Tag Archive for: Savage & Savage Chartered Accountants

Covid-19 update – 14.04.20

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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 Weekly Update – 05.04.20

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Well it certainly has been an interesting week and a half as we all get used to working and living differently during the Covid-19 lockdown.

It seems that every day the government is providing more clarification as to things we can do day-to-day and, most importantly for you, how you can use the wage subsidy. There have been many conflicting pieces of advice from employment lawyers and employment relations businesses. As we have digested these varying pieces of interpretation we have taken a ‘use it responsibly and fairly’ attitude.

On Friday Minister Grant Robertson clarified that if a wage subsidy received for a part time employee is more than they would usually get paid then the balance can be used towards paying other employees. The key thing is it MUST be used to pay staff wages.

Wage Subsidy for Sole Traders, Self-Employed and Contractors

We have had many queries from clients who are sole traders, partners in partnerships, and contractors as to whether they can get the wages subsidy. The answer is yes, provided you meet the necessary criteria.

Contact Anna at anna@savage.co.nz if you need help filling in the application

Keeping wage subsidy records

You may be asked to prove you have applied the wage subsidy correctly and we will need to account for any subsidy you have received when we prepare your annual accounts at the end of the year so it is important you keep a record of how you spend the money the government gives you for wages.

We have prepared a very simple spreadsheet that will help you keep track of the money you receive and pay out.

If we prepare your payroll for you we will do this for you and can send you updated figures on a regular basis so you know how much you have left to use for wages. If you want a copy of the spreadsheet just email neil@savage.co.nz and he will send it to you

At the end of the year please email it back to us with your annual accounts information.

Minimum wage increase

If you are an employer it is important to note the minimum wage rate increased effective from 1st April. Even during the current difficult trading conditions this is the minimum you must pay all of your staff

The rate increases from $17.70 to $18.90 per hour.

7th May Provisional Tax

If Sari normally contacts you prior to provisional tax payments she will still do so as many businesses may need to estimate their provisional tax down due to low trading / no trading in March and doubt about debtor payments.

As usual we will be sending out tax notices to you during April for 7th May payment.

If you have any queries contact Sari – sari@savage.co.nz 021-548-489

Annual Accounts

If you are using Xero or MYOB on-line and would like us to get started on your 2020 annual accounts please sign client questionnaires that were previously emailed to you in March, and send them to Sari.

Your bank may need these if you are looking for further support from them during these difficult times. We have two senior accountants as well as Sari working remotely from home who can work on these during the Covid-19 lockdown.

Remember, we are here to help you if you need some advice or assistance, just email or phone us, but most importantly please be safe and stay home so we can all get back to a level of normalcy as soon as possible.

 

Covid-19 Update – 30.03.20

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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.

Covid-19 Update 23.03.20

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These are certainly curious and challenging times for everyone in the community and we know businesses will need all the support they can get to survive through the next few months.

At Savage & Savage we are being pro-active and have set up systems to allow us to operate with a similar level of service to you, our clients.

We have taken the decision to close our office effective from 5pm this Wednesday

The Government has just moved the warning level for Covid-19 to level three and expect to move it to level four within 48 hours.

This means total lockdown for all but essential businesses

You can still drop paperwork in to us using the mail slot in the wall beside the front door. Neil will check for mail every few days.

As the majority of our clients deal with most things by way of email and telephone we expect this inconvenience to have minimal impact for much of the work we do for you. We have set our senior staff up to work from home and they will have remote access to our secure servers and email so we can continue to work as normally as we can in these trying circumstances.

We do understand these are going to be difficult times as we are also a small business facing many of the same challenges as our clients.

We will help you and work with you to ensure everyone survives this challenge.

We expect the government to roll out more support for businesses and we will keep you updated on help available to businesses.

Please do not hesitate to contact us for advice and assistance.

If you have any queries please contact us either on our normal phone line that will be diverted to Neil Hodgson’s mobile if we are forced by government restrictions to close our offices.

Contact details for our senior staff are:

Sari Hodgson       021-548-489       sari@savage.co.nz

Anna Patchett   021-276-7393      anna@savage.co.nz

Libby Gledhill      027-313-4382    libby@savage.co.nz

Neil Hodgson     021-445-142        neil@savage.co.nz

Most of all please be safe, take appropriate precautions, stay in touch with lonely and vulnerable people (at least by phone) and take care of yourselves.

Kind regards to you all

Xero updates

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Hubdoc

From 18th March Hubdoc will be included for free with Xero business plan subscriptions. Hubdoc is a document collection and management software that reads and extracts key information from your  receipts, invoices and emailed invoices and statements and converts it to files that links to your transactions in Xero.  Get in touch to find out more or visit Hubdoc .

Uber

Uber for Business now integrates with Xero where Uber statement data is extracted by Xero and a draft bill created. You need an Uber for Business account and the Uber for Business from the Xero App Marketplace. For more info and how to get started visist the Xero blog

IRD changes – Free seminar & webinar in March

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Chamber of Commerce Seminar

The Nelson Tasman Chamber of Commerce is hosting an IRD seminar at NMIT on the 12th March on the IRD’s business transformation and further changes to be implemented in April. This includes changes to payroll, Kiwisaver and Student Loan accounts in myIR.

It will be a great opportunity to learn more about the changes and how to get ready and to ask IRD representatives any questions you may have. It is open to both members and non-members and is free to attend.

Follow this link to find out more and to register

IRD Webinar

IRD are also running a webinar suitable for Employers and Not-for-Profit organisations on Wednesday the 18th March. This webinar will help you prepare for the upcoming changes.

To find out more and to register click here

Residential Loss Ring-fencing

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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

Agreements for Sale & Purchase of Property

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The Agreement for Sale and Purchase of Property that’s used for the vast majority of property transactions is the Real Estate Institute of New Zealand / Auckland District Law Society (REINZ/ADLS) Agreement for Sale and Purchase and the form is reviewed regularly to ensure it remains an effective agreement as times change. Changes take into account things like allowing for electronic (emailed) forms as well as forms sent by fax or posted and also various changes required as a result of law changes.

The latest update happened late last year and the current version of the agreement is now the 10th edition of the REINZ/ADLS Agreement for Sale and Purchase. (click this link for more detail)

The most significant change, and one that may catch buyers out, relates to using a finance clause to withdraw from a purchase offer. People who want to withdraw from a housing deal due to being declined finance now have to prove they are unable to get the money.

If a finance condition is inserted but money can’t be secured to settle the agreement the purchaser’s word was generally enough for them to pull out of a contract. But under the changes that took effect on 6th December 2019 purchasers must provide evidence, generally by providing a letter or email from the bank.

This is a significant change to the sale and purchase agreement with significant implications for prospective purchasers who rely on a finance clause as a ‘get out of jail’ card, if purchasers can’t provide evidence they were unable to obtain finance they could be forced to proceed with the purchase or face other legal action by the vendor.

In the older form you could specify a lender in a finance clause in the Sale & Purchase Agreement, this option has been removed in the new form. The new clause in the fine print in the REINZ/ADLS 10th edition form removes the reference to a particular lender. It now requires a purchaser to provide evidence, if required by the vendor, that they had taken reasonable steps to obtain finance on satisfactory terms.

Along similar lines to the changes to the Finance clause is the Building Inspection Report clause that many prospective buyers obtain, in the updated agreement if you cancel the agreement because of an unsatisfactory building inspection report you are required to share the report with the vendor. This removes another ‘get-out-of-jail’ option some people have used in the past.

Other changes include an optional toxicology report condition, a new process to resolve compensation if there are disputes between vendors and purchasers and fixtures and chattels have been removed and replaced with new definitions and warranties.

GST clauses have been revised, the time-frame for deposits being released has been clarified, references to fax machines are removed, tenancy documents must now be provided by the vendor on the settlement date and various other changes to language and formatting have been made.

It has always been essential buyers take legal advice before signing any sort of property sale and purchase agreement rather than relying on standard Further Clauses inserted by real estate sales people, this change makes it even more important.

The bottom line is to make sure you deal with a reputable Real Estate Agency so you are given good advice and don’t sign any agreement for the sale and purchase of real estate before you have taken legal advice.

Kawai Cottage

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If you are looking for delightful accommodation in Nelson that isn’t just another motel or hotel room then check out Kawai Cottage.

It’s a stunning cottage in Nelson city, lovingly renovated and furnished by clients of Savage & Savage.

Kawai Cottage is an original kiwi cottage in all her original glory but with a bit of luxury and glamour for you to enjoy. It is sunny, comfortable and close to the CBD.

French doors lead you into the garden and patio area, both of which enjoy lots of sunshine and very private.

Check it out or book the cottage for yourself, visiting family of friends by clicking here

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.