ADO Newsletter

July Newsletter

Winter has arrived – are you ready to grow?

Why grow?

Growth and innovation takes the right plans, resources and attitude to succeed. Successful business owners continuously improve and expand their products and services, but do so in a planned and responsible way.

Business owners who strategically grow:

  • increase their profits and sales
  • stay relevant
  • perform better than their competitors
  • have a better chance of surviving in the long run

Planning for growth 


Identify clearly what you are trying to achieve and why.

Set goals that are:

  • Specific:     Define exactly what you want to accomplish.
  • Measurable:    Make sure you can track progress and measure outcomes
  • Achievable:    You must have a reasonable chance of success.
  • Relevant:    Set objectives appropriate to your overall business strategy.
  • Time-Limited: Work towards a deadline to keep on track and focused.

The next step is to identify the strategies and tactics you can use to achieve your goals.


Common growth strategies 

Each has its own potential risks and rewards.

Work with advisers to choose which is the most appropriate for you — and continue to do so as you grow. Surrounding yourself with an extensive support network will help you achieve better results.

 

    • Growth Strategy
    • Product Development
    • Market Penetration
    • Market Development
    • Diversification
  • Why?
  • Creating new products and services for existing markets.
  • Selling more existing products and services to existing markets
  • Selling existing products and services to new markets, eg another part of NZ.
  • Developing new products and services for new markets, eg exporting.

Realities of growth


Growth isn’t easy. When you take your business to places it’s never been before it will be challenging…

Common realities of a growth spurt include:

  • Increased costs and overheads — your cash flow and work/life balance will most likely take a hit
  • A significant change in your current systems and structures — or a need to throw them out completely
  • Competing priorities
  • A shift in your company culture
  • Lacking the talent or internal capacity to meet growing demands

Liken growth to going up a steep hill in a manual car. The hard work you put in upfront will have few immediate results. But if you keep on course, you’ll build up momentum and speed over time.


Common mistakes

  • Not seeking external advice — work with trusted advisers to ensure your plans are realistic and achievable.
  • Quickly hiring new staff to deal with an increased workload — first weigh up the long-term scope and cost of any new roles, and only bring on people who are right for the business.
  • Not measuring your progress — you should have KPIs in place to make sure you’re on track for success.
  • Not being ready and willing to scrap your agenda when things aren’t going according to plan.
  • Underestimating the costs — both financial and emotional — of growth.

Calendar reminders

28 July 2017

Monthly based GST returns and payments due for the taxable period ending 28 June.

28 Aug 2017

Provisional tax instalments (for those on a March balance date),student loan interim payments, & GST returns and payments due (for the period ending 31 July).

28 September 17

Monthly based GST returns and payments due for the taxable period ending 30 August.

20th of each month

PAYE Returns are due for the previous month, on the 20th of the following month. i.e. PAYE tax for July wages is due 20 August.

Note
If a due date falls on a weekend, public holiday or provincial anniversary day, IRD can receive your return and payment on the next working day without a penalty being applied.



Budget 2017

Striking the right balance?

A $2bn “Family Incomes Package” looks to be the centrepiece of this Budget. As expected, this will see tax relief by way of changes to income brackets. The upper threshold for the lowest tax rate of 10.5% increases from $14,000 to $22,000, and the threshold for the next bracket of 17.5% rises from $48,000 to $52,000. The top threshold of $70,000 (where the top tax rate of 33% kicks in) is unchanged.

This should ensure the changes are perceived as targeting low and middle income earners, rather than those on higher incomes. Having said that, all earners will see benefits to some degree. Accommodation supplement payments and family tax credits will also be increased, while the Independent Earner Tax Credit is scrapped. This package commences on 1 April 2018.


Know when to use an Advisory Board


If you’re growing quickly, consider using an Advisory Board for support and advice. Boards can provide you with the high-level support you need to reach your potential.

Have a look at the business.govt.nz website for further information regarding the use of Boards here


Brightline Test & Nominations of Sale & Purchase Agreements


IRD changes its view..

Until now, the IRD supported the position that a nomination was a disposal under the bright-line rules and consequently bright-line income (taxable) may arise to the nominator where the underlying land increases in value between the date an agreement is entered into and the date of nomination. A common scenario is where a purchaser enters into a sale and purchase agreement in their own name “and/or nominee” and before settlement nominates an associated party to complete the purchase.

According to latest information released (QB 17/02) the IRD has changed its view on nominations and it no longer regards a nomination between associated parties before settlement as being a disposal for the purposes of the bright-line rules where no consideration is paid. A nomination of a sale and purchase agreement where consideration is paid is regarded as an assignment and is a disposal for bright-line rules. It gets more complicated than this, but what is clear is that the IRD will not pursue income tax in these circumstances.

This welcome change in the IRD’s view will be of great relief to affected tax payers.
Please be aware that if you have signed up to property that is still subject to issuance of Title, then the 2 year period for the Brightline Test only starts from the point where Title is issued. For some of the new Queenstown developments for example, this can mean quite a lengthy period of holding to get outside the Brightline property rules.


Key Person, Business Continuity, and Life & Income Insurance Traps


Something to consider…

If key person insurance is being taken out to provide money for a shareholder to buy the shares of a deceased shareholder, it may be better to have the individuals (or better yet a bare Trust) own the policies, rather than a company.

If the company were to fail the policy proceeds would be available to creditors. Key person insurance may be tax deductible for the company. However FBT would have to be paid, which negates the tax benefit.

The same principle applies to Life & Income insurance. If shareholders are trying to protect their personal incomes, why pay the money to the company? Let the shareholders claim the costs against their personal income. Many clients take both these types of policies as company policies.

We have good relationships with key advisers in this space if you want an independent assessment of your insurances. We are also available to advise on the structure and tax implications of these insurances for you.


Remember..

“If Plan A doesn’t work, you still have 25 more letters in the alphabet…””

 

AFFLECK
O'MEARA

QUEENSTOWN
Level 2, 45 Camp St
PO Box 1010,
Queenstown 9300
New Zealand
+64 (0)3 441 3901
zqn@affleck.co.nz

ALEXANDRA
Level 1, 65 Centennial Ave
PO Box 199,
Alexandra 9320
New Zealand
+64 (0)3 448 6088
info@affleck.co.nz