Our office will close on Wednesday 23rd December 2015 and reopen in the new year on Wednesday 13th January 2016.
Should you require any urgent attention during this period, please contact us at email@example.com.
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Following on from our previous article (available here), the new property tax rules came in to effect on 1 October 2015. The changes hit in a variety of ways.
Bright-line test and residential land
New tax rules now apply to residential property sales made from 1 October 2015. A new ‘bright-line test’ will apply where a person who has purchased a residential property on or after 1 October 2015 then sells it within two years. The sale will be taxed unless the property is the seller’s main home, inherited from a deceased estate or sold as part of a relationship property settlement. The bright-line test does not apply to business premises or farmland.
How the start and end date of the bright-line test is counted varies with the type of sale and purchase it is. For instance, where it’s a standard purchase, the start date will be the date a person obtains registered title for the property and the end date will be the date of entry into agreement for sale. However, start and end dates will be calculated differently where the registration date may not take place immediately or be the definitive point of transfer – sales off the plan, sales of subdivided land, mortgagee sales or where property is gifted to a trust.
Selling the main home
The seller’s main home is exempt from the bright-line test. Where the seller has more than one home, their ‘main home’ is the property with which they have the greatest connection. Just to prove that the tax system has a sense of humour, a person will not be able to use the main home exception if they have already used it twice in the previous two years.
It may get tricky for family trusts where family assets are distributed between individual owners and the trust. If a trust owns the property being sold, the main home exception will apply when it’s the main home of a beneficiary of the trust. However, if the principal settlor of the trust has a main home that the trust doesn’t own, the main home exception cannot apply to any property owned by the trust.
Claiming tax deductions
There are provisions for allowable deductions when a property subject to the bright-line test is sold. However, where losses arise as a result of the bright-line test they have been ring-fenced so they may only be offset against taxable gains arising on other land sales. It is not possible to claim a loss arising from a transfer of property to an associated person.
Companies and trusts
Inland Revenue will keep a close eye out for where land-rich companies and trusts try to get round the bright-line test. They may view a transaction as subject to the bright-line test where:
This applies where at least 50% of the value of the company or trust is attributable to residential land either directly or indirectly.
Please contact us if you are considering buying or selling residential property; your company is thinking about a large scale share transfer; or there are any changes to the family trust’s trust deed or trustees.
You might also like to have a catch up with us on whether the changes affect your tax profile or investment strategy.
All vendors and purchasers of property other than their main home must now provide an IRD number as part of the land transfer process.
Offshore buyers must provide a New Zealand bank account number before they can obtain a New Zealand IRD number. And all non-resident buyers and sellers must provide their tax identification number from their home country, along with current identification requirements such as a passport.
Where a family’s main home is owned by the family trust, the trust is not exempt from providing an IRD number.
It’s quite common for a trust to own the family home, protecting the family from business or other relationship property risks. Up till now family trusts haven’t needed IRD numbers unless they operated a business or owned rental properties. Now, when the family home is transferred into the trust or when the trust buys or sells property, the trust needs an IRD number. Trustees’ own personal IRD numbers are not acceptable.
The new requirements also affect changes of title. So, if a trustee dies or retires and the new trustee’s name needs to be registered on the property title, the trust needs an IRD number to register the change.
If you are arranging for the family trust to buy, sell or transfer property, please contact us. If the trust does not already have an IRD number we can take care of this. Otherwise you could face costly and stressful delays while you sort out the paperwork.
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How often are you able to really work on your business, as opposed to working in it? Day to day demands can swamp the bigger picture. It can help put it all in perspective to call on a specialist so you can focus your energies on taking that next step up.
There are many advisory services out there. It can be confusing to try and sort through all the marketing to make sure you connect with someone who can really help. For instance, what’s the difference between a business mentor and a business coach? And where do business advisors fit in? Or are they all just different names for the same animal?
Horses for courses. Advisors, mentors and coaches all serve different functions and you might call on one or the other at different times for different reasons.
Ideally, if you do consult more than one source of business advice, they should work with you in some kind of coordinated framework. The last thing you want is for them to be working at cross-purposes with each other (and you). Even if they never meet each other face to face but only work one on one with you, they should all support your business goals and help you develop and align strategies to achieve your goals. And, if you are considering a special project or a major transaction, you should be able to call together all the people who can provide specialist advice.
A business advisor is a specialist with professional insight into specific issues for your business. For instance, if you’re a farmer, you might speak with your farm advisor on the pros and cons of different pasturage systems and how to monitor returns. They’d be your resource to work on your farming system to produce higher outcomes from your pasturage. A manufacturer might consult an advisor on strategies for marketing and distribution.
Advisors can also serve a useful clearing house function. They have wide networks and, if they know you and your business, they can connect you with reliable people and businesses that would be a good fit.
A mentor is more like a role model. He or she will be someone you admire, with sound business success. You can confide in them. Typically, you might schedule a call or a coffee with them once a month or so.
A mentor can help you build your existing skills and develop new skills. They’ll be straight with you, call you out on your assumptions and challenge you on your goals and your business direction. They can red flag potential mistakes, on the basis of their knowledge of the business world. They can play devil’s advocate, to help you test your plans and decisions to make sure they’re solid.
Mentors typically have excellent networks and can turn you on to people and businesses with resources that may be useful to you. They might also provide introductions so you don’t have to cold call. And they might provide consultancy services to you from time to time on key projects.
A coach is a bit different. Reach out for a coach when there is some particular aspect of your business performance that you want to improve. They will help you find the gaps and analyse why they exist and how to overcome them. A coach will help you refine your skills and goals and help you stay on track.
Like a coach to a high performance athlete, a business coach might cheer you on from the side but they will also push and pull until you deliver at the level you aspire to. They help keep you motivated and help you push beyond your own limits. Coaches help you to be accountable for your own success (or lack of it).
As your accountant, we take care of the tax returns and make sure you meet your compliance obligations. But we recognise that your business success is bigger than that. We provide business coaching services with the intention of helping you to establish a business plan with realistic goals and objectives, whilst providing accountability and support to keep you moving towards your desired outcome.
Please contact us if you feel that your business could benefit from speaking to a business coach.
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The Construction Contracts Act 2002 has been on the statute books for over a decade and brought about significant changes in the way construction contracts were administered. However, with significant changes in the construction industry, the provisions needed an update and from 1 December the Construction Contracts Amendment Act 2015 will come into effect on a progressive basis.
The key changes are:
Typically, such changes will present challenges in their application, particularly in respect of the issue of holding retentions on trust.
If you are in the construction sector, or are having works done for you, please feel free to check in with us on these changes.
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‘Tis the season to … do some network housekeeping. What would you do if the unexpected happens while you’re on the beach giving it some Christmas cheer? There’s a blackout, your laptop is stolen from your car, or downloading someone’s dancing turkey video has infected one or more computers on the network with a virus? A backup plan takes it from what could be an utter disaster to somewhere on the inconvenience scale.
Even if you don’t have a rolling contract with an IT provider, it might be worthwhile for peace of mind to have them audit your system and review your IT plan. It should cover backup for all data and files and protection for viruses and malware. It can also be good to have clear protocols for all users so they don’t put the business at risk by failing to backup key files or unwittingly attracting a virus.
Start the holidays with peace of mind and come back in the new year with all systems go.
Do you have protection from viruses and malware? Is it up-to-date to carry you through the holiday period?
Do you have a routine backup of data and files? If you backup to external disk or tape, does this include all shared drives or just some? What happens with your laptops? Do you need to make sure you and team are saving to the shared drives and not leaving critical files or the latest versions in their My Documents folders? Are your backups stored securely off-site?
If you have cloud data backup, does it cover all cloud data and desktops? Do you need to synchronise office laptops and hard drives to your cloud storage? If so does this happen automatically whenever users log into the network or do all users need to follow a manual process?
It’s important to have some kind of rolling plan to replace out of date equipment. Even if your computer setup isn’t all absolutely up to the minute, it should at least be up to the operating requirements of the applications you need to run your business. If you’re largely operating in the cloud, hardware capability (and internet speeds) should be such that it doesn’t slow you and your team down whether downloading, uploading and just getting things done. Give some thought to whether this should be a priority.
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|All employers – returns and payments due|
|Large employers – returns and payments due|
|GST||15 January||For period ended 30 November|
|28 January||For period ended 31 December|
|29 January||For period ended 31 January|
|FBT||15 January||December balance date – Annual return and payment due|
|20 January||Quarterly return and payment due (if completed quarterly)|
|Provisional Tax||15 January||3rd installment due for clients with a December balance date|
|20 January||2nd installment due for clients with a March balance date|
|Terminal Tax||15 January||For clients with a December balance date for the 2015 year|
|7 February||For clients who have a March balance date but who don’t have an extension of time for the 2015 year|
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