure information regarding ALL overseas income, bank accounts or assets is provided to us for your tax return preparation, even if you think it’s non-taxable income!

AIM Method of Calculating Provisional Tax

Many of our clients may have seen or received information from IRD about the AIM method of Provisional Tax calculation

This method will become available for use on 1st April 2018. We are not recommending it to our clients for the following reasons:

  1. Most SMEs (Small Medium Enterprises) qualify to use Standard Provisional Payments without any Use of Money Interest
  2. Depending on your business you may have to do things such as a physical stock take every two months
  3. While IRD are promoting that this is an easy method to use in fact, in our opinion, it is not and also the option is not available through Xero and MYOB for clients to use – it is only available to firms such as ours to use.

If you want to discuss the AIM option please give Sari or Anna a call.

Get the IRD payment dates right

We would like to remind everyone to make sure that when you are making tax payments to IRD they check that you have selected the correct tax type (e.g. INC for Income Tax, GST for Goods & Service Tax, DED for employer Deductions that include Kiwisaver contributions as well as PAYE etc).

Also, it’s very important that you select the correct period and year that the payment is going to. Most banks have a ‘Pay Tax’ or ‘Pay IRD’ tab in their on-line banking facilities so we suggest you follow the steps using this rather than setting IRD up as a regular payee.

Potential consequences of getting it wrong:

For example, if you are a company and you accidentally pay 2018 provisional tax to the 2017 year, and your 2017 annual accounts have not yet been completed, IRD will not allow this payment to be transferred to the 2018 year unless we fill out additional paper work, it will be applied to the 2017 year and that means it will show as overdue in your 2018 income tax account.  So please chose the year carefully.

Tax Refund Companies – First published on Stuff website 13.06.17

The matter of how Tax Agents, particularly tax refund companies has been raised in the media again and the most recent article comes with a warning about how your refund could be paid into their bank account even if you do your own tax return online.

At Savage & Savage we never receive client tax refunds into our account, not even our Trust Account. All client refunds go directly to the client and that is why we ask for your bank account details in our client questionnaire each year. And we most certainly do not take fees from your refund.

It is important you fill in your bank account details on the Client Questionnaire Forms each year as we never assume you haven’t changed bank accounts.

To see the original article as posted by Fairfax Media on their Stuff website click here

The article is copied here;

You might still have to pay a tax refund company a fee – even if you do your return yourself.

Casey Kaumatule thought she was being sensible and saving money when she decided to take matters into her own hands and do her partner’s tax return herself, online.

She opted to do it via the Inland Revenue website rather than paying a tax refund company to handle it.

“We got a good amount that was owed to us. But when I checked, I noticed it was paid to a different bank account. I rang IRD and the tax return money had been sent to Savvy Tax Agents. They did my partner’s tax return before and their account wasn’t removed.”

She spoke to the firm, which agreed to waive the fee it would normally charge to release the money that had been sent to it. Kaumatule said it was her mistake not to have checked the details, but it was still frustrating.

Another woman, Samantha Dallas, was also caught out. She said she was not sure when she had signed up with the tax refund firm, but discovered after she had processed her personal tax statement that they were listed as her tax agents.

“I think all tax should just be done through IRD. We already get taxed and private tax agents make it feel like you are getting taxed on your tax.”

People who sign up to have a tax refund company prepare their tax returns usually agree to have those firms act as their tax agents from then on, with their bank accounts set up to process future refund payments.

That means, even if they do their return themselves in future, the agent can end up with the refund.

Consumer NZ spokeswoman Jessica Wilson said it was something her organisation had received complaints about.

Many companies charge a fee to release tax refunds that have been put in their banks accounts in error.

“Problems arise when people aren’t aware they’re giving the company the authority to act as their tax agent – and it remains so until the arrangement is cancelled,” she said.

“There’s an onus on tax refund companies to keep their customers informed the arrangement is still in place. If a company hasn’t done so and receives the refund as a result of a return the customer has filed, we think it shouldn’t deduct a handling fee.”

NZ Tax Refunds, or WooHoo, charges a $25 handling fee in these circumstances.

Managing director Gabrielle Purchas said her firm would automatically push money back to Inland Revenue when a client had not completed the return within its system.

She said it was an administrative burden for her organisation to have to deal with and was something that could be overlooked. “We send it straight back to IRD if we can see it hasn’t been requested.”

Savvy Tax Agents said it would do the same but would not charge.

An Inland Revenue spokesman said it was clear on its MyIR online service whether a person’s account was linked to a tax agent.

“The best advice would be that if you have used a tax refund company in the past then you should check all your details are correct on MyIR before you start applying for a refund yourself.

“Once the customer has reached the My Tax Agent tab on MyIR, they can see who their tax agent is but to de-link they would need to give us this instruction by phone or through secure mail in MyIR.”

 – Stuff