Johnston Associates Chartered Accountants

Masterminding Brighter Tomorrows

Annual Accounts

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Are you owed a refund from ACC?

If you were in your first year of self-employment between 2002 and 2017, or paid provisional ACC levies after ceasing trading, ACC may owe you a refund. Customers receiving refunds will also receive an interest payment.

ACC will refund:

  • all first-year levies collected between 2002-2017 from self-employed customers who worked full-time (averaged over 30 hours per week over the financial year), did not have a mix of employee and self-employed earnings and did not cease being self-employed in the same year.
  • all businesses who paid provisional invoices and weren’t required to do so because they later ceased trading or changed their business structure.

ACC expects the refund process to be completed by 31 March 2019.

What you need to do

To find out if you may be eligible for a refund go to acc.co.nz or use MyACC for Business. If you may be eligible, you’ll be prompted to provide up-to-date contact details.

For more information and updates about ACC levy refunds go to acc.co.nz, call 0800 222 776, or email business@acc.co.nz

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End Of Tax Year Checklist

The end of the tax year is on 31 March 2018. Here are a number of ways you can straighten things up in advance:

Think about. …Deductions

Bad Debts
Write bad debts off in your debtor ledger before balance date so you can claim a deduction. Make sure your records show you have taken reasonable steps to recover the debt prior to write-off. Note the details so we can check the GST adjustments.

Employee Expenses
You can claim deductions for holiday pay, bonuses, redundancy payments, long service leave etc., if you commit to them before year end and pay them within 63 days of balance date. Check holiday pay has been calculated correctly.

Expenses
Can you pre-pay expenses such as stationery, postage and courier charges before 31 March? You may be able to claim for them. Check with us. There are limits to how far some prepaid expenses are claimable, such as on rent, insurance, plant and equipment maintenance contracts, travel and accommodation.

Fixed Assets
Are you still using all of them? Can some be written off?

Repairs/Maintenance
Complete planned maintenance or repairs before year end for a tax deduction. Ask us if you aren’t sure whether the expenditure is classified as repairs and maintenance (which would be deductible) or as a capital expense (which wouldn’t).

Stocktake
Dispose of obsolete stock by year end or write it down to its net realisable value (the lesser of cost or market value). If your stock is worth less than $10,000 and turnover for the year less than $1.3m, you won’t need to include your stock movement for tax purposes.

Vehicles
Don’t forget to note your odometer reading at year end. If you keep logbooks noting business and personal use, mileage and costs, ensure these are all in order.

Think about.…Income

Credit Notes
Look for credit notes issued to customers after balance date but related to sales made prior to balance date. Note these so you can reduce your taxable income for the current year.

Increased Income
Is this year’s income a lot higher than last year’s? If so let us know. It might be a good idea to consider making a voluntary provisional tax payment.

Losses
Did your group of companies have losses in 2017? Groups of companies may offset profits and losses against each other if you make loss offset elections and subvention payments by 31 March. We can help you with this.

Retentions
Check contracts for the terms on retentions owing. Have you invoiced retentions but they are not payable until work is complete in a subsequent tax year? They won’t count as assessable income for this year. However, If they are payable this year they are assessable income. Note retentions you have invoiced which are not receivable until the next tax year.

If you have any questions or concerns regarding your end of tax year preparation then don’t hesitate to contact us – we are here to help.

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Claiming expenses when away on business

You can claim for lots of daily expenses when you’re travelling for work. If you take a holiday as part of the same trip, you can only claim for the parts of the trip that were work-related.

What can you claim?

In general, when you’re away from home you can claim for:

  • flights
  • taxis, or mileage if you use your own car for business travel
  • accommodation
  • meals and snacks.

Accommodation

If you’re attending a work-related meeting, conference or training course that requires an overnight stay, you can claim the cost of accommodation, eg hotel, motel or short-term rental.

If an employee is working away from home for an extended period, eg on secondment, you can claim for accommodation, or any accommodation allowance you pay, as long as they won’t be gone for more than two years (or three years for capital projects).

Food and drink

If you or one of your employees buys a meal while travelling on business, the cost is 100% deductible. But you can only deduct 50% of the cost of food and drink if either:

  • the trip is mainly for the purpose of enjoying entertainment, eg a team bonding trip
  • the meal or function involves an existing or potential business contact as a guest
  • a celebration where you won’t be working, eg a reception, or a staff Christmas party
  • you or your employees can also claim for snacks and refreshments, eg tea and coffee, while they’re away if you normally provide these refreshments at work.

Entertainment

On a work trip, you can claim the cost of entertainment if its purpose was to:

  • build up business contacts, eg taking a potential client out for dinner
  • keep your employees happy, eg providing tickets to a show
  • promote your goods or services, eg offering food to entice customers to a stall at an expo.

If the entertainment is helping you earn your income, it’s usually deductible when it’s time to work out your tax.

Within New Zealand, entertainment expenses can be either 50% or 100% claimable — check with Inland Revenue.

If you’re travelling overseas, you can claim 100% of work-related entertainment expenses.

For expert tax advice speak to our experienced tax team – we’re here to help.

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Several ways taxpayers can get caught out

Taxpayers who earn income from various sources may get caught short if they don’t plan ahead. This could come about in various ways:

• Airbnb
• Overseas investment
• Shares in an overseas company

AIRBNB INCOME

If you rent rooms or homes through Airbnb, you may not realise that the IRD considers you to be a landlord. Your rental income must be included in a tax return.

If you’re unsure of your tax obligations please consider speaking to one of our tax experts.

OVERSEAS RENTAL PROPERTY

You must declare any rental income you get from properties overseas. You can claim deductions for rental-related expenses, and you may also be able to claim a credit for tax paid in the other country on that income.

Complexities can arise when loans and mortgages are held overseas. Call us if this applies to you.

OVERSEAS TRUSTS

Under New Zealand law, trust matters are settlor-based. This means New Zealand tax treatment of the trust depends on where the settlor of the trust lives. As a trust does not have a legal personality, there is no concept of residency for trusts. However, a trust is recognised as a taxpayer, so New Zealand generally verifies the residency of the trustee to determine which income of the trust is subject to New Zealand tax.

IF YOU OWN SHARES IN A FOREIGN COMPANY

You will have to pay tax in New Zealand on foreign share dividends unless:
• You are a transitional resident, or
• The shares are subject to the foreign investment fund or controlled foreign company rules.

Dividends paid by overseas companies to transitional residents or non-New Zealand tax residents are not taxable in New Zealand for the transitional period.

The rules surrounding Foreign Investment Funds and Controlled Foreign Companies are complex and you should get professional advice on the taxation of offshore investments, whether from us or your financial advisor.

OVERSEAS-ISSUED CREDIT/DEBIT CARD

Having an offshore credit or debit card may or may not trigger New Zealand tax obligations. Note, though, that even if foreign withholding tax has been deducted on foreign income, that does not necessarily mean the income is no longer taxable in New Zealand.

It can be tricky to work out your tax position. Call us if you’re not sure, we’re here to help.

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31st March is fast approaching – How we help you!

31 March calendar day over road marking yellow paint line

It’s that’s time of year again! With the end of the financial year and standard balance date (31st March) fast approaching, we’ll begin to prepare the financial reports and tax returns for you, our clients.

The Companies Act and the Financial Reporting Act 2013 cover your legal obligations in terms of financial reporting. These obligations vary depending on the size of your business. The size of your business entity is determined by taking into account your revenue, expenses and assets.

If you are a small or medium sized business your obligation is to produce accounts that meet the IRD’s minimum financial reporting requirements. Larger businesses and those issuing debt or equity securities, are required to prepare financial statements to a higher standard of accounting, these are mandated by the External Reporting Board (XRB).

If you’re unsure about your obligations, please contact us. If you’re a current client we have you covered and know exactly what needs to be prepared for your business.

Many of you will need to comply within the minimum financial reporting requirements. These are detailed on the IRD website.

  • If you think the “minimum” looks pretty maxed out, then rest assured that we take care of the details for you, as a current Johnston Associates South client please complete our 2016 Client Questionnaire to allow us to begin working on your financial statements.
  • If you are not a current Johnston Associates South client, please contact us to find out how we can make things simpler for you.

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Not just Chartered Accountants!

These days there’s more to being a Chartered Accountant than just looking at the balance sheet. At Johnston Associates South, we’re proud to be Chartered Accountants, but more than that, we’re proud to represent the changing face of accountancy. 

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We believe there are many other job titles we could adopt as part of our role in your business, here is a list with five examples…

  1. Entrepreneur – We always adopt an attitude and approach of thinking outside the box for your business. We embrace critical questioning, innovation and strive to help your business continually improve.
  2. Relationship Coach – We help you liaise with key stakeholders within your business and externally. That might be shareholders, financial institutions, legal representatives or any other organisations and individuals that are integral to the smooth running of your business.
  3. Communications Officer – We can deliver budgets and financial reports to key stakeholders; communicating them with clarity and in a manner that ensures they are easily understood.
  4. Business Analyst – Our virtual CEO and CFO service offers you the assistance you’d expect from a business analyst. We look at your processes and systems and assess your business model. We’ll come up with strategies that will help you grow sustainably. But we don’t stop there, we can check back with you on a regular basis to see how you’re progressing and what needs to be changed. Ensuring you get measurable results.
  5. IT Specialist – We can help review your systems, but we can also provide support and training when you put systems in place to ensure you understand them and get the most out of them.

Johnston Associates South Chartered Accountants can play an important and influential role as part of the finance and accounting backbone of your organisation, but we are also  business advisors, strategists and administrators, give us a call to discover how we can help you!