Perriam & Partners Ltd

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BEHIND THE NUMB3RS—2013

March 2013 - Issue 46

Purpose With Profit

1. Your website - first impressions How much to rebuild $6,000,000 Man? Make change happen Reminders and Key Dates 3. Blowing our trumpet

2. Confidence Happiness trends Tax Residency - New Proposals ACC Rates for 2014 Tax year Xero - Time to try something new? 4. Employee Allowances - Summary Proposals Treatment of Accommodation Allowances Challenging times need flexible thinking

All information in this newsletter is, to the best of the author’s knowledge, true and accurate. No liability is assumed by the author or the publisher for any losses suffered by any person relying directly or indirectly upon this newsletter.

You are advised to consult professionals before acting upon this information.

A warm welcome to the year to all our fabulous clients, business associates and supporters

One quarter of the year gone already! The kids are all back at school, the contents of their lunch boxes - a topic of discussion most mornings. You are still sticking to your New Year’s resolution, but starting to question how long this will last? There are some changes you want and need - so seize the moment and DO IT. It’s no use just thinking and talking about them - We have to MAKE them happen. We are a notorious breed for just hoping that it will happen eventually, in some shape or form, but it won’t. You have to see that change through yourself so get going and good luck ! REMEMBER ME?

Now this guy would have beaten Lance Armstrong and he didn't need drugs! What do you reckon NZ $6 million is worth today if we had to rebuild him? Have a guess before you go to the back page for the answer?

REBUILD !

Reminders and Key Dates 28 February 2013 GST Due for return periods 1 December 2012 - 31 January 2013. 7 April 2013 2012 Terminal Tax Due 15 May 2013 Third instalment of 2013 Provi-sional Tax

Contents in this newsletter:

Your Website Your Website is your business’s new front door and often the first point of contact. First impressions are important. You only have a very short time to engage your potential new client so make their visit as interesting and enticing as possible. Any person who “googles” or visits your website needs to see that you are exactly what they are looking for. Make the content fresh and current and new business will be knocking on your door. Perriam’s website is updated every week - and that’s a fact!

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All information in this newsletter is, to the best of the author’s knowledge, true and accurate. No liability is assumed by the author or the publisher for any losses suffered by any person relying directly or indirectly upon this newsletter.

You are advised to consult professionals before acting upon this information.

CONFIDENCE - What’s hot, what’s not? According to recent press reports, confidence in the economy is increasing and investors are returning to the market, including shares. This mood, in my view, is largely buoyed by the low interest rates we are still subject to. You can borrow $100,000 for just under 5% and that will cost you approximately $5000 per year. To put this into some form of perspective, all you need to do is give up those couple of beers and wines and a quick bite to eat out each week and you’ve covered the interest on your $100,000. So, if you are looking at investing, we hope you are not going to follow the herd. Auckland property prices are on fire, as are some parts of Christchurch. The New Zealand sharemarket returned 25% across the board last year and could be fully priced. Therefore investing in those areas or stocks that are not “sexy” or “flavour of the month” could be the prudent way to go. Look to go against the herd and have patience. Wasn’t the best time to buy property back in 2009 and shares in 2011, and did you? Don’t forget to do your due diligence because nothing comes easy and if it looks like it will, then it may be just too good to be true and therefore not for you.

Are you Hap, Hap, Happy Too?

They reckon that apes get a bit down in the mouth in mid-life just as we humans tend to do. Several studies have concluded that happiness in human adults tends to follow a certain course between the ages of 20 and 70 so that’s most of you reading this now.

Happiness starts out high and declines over the years to reach a low point in the late 40’s, then turns around and rises to another peak at 70 years (let’s all hope we can get there). For those of you starting out - happiness in youth can lead to higher incomes a few years down the road.

Happier people work more effectively and are more likely to get hired and promoted. “Money won’t necessarily make you happy - but it would seem that happiness is going to help you out in the money stakes”.

ACC Rate for 2014 Tax Year The ACC levies have been set by Cabinet for the 2013-14 tax year. These levy rates will be formalized when they’re passed into Legislation. There is no change in the ACC earner levy rate for the 2014 tax year. The earners’ levy is set at $1.70 (GST inclusive). The minimum and maximum liable earnings figures for self-employed work-ers have changed and its tax treatment has, in our view, significant conse-quences.

ALERT - Tax Residency - Summary of Proposals - ALERT The IRD are looking at some significant changes to their proposed meaning of Residency and in our view if this legislation is passed it is likely to result in a number of taxpayers being New Zealand tax resident unless, and here’s the change, unless they sell every-thing before they leave New Zealand and have no intention to return. For example, in 1989 eg: “A person moving overseas for 3 years with their family and renting out the family home was non-resident under the old and current policy but would now be resident under the proposed draft legislation. Under the proposed new rules, the permanent place of abode test that is likely to focus heavily on having a home available, even if it is rented out, even if owned by a Family Trust. There has been no clarification as yet as to how this will affect those taking a non-residency position on the basis of existing policy. New Zealand residents are taxable on their worldwide income under this proposed new interpretation of New Zealand residence rules. It is imperative you get advice on this before embarking on your journey overseas.

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All information in this newsletter is, to the best of the author’s knowledge, true and accurate. No liability is assumed by the author or the publisher for any losses suffered by any person relying directly or indirectly upon this newsletter.

You are advised to consult professionals before acting upon this information.

Blowing Our Trumpet

As a service industry, it is difficult to display or show off our product. We are not like a builder who can promote his latest build or show home, or a retail store whose visual product can often sell itself.

Much of what we do is in confidence between our clients and ourselves. So how can we let you know what we’ve been up to without breaching the confidence we have with our clients? Each month we publish for you some of our highlights and success stories with the above heading ‘Blowing our Trumpet’. Here’s a look at some of the tunes we blew in December 2012.

1. We had a client company who owed Inland Revenue $77,000 in GST arrears inclusive of interest and penalties.

The company had ceased trading due to difficult trading circumstances. We successfully agreed a full and final payment with Inland Revenue of $12,000.00. Note here that the company had tax losses of just under $50,000 which it had to forfeit as part of the negotiations but this was not a problem for our client. Our client continues to operate in a new line of business - a happy client.

2. Many of you pay your provisional tax based upon the safe harbour option, that is, you pay an uplift of 5% based

on your prior year’s tax liability. During the month of December we were able to revise down a number of our clients’ provisional tax payments due 15 January 2113 by adopting the “estimation option” of paying tax rather than the safe harbour option. This allowed these clients to minimise their cashflow requirements over what is a difficult cashflow period for many.

The Staff Room

1. It’s great to see all of the staff back on deck and by all accounts everyone enjoyed the break, some so much that they had another week in February. 2. We welcome Florina Pirnea and Shelly Morley to the team. Florina is a first year Graduate with a bubbly

personality. Shelly is our new Receptionist as Sam has moved to another administration role. Shelly comes to us after spending 14 years in a school administration role, so she’s more than happy to get the “strap” out if we’re not pulling our weight!

3. You can find out more about Florina and Shelly in their profiles on our website.

We thought you would all like this one! But maybe not so for any of you who have lost money on account of poor advice.

EMPLOYEE ALLOWANCES - SUMMARY PROPOSALS

∗ Reimbursements of employee’s meal expenses during work travel to be tax free if duration of travel no more than 3 months - otherwise fully taxable.

∗ Reimbursement of work related meals (outside work travel) tax free if not a regular payment for employee services.

∗ Payment of employee accommodation costs during work travel tax free if trip no longer than 12 months - otherwise fully taxable.

∗ Proposed to confirm that the taxable value of employer provided accommodation is the renal value (less any employee con-tribution).

∗ Reimbursement/provision of accommodation where employee has 2 places of work to be tax free in certain circumstances.

∗ Payment for accommodation costs for employees seconded overseas who remain NZ tax resident - tax liability to be limited to the tax value (ie NZ equivalent rent, not overseas rent).

∗ Reimbursement of communications costs where there is both private and business use to be taxable in full unless private/business use separately identifiable.

∗ Work related clothing to continue to be non-taxable only when for uniform or specialist clothing.

∗ Changes intended to provide certainty around tax free/tax exempt employee allowances.

∗ Be sure to give us a call if you would like further clarification on these.

Answer - He would be the $27.9 million dollar man!

CHALLENGING TIMES - SO THINK FLEXIBILITY

Flexibility will be the key in the arsenal of many businesses, and yours is likely to be no different. Today, and in the future, you face the tide of technological change. The means to respond nimbly and willingly to changes that will threaten your profitability and, perhaps even your very existence, will be crucial. You can’t not do anything about it! If you think that your business can hold out on making change, then you need to be prepared to see your competitors leap-frog you and your customers go with them.

Small “short-term fixes” may not even be enough to react to some of those changes. Your businesses must be prepared to accept change and be flexible.

“Your most unhappy customers are your greatest source of learning”. Bill Gates

“Being responsible sometimes means pissing people off”. Colin Powell

TREATMENT OF ACCOMMODATION ALLOWANCES - Very typical, particularly in Christchurch. We’ve had several queries over the tax treatment of accommodation allowances and the IRD have published a statement to clarify this point. The Commissioner’s view is that an accommodation allowance counts toward an employee’s income and is subject to PAYE. This is the case whether it’s paid by an employer on behalf of an employee or paid through an allowance. However, in certain circum-stances, overnight and temporary accommodation related to an employee’s job will not be taxable. The IRD are intending to provide some examples to illustrate the Commissioner’s view on what is a temporary shift, including what must be taken into account. These examples will illustrate that, in certain circumstances, Inland Revenue accepts a temporary shift can be several months in duration When these examples are finalised they will be added as an appendix to the Commissioner’s statement. Read the Commissioner’s statement CS 12/01 “Income tax treatment of accommodation payments, employer-provided accommo-dation and acommodation allowances”.

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