Residential rental loss ring-fencing

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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.

Sari Hodgson Awarded FCA Status

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Each year the Council of Chartered Accountants Australia and New Zealand recognises outstanding achievement in the profession of accountancy by awarding Fellowships to its members.

Fellowships, are awarded to members who are nominated by their peers for outstanding career achievement or contribution to the profession.

The 2019 awards are to be formally announced in a few days but we are able to share some fantastic news with you – Sari Hodgson, Director of Savage & Savage Limited, has been made a Fellow of CA ANZ this year.

The founder of Savage & Savage Chartered Accountants, Mr Noel Savage, was himself an FCA and Sari says she is proud to follow in her father’s footsteps. “I am also delighted to be able to help our clients succeed in business as well as contributing to our community whenever I can.”

Sari is a Past President of the Nelson Tasman Chamber of Commerce, was the Chair of the Bishop Suter Art Gallery Trust and guided the organisation through the process of changing from a private trust to a Council Controlled Organisation. Sari has been the Chair of the School of Business Advisory Committee at NMIT for more than fifteen years. She has also written several books aimed at helping small to medium businesses. She is a Rotary Paul Harris Fellow. She also supports many community organisations through Savage & Savage.

 

FELLOWSHIP CRITERIA
The member must have demonstrated excellence through:

1. Outstanding achievement in the profession of accountancy through his
or her career
And/or
2. Outstanding contribution to the profession of accountancy through
a. Service and participation with distinction to CA ANZ, ICAA or NZICA
or other organisations within the profession; and/or
b. Services to the community or business; and/or
c. Teaching, research and or writing within the field of accounting that
reflects positively on the profession.
The member may be nominated under criteria one, any part of criteria
two or a combination of these criteria.

Inland Revenue to probe hospitality sector for businesses hiding cash sales

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First published in Stuff 4th October 2019

This serves as a word of warning to anyone who owns a business where cash is regularly received as payment for goods and services

Four members of the Thai restaurant family have been sentenced to prison or home detention after a $2.3 million tax evasion case brought by Inland Revenue, and another was convicted but discharged.

They were also been ordered to pay more than $2.2 million in reparations by the High Court in Wellington over tax evasion carried out through 21 “Thai House Express” restaurants around the country.

The five – Boonrouen Thongskul, Sirirat Kampeng, Anchalee Minwong, Chanaratt Thongskul and Anuchit Tongskul – originally denied the charges but entered guilty please five weeks into the trial that had been expected to last ten weeks.

They were accused of having been part of co-ordinated tax evasion effort over a seven-year period which involved not reporting cash sales to the taxman, and distributing the cash directly to family members.

The charges related to the filing of 366 false income tax, GST and personal tax returns evasion relating to their own tax affairs and those of their 11 companies.

“Once they’d heard much of the Crown evidence against them, these five entered guilty pleas in relation to the GST and income tax returns of the businesses for which they were responsible, and their own income tax return,” said Inland Revenue spokesperson Richard Philp.

“By their guilty pleas the brothers and sisters acknowledged they knew their returns were false and were a deliberate ploy to evade tax. Cash sales were deliberately suppressed to pay less tax.

“An aggravating feature of the offending for Chanaratt Thongskul and Anuchit Tongskul was that their declared income was low enough to qualify for Working for Families Tax Credits in some of the years charged.

“The case followed an extensive investigation into the family group with searches of private properties disclosing business records, luxury goods and cash in some instances.

“The general allegation was that the family distributed the cash amongst themselves, as part of a deliberate practice of not reporting or recording cash sales and diverting the cash to private use.

“This is not trivial tax evasion. At one point in the trial the cash deposited in personal bank accounts was said to be more than $9 million. For these five defendants the sum is more than $5.2 million.”

At the High Court in Wellington today Chanaratt Thongskul was sentenced to two years and eight months in prison and ordered to pay $900,000 in reparation.

Sirirat Kampeng was sentenced to 12 months home detention and ordered to pay $600,000 in reparation.

Anchalee Minwong was sentenced to 10 months home detention with $400,000 in reparations.

Anuchit Tongskul was sentenced to nine months home detention and must pay $300,000 in reparations.

Boonruen Thongskul was convicted and discharged with $5000 in reparation to pay.

Debt Management and Recovery

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How do I ensure customers understand the importance of paying my invoices on time?

Customers juggle cash flow requirements on a frequent basis monthly, weekly or sometimes daily.
When cash flow becomes tight, some of your customers may choose whether they pay you and other creditors based on what effect non payment will have on them and their business.

Ensuring you have a robust process to follow up on overdue invoices is important, however, it is far more
important to adhere to the process. Far too often, we work with clients who have good processes but due to a variety of reasons, they don’t stick to them.

By having an effective debt collection agency to assist managing late paying customers as part of your credit management process is encouraged as it enables you to focus on what you do best. It also ensures your customers understand that you place importance on being paid.

The Nelson Ark

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At Savage & Savage we are a dog-friendly office, you are welcome to bring your well behaved dog with you when you come to see us.

Our staff love cuddles with furry friends and because we love dogs we support The Ark. We have a collection jar on our front counter for the month of August to help this fantastic organisation do what they do.

And they do a lot, they re-home dogs and The Ark provides a wonderful education opportunity for at risk youth, they work with dogs to help these young people find a positive aspect to their lives.

APART (Animals People And Rehabilitative Training) – What happens when you join a young person going through tough times together with a rescue dog? You get APART. APART is a character education and dog training programme. It provides opportunities to develop compassion, empathy, respect and responsibility. APART provides young people with the opportunity to:

  • learn alternative coping strategies for quality of
  • life learn considerate ways of dealing with problems which may arise during dog training
  • take part in rewarding experiences that grow respect for oneself, others and animals.

If you are able to we would love you to support this outstanding organisation by making a donation next time you are in the office 

If you don’t have cash we can take an electronic payment and pass it on to The Ark.

Supporting Volunteer Service Abroad

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A tax specialist we work with, Geoff Falloon from BizRescue is taking six months out of his busy business to work as a volunteer with VSA

He is taking up a role as Finance Systems Trainer/Mentor with Kokonut Pacific SI, a social enterprise promoting rural livelihoods in the Solomon Islands.He will be developing a financial processes manual and training staff to manage and maintain the financial systems.

The Solomon Islands ranks among the 30 poorest countries in the world. Some of you will have read about the subject of sustainable development goals. This role addresses (in a small way) three of the sustainable development goals being the alleviation of poverty and hunger and promoting work and economic growth.

VSA works in partnership with MFAT which covers a significant portion of the work but VSA is required to cover 10% of the in-country costs for each volunteer. VSA therefore asks volunteers to raise $1,000 each – a small portion of the assignment cost – to help pay it forward for future volunteers.

If this is something you would like to contribute towards simply follow this link https://give.everydayhero.com/nz/geoff-and-carol-in-honiara and click the “Give Now” button at the bottom. All contributions are welcomed.

Celebrating 25 Years of Creativity at Downings

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The year is 1994, Sony releases the PlayStation One; Lieutenant Dan gets new legs; Friends makes its debut and Tony Downing starts a design studio out of a small flat in Tahunanui. Twenty five years later, that business is a bit bigger!

Downing Creative is the leading Marketing and Branding creative business in this region and we are proud to have been part of their journey.

Congratulations to Tony, Vanessa and everyone at Downing Creative and thanks for the work you do for us and for trusting us as your financial advisers

Check out their new website to see how they can help you and your business. Click here for some great ideas

Callaghan Innovation’s R&D Student ‘Experience’ Grants

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Callaghan Innovation’s R&D Student ‘Experience’ Grants are now open to help you to access fresh skills and talent to drive innovation in your business.

R&D Student ‘Experience’ grants support students and recent graduates, by funding businesses to engage a student in a R&D activity, giving them the work and technical experience, and in exchange a business will receive new talent, capabilities & fresh thinking to assist you with your R&D endeavours. 

Key Things to Know:
Businesses receive $8,460 (excl. GST) to cover 400 hours of a student’s time to work in your business (equivalent of 10 weeks work);

It’s a great way for a business to bring in a student to add some focus, expertise or blue sky thinking to a R&D project;

Applications for the 2019 student ‘experience’ grant are open between 1 May 2019 – 31 August 2019;

The student must be an Undergrad, Masters or Phd student (note,a student is still eligible if they have recently graduated and their final semester is within 6 months of your application); 

The student’s main area of study must be Science, Technology, Engineering, Design, or Business; 
You can apply now, and then recruit the student later;

and The student can come on-board any time after an application is approved and their work (within the business) must be completed by 31 March 2020.

This year the process is more flexible and faster, and applications are assessed as they are submitted for a faster outcome (approx. 2/3 weeks approval time).  Applications are open for the next 4 months so you can secure the talent you need earlier in the year and before students break for summer.  We recommend that you apply now so you can access and recruit the best talent from around NZ.   
Next steps:
For more information on the R&D Experience Grant and to find out if your business is eligible, please contact Mark Maguire on mark.maguire@nelsontasman.nz.  We will assist and guide you through the process, as well as approving your application, so please contact us now.

As the region’s economic development agency, one of our core roles is to connect our clever businesses and people with opportunities to grow and innovate.
 
The Regional Business Partner (RBP) Network is designed to make it easier for NZ businesses to access early-stage support to innovate and grow. This national network is made up of 14 ‘Regional Business Partners’ and is supported by New Zealand Trade and Enterprise (NZTE) and Callaghan Innovation – the government’s business innovation agency. 

The Nelson Regional Development Agency is the ‘Regional Business Partner’ for the top of the south.  We provide information, advice, funding and connections to local businesses seeking support for their growth journey.  

Personal Grievances – When a Win is actually a Loss

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A recent personal grievance case between Philipa Johnson and the National Business Review (NBR) resulted in a win for the employee, which actually ended in a financial loss for her when all was said and done. The Employment Relations Authority determined the employee was unjustifiably dismissed. However, the sting in the tail for the employee was that her legal costs were 10 times higher than the compensation she received.

As an employer, it can at times feel like the cards are stacked against you when dealing with a personal grievance. Frequently the better business decision can be to reach a settlement to resolve a dispute even when you have done nothing wrong. From a point of principle this may not feel particularly comfortable.

However, despite best intentions an agreement might not be reached, or you may decide the principle is more important. As a client goes through the decision process to determine which strategy to adopt, we take you through the risks of each pathway and the potential costs of both winning and losing a grievance in the Employment Relations Authority.

At the same time we analyse the risk for the employee and likely value of any compensation award, and this helps inform the decision on how  much to consider offering to reach a settlement if this is the preferred option. There are times the employee is either too greedy or poorly advised and their expectations of a settlement amount are unrealistic.

Affecting the level of the award Johnson received was the Authority’s determination that she breached her employment agreement when she took and distributed confidential information from the employer when she left their employment.

Johnson was awarded $1,666.67 in lost wages and $8,000 in compensation for the unjustified  dismissal. She had claimed $50,000. However, she was ordered to pay a $9,000 penalty for breaching her Employment Agreement, of which $6,750 was to be paid to the NBR and the balance to the Authority. Johnson paid a staggering $96,000 in legal fees.

The winning party ordinarily is awarded $4,500 in costs for a one day hearing in the Authority.  With this in mind, even without the penalty awarded against her, Johnson was always going to be on the losing side financially, as she claimed $50,000. This case demonstrates how principle can override common sense, and some people cannot be negotiated with.

Emma Heke in NZ Lifestyle Block Magazine October 2018

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Our client, Emma Heke, is featured in the NZ Lifestyle Block magazine this month. With great photography by Daniel Allen this article tells Emma’s story about making teas from her home in Nelson.

Buy your copy to find out more about this very successful small business making its mark in NZ and click here to enter the NZ Lifestyle Block competition to win 10 packs of delicious Heke Homemade Herbals teas, these teas are favourites in our office.