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Our Office Hours over Christmas & New Year - 2021/2022

Our office's will be closed the following days during the Christmas period:

 

Otorohanga Office

Closed Midday Friday 24th December to Tuesday 4th January 2022

Normal opening hours as from 5th January 2022

Te Awamutu Office

Closed Midday Friday 24th December to Friday 7th January 2022

Normal opening hours as from 10th January 2022

Taumarunui Office

Closed Midday Friday 24th December to Friday 7th January 2022

Normal opening hours as from 10th January 2022 8.30am

MERRY CHRISTMAS

AND

A PROSPEROUS NEW YEAR

KC Farmer November 2021 - Increased Dairy Payout Comes with Challenges

There was good news for dairy farmers last week with Fonterra increasing their 2021-2022 forecast farm gate milk price range to $7.90 - $8.90 per kilogram of milk solids, a mid-point of $8.40. This, coincidentally, is the same amount as the record payout for Fonterra farmers which was achieved in the 2013-2014 dairy season.

The advanced rate payment has been lifted to 65% of the forecast payout which equates to $5.45 per milk solids, with this increase coming into effect for the October payment which is paid out in November.

While the increased payout for dairy farmers is great news for the local economy, it is not all plain sailing.  All farmers are feeling the effects of:

  • Increased costs such as fuel, fertiliser, wages, fencing and building materials (if you can get them).
  • Ongoing environmental compliance and costs related to this.
  • Staffing issues and staff shortages.
  • A credit squeeze in the rural sector.
  • Reduced demand from China, as China increases its own production and becomes more self-sufficient.
  • The threat from carbon farming and increased carbon costs.
  • Increasing interest rates and increased tax.

A further threat for the dairy sector is the effect that higher commodity prices have on the worldwide supply of dairy and other food products. All countries tend to ramp up their production when commodity prices increase and this can lead to an over-supply and if this is coupled with falling demand through Covid-19 and other issues, then the payout can drop pretty dramatically. History tells us that in the 2014-2015 dairy season the payout went from $8.40 down to $4.40 and then reduced a further 50 cents to a payout of $3.90 the following season. We don’t think this will happen this time around, but nothing is certain in today’s world.

Our advice to farmers right now is to make good use of the dairy payout by doing the following:

  • Getting your working capital position as strong as you can.
  • Attending to any outstanding compliance issues which may include on-farm projects, as well as administrative compliance.
  • Getting good financing arrangements in place with your Bank.
  • Repaying debt.
  • Sorting out any staffing issues, including ensuring there are good facilities and accommodation.
  • Making sure you are meeting your tax commitments and allowing for increased provisional tax to be paid.

In addition, your own family wellbeing is very important. All of these things contribute to a strong and sustainable business.

We have been asked recently by a few clients as to how they can pay less tax. Tax can be reduced through the use of good business structures and careful planning; but our main point regarding income tax is that paying a higher amount of tax itself is not a problem, as this comes with good disposable income and creates future opportunities. A person paying tax does not have a tax problem, a person with the tax problem is one that is not earning enough income. A wise farmer once told me that it is not prudent to spend $3 to save $1 and I would have to agree with this.

Along with a good payout the weather and growing conditions have so far been reasonably favourable in the Waikato and King Country compared to other parts of the country. If farmers can make use of what looks like a bumper season ahead then they will set themselves up to deal with future challenges, which history shows us will be inevitable.

 

Cheyne Waldron

Chartered Accountant – Director

Last Day to Apply for the Wage Subsidy August 2021

We want to remind you that today is the last day to apply for the current Wage Subsidy that covers the period of the Level 4 lockdown(17th – 31st August).  Your application must be in by 11.59pm tonight, 2nd September 2021.

Below is the link to the ‘Work and Income’ web page where you can apply.

https://www.workandincome.govt.nz/covid-19/wage-subsidy/index.html

Note that from Friday 3rd September, another round of the wage subsidy will be available for another two weeks.  This covers businesses that predict a 40% revenue decline from the 31st August to 13th September and meet all other eligibility criteria.

If you have any queries, please contact our office.

 

The Directors

 BAILEY INGHAM LIMITED

Client Newsletter RE Covid Subsidy - Friday 20 August 2021

Recent events including community cases of Covid 19 in Auckland and the move to Alert Level 4 throughout New Zealand will be causing uncertainty and financial difficulties to many New Zealand businesses.

For this reason, the Government have reintroduced the Wage Subsidy and the Resurgence Support Payment (RSP) to assist businesses that have had a certain reduction in their revenue to meet ongoing wage and other business costs.

Applications for the Wage Subsidy opened at 9am this morning while the Resurgence Support Payment is available from next Tuesday. Payments are expected to be received by businesses within three working days of applying.

Businesses must be able to prove that they have had a decline in revenue and must agree to the conditions of receiving the payments. From what we have seen so far, the Wage Subsidy can be applied for based on anticipated revenue decline (of 40%, and because of the return of Level 4), while with the Resurgence Support Payment, it appears that this should be applied for after the business has confirmed a drop of 30% of income and is to meet other business costs. 

It is not entirely clear from what we have seen so far whether Wage Subsidy payments received need to be included when calculating the loss of revenue for applications for the RSP, but it is clear that businesses can apply for both support schemes.  We will keep you up to date once applications for the Resurgence Support Payment open on Tuesday and more detail is announced.

More details are below, please click on the links for more detailed information and to apply for the support.

employees through the response to COVID-19

Wage Subsidy Scheme

Applications for the Wage Subsidy Scheme will open nationally from 9am on Friday 20 August 2021, with applications initially open for two weeks. You’ll be able to apply on the Work and Income website.

The Wage Subsidy will be available to eligible businesses, organisations and the self-employed impacted by the move to Alert Level 4 on 17 August 2021.

To reflect higher wage costs since the scheme was first used in March 2020 the payments have been increased to:

  • $600 per week per full-time employee (working 20 hours or more per week)
  • $359 per week per part-time employee (working less than 20 hours per week)

For your business to meet the revenue decline test the following must apply:

  • your business is being or will be affected by the move to Alert Level 4 on 17 August 2021; and
  • your business has had, or you are predicting will have, a decline in revenue that is attributable to the effect the move to Alert Level 4 on 17 August 2021 has had on your business and that is:
    • of at least 40% over the period 17 August 2021 to 30 August 2021 (inclusive) (revenue test period), when compared to a typical 14-day consecutive period of revenue in the six weeks immediately prior to the move to Alert Level 4 on 17 August 2021 (default comparator period); or
    • if you are an employer that has highly seasonal revenue, of at least 40% over the revenue test period when compared to the same 14 consecutive days in 2020 or 2019 (seasonal comparator period), provided you can demonstrate that the seasonal nature of your business makes it harder to meet the 40% revenue decline using the default comparator period than if your business was not of a seasonal nature; and
    • in relation to both the calculation of revenue for the test period and the calculation of the revenue for the relevant comparator period, exclusive of any payments made to you from this subsidy, other COVID-19 Wage Subsidy schemes, the COVID-19 Short-term Absence Payment scheme, COVID-19 Leave Support schemes, COVID-19 Essential Workers Leave Support scheme, COVID-19 Resurgence Support Payment scheme or the COVID-19 Small Business Cashflow scheme.

Information on the Wage Subsidy Scheme — Work and Income

https://www.workandincome.govt.nz/covid-19/wage-subsidy/how-to-apply.html

Resurgence Support Payment

Resurgence Support Payment applications will open nationally from 8am on Tuesday 24 August 2021. Applications will remain open for one month after a nationwide return to Alert Level 1.

Businesses and organisations will be eligible if they experience a 30% drop in revenue over a seven-day period after an alert level increase and meet other eligibility criteria. This drop is compared to a typical seven-day period in the six weeks before the increase in alert level. Seasonal businesses should show a 30% revenue drop compared with a similar week the previous year.

The decline in revenue must be a result of the specific alert level change, not just COVID-19 in general. You must have been in business for at least six months to be eligible. Charities, not-for-profit organisations, the self-employed and pre-revenue businesses, such as start-ups may also be eligible.

This payment is not a loan, so does not need to be repaid. The payment must be used to help cover business expenses such as wages and fixed costs.

There have been some recent changes to the eligibility criteria for commonly owned groups. A commonly owned group generally consists of businesses that have the same owners. Some individual businesses or organisations within a commonly owned group may now be eligible for RSP. You can find examples of commonly owned groups and more eligibility criteria for the RSP on the Inland Revenue website.

You can also calculate how much you may be entitled to and how to apply on Inland Revenue's website.

Eligibility for the Resurgence Support Payment– Inland Revenue https://www.ird.govt.nz/covid-19/business-and-organisations/resurgence-support-payment/eligibility

Apply for the Resurgence Support Payment – Inland Revenue https://www.ird.govt.nz/covid-19/business-and-organisations/resurgence-support-payment/apply

If you don’t meet the criteria for RSP but do have cash flow problems, Inland Revenue can help. Visit their Manage my tax page for more information.

Manage my tax – Inland Revenue

https://www.ird.govt.nz/covid-19/manage-my-tax

The NZ Government Covid Support page also has useful information for businesses:

NZ Government Covid 19 – Support for businesses

https://covid19.govt.nz/business-and-money/financial-support/financial-support-for-businesses/

Leave Support Scheme & Short-Term Absence Payments

These payments are available at all Alert Levels to employers to pay workers who are following public health guidance and are staying home (and cannot work from home) to self-isolate or are waiting for a COVID-19 test result. Note that you can’t get a Wage Subsidy for an employee for the period they're covered (and paid by) by a Leave Support Scheme or Short-Term Absence Payment.

Many businesses and self-employed people have applied for the various types of assistance last year so have a decent understanding of how to apply and how the criteria works for paying staff. With luck, the rest of New Zealand (Auckland and possibly Coromandel excluded) may be able to move out of Level 4 reasonably quickly if no cases emerge in the community (outside Auckland) in the next few days. However, as we saw last year, for many industries, particularly tourism, hospitality and retail, there is a huge cost to profit and productivity at Alert Levels 2 and 3, so businesses may be facing difficulties for some time.

At Bailey Ingham we are here to help our clients through this difficult and uncertain time. Please call or email your usual staff contact or one of our directors or associates should you need assistance at any time.

Stay safe and take care.

 

Regards,

 

Bailey Ingham Directors and Staff

Client Newsletter re Alert Level 4

Dear Bailey Ingham Clients,

 

As you will be aware, the whole of New Zealand is now under a Level 4 Lockdown, which means we must all stay at home apart from essential travel or work.  This means that our three Bailey Ingham branches will be closed, from today until Friday. This may be extended and we will update you in due course.

 

Our staff will all be working from home until we are given permission to return to work at the office.  This means that we are available by phone or email to assist with any matters that need your attention.  Our three office phone numbers will be answered by staff who have the number diverted to their homes, and messages will be passed on to the relevant staff member that you wish to speak to, and in addition you may ring our cell phone numbers (listed below) to speak to one of the partners, associates or office managers directly.

 

Our staff will be completing GST, PAYE and other returns from home and we can assure you that it is business as usual (as much as possible!) and we will attend to your returns to ensure that they get to Inland Revenue on time.  The vast majority of returns can be completed through the use of Banklink, MYOB and Xero as staff have access to log on from home – your assigned staff member may be in touch if there are any transactions which require clarification from you.

 

For any PAYE and employment related queries please phone Tarin on 027 595 9779

For GST, Income tax and general financial enquiries please call the office phone number and your call will be passed on to the relevant staff member:

Otorohanga Office 07 873 7325

Te Awamutu Office 07 870 1888

Taumarunui Office 07 895 7312

 

To speak to one of the partners, associates or office managers please call:

David Bailey 027 278 1603

Cheyne Waldron 027 446 5750

Bridget Boshier 027 222 3055

Kelly Bair 021 155 1115

Layne Kerr 021 179 7894

Jayne Adams 027 823 7671

Tracey Hall 021 216 6321

 

The government have announced that the Resurgence Support Payment and Wage Subsidy will be available shortly for all businesses who are adversely affected by the lockdown, and we will be in touch when further details have been announced.

 

As always we are here to help, please do not hesitate to call or email should you require any assistance. Take care and stay safe.

 

Regards,

 

Bailey Ingham Partners and Staff

NEWSLETTER TO CLIENTS 2021

Thank You

First of all, a big thank you to all those clients, solicitors and banks who have worked with us through a difficult period over the last eighteen months for many families and businesses. As the vaccine for Covid-19 rolls out, we hopefully will enjoy greater freedom and movements of travel. It is certainly a period of our lives that we will never forget. We have had a lot of issues to work through with entitlements for clients, helping families and businesses with all the requirements and dealing with working from home, both for our staff and a lot of people we deal with.

We are very fortunate to be living in New Zealand which can have a very strong border and we must acknowledge the work our Government has done in getting us through this period.

Thanks for all your assistance, help and support.

 

Staff of Bailey Ingham Limited

At the start of Covid, we sent a newsletter out to all people advising them of new Directors, Bridget Boshier, Layne Kerr and Kelly Bair. We also advised that Robert Ingham was resigning as a Director and would remain as a Consultant. Unfortunately, we now find that some of these newsletters did not go out to clients, and we apologise for this.

The three new Directors joining David Bailey and Cheyne Waldron have each been with the firm for over twenty years and are all experienced rural and business professionals.

Robert has greatly assisted us through this change to ensure the Directors handling your work have a good understanding of your family and operations.

We have a very good group of Chartered Accountants and Institute members as follows:

Directors – David Bailey; Cheyne Waldron; Kelly Bair; Bridget Boshier and Layne Kerr.

Associate Directors – Jayne Peers Adams; Tracey Hall.

Chartered Accountants - Rebecca Lynch; Jessica Quirk (currently on maternity leave); Vanessa Neustroski; Rakeshwar Lal; Ashley Shrubsall; Cathrine Hurley and Jenny Martin (awaiting confirmation of membership).

Associate Chartered Accountants – Michael Crook; Carolyn Dew and Shellee Hazledon.

Accounting Technicians – Christine Benefield; Ellyn MacPherson

Office Staff – Kim Brown; Ashleigh New; Casey Rolton; Teresa Cooper, Toni Wright (currently on maternity leave) Ann-Marie Thackray and Molly Crook.

­Taxation – Sarah Hickey; Anna Needham; Leanne Cameron with Niki Needham helping out.

Accounting Staff – Amber Gane; Ana Wise; Andrea Waite; Bashi Singh; Catherine Clark; Dominic Clapcott; Janet Beehre; Jann Sanson; Jennifer Muller; Jo Butcher; Karen Budden; Ken Fisher; Kylee Burmester; Lauren Hill; Maggie Roy; Mathew Findsen; Monique Bains; Morgan Rata; Natalie McMullan; Stephanie Josling; Stevie Lacy; Tanya Le Fleming; Tessa Walker and Hamish Patel.

Administration – Carolyn Pye; Rosemary Johns.

Payroll – Dany Neustroski; Tarin Alcock.

Bailey Ingham Limited are an approved training organisation for admission to CAANZ.

We are pleased to report, in the last eighteen months, Ashley Shrubsall who works in our Taumarunui office, Cathrine Hurley from Te Kuiti, Jessica Quirk and Rakesh Lal all became Chartered Accountants after years of study and hard work. They will shortly also be joined by Jenny Martin who is now applying for full membership.

We congratulate these people and look forward to seeing their careers develop.

Recently the New Zealand Institute of Chartered Accountants Australia New Zealand carried out a survey of accounting firms in New Zealand. We are pleased to report that Bailey Ingham Limited was placed in the Top 20 Accounting Firms in New Zealand. We note that included are the major international firms and we are greatly encouraged by this and recognise the support of all our wonderful clients that have assisted in achieving this.

The New Zealand Institute of Chartered Accountants Australia New Zealand placed Bailey Ingham Ltd as No. 1 accounting firm for charitable and community work. We are humbled by this award and recognise that many firms carry out a lot of work to assist the community they live in and people they communicate with. We are very grateful for the award in recognition of how we help the communities we work in.

The strength of our firm has been, and continues to be, a lot of dedicated people who work very hard meeting the needs of the clients, deadlines for GST and income tax, and assisting with all queries. We are grateful to have such hard working staff, with many years of experience.

 

Succession Planning

A number of our farming clients have reached a stage where they are either carried out, are in the middle of, or considering succession planning. This is always a difficult topic and we are happy to work through with your lawyers and other consultants to achieve a solution.

Outlook

 

The outlook for the New Zealand economy and farming is positive and generally exceeds most peoples expectations. We have seen property prices, particularly houses, rise substantially and are getting close now to levels that are not sustainable. The introduction of lending restrictions and bright line test obviously has a bearing on this.

We see a period ahead when there will be some inflation and rising interest rates, so these need to be factored into any operations or budgets.

The above comments are of a general nature and need to be backed up by specific advice where applicable.

Once again, thanks for your support. We look forward to continuing to work with you.

From all at Bailey Ingham Limited

  

The Three New Directors

Layne Kerr

 

Bridget Boshier

Kelly Bair

 

 

Taxation Rates

Individuals: Taxation rates for individuals currently are as follows:

Income

Rate

0 – $14,000

10.5%

$14,001 - $48,000

17.5%

$48,001 - $70,000

30%

$70,001 - $180,000

33%

Over $180,000

39%

Companies: Company Tax rates are 28%, however when dividends are declared, Dividend Withholding Tax (DWT) is required to bring the effective tax rate up to 33%, made up with 5% dividend withholding tax (DWT) to be paid and imputation tax credits of 28%.

Where the person receiving the dividend lives overseas, there is no DWT payable and DWT is not payable when dividends are declared to associated companies.

Family Trusts: Family Trusts are taxed as follows:

Trustees Income 33%.

Beneficiaries – These are taxed at the individual tax rates

Children under the age of 16 generally can only receive $1,000 and any amount in excess of this is taxed as Trustees income. Once they are over 16 individual tax rates apply

Where Beneficiary Current Account’s exceed $25,000, the Beneficiary is deemed to be a settlor of the Trust and therefore can be assessed on Trust income, which could affect student allowances, Working for Families and any other entitlements.

As you may be aware there were amendments to the Family Trust Act  of 2019 and lawyers are quietly working away with their clients to review Trust Deeds and any changes that need to be made. There is a need to make beneficiaries aware they are beneficiaries in the Trust, however it is up to the Trustees to run the Trust, be aware of what the Trust requirements are, and what the Trust is doing and consider the needs of beneficiaries before making any distributions or major decisions.

Appropriate Resolutions regarding beneficiaries and major decisions are essential following meetings.

 

Student Loans

Student loan repayment threshold has been increased to $20,280 at a prescribed repayment rate of 12 cents in the dollar. This can include student loan adjustments at the end of the year and provisional tax payments for student loans, where the deductions are not made at source from earnings.

Fringe Benefit Tax

Quarters 1 to 3                                                             Quarter 4

63.93% (single rate)                                                     63.93% (single rate) or the alternate rate

                                                                                     Calculation (see below)

49.25% (alternate rate)                                               alternate rate calculation (see below)

The alternate rate calculation applies the following rates:

Income plus Fringe Benefits                                        Rate

0 - $12,530                                                                   11.73%

$12,531 - $40,580                                                        21.21%

$40,581 - $55,980                                                        42.86%

$55,981 - $129,680                                                      49.25%

Over $129,680                                                             63.93%

 

Low Interest Rates

Low interest rates for fringe benefit tax should be at 4.5%.

Depreciation

Straight line or diminishing value can be applied on an asset by asset basis. Depreciation rates vary depending on estimated useful life. Individual asset purchases can be immediately deducted in some circumstances. The relevant thresholds for immediate deduction are:

Purchase Date                                                             Deductibility Threshold         

19 May 2005 to 16 March 2020                                  $500

17 March 2020 to 16 March 2021                               $5,000

17 March 2021 and after                                             $1,000

Buildings           Residential buildings are not depreciable. Commercial and industrial buildings are depreciable at 2% DV or 1.5% SL.

Fitouts               Commercial fitouts are depreciable. Residential fitouts are non depreciable, but chattels can be depreciated.

Donations

Companies        Allowed a deduction for approved charitable donations up to their net income.

Individuals         Cash refund for one-third of donations of $5 or more to approved charitable organisations (provided the value of gifts made do not exceed their taxable income). This is up to the level of taxable income.

Use of Money charged by Inland Revenue

Under payments - 7%

Overpayments - nil

Use of money charges apply where the residual income tax for the year exceeds $60,000 and the residual tax has not been paid by the last tax payment due for the year. Penalties can also apply in respect of late payments or under estimations. We can use Tax Pooling at a lower cost in respect of the previous year’s income tax, but not GST.

Bright Line Test

The Bright Line Test includes subdivision of farm land into house sections and lifestyle blocks, and was increased on the 27th March 2021 from five years to ten years. Before entering into any agreement for sale, please contact our office to discuss.

The bright line test on properties has been extended from five years to ten years on all existing properties, sections, beach properties and subdivisions, and it is in effect a capital gains tax.

Where a farm is being purchased which does include a separate section, and or house, that is to be subdivided or has been subdivided, this needs to be assessed at full value to ensure on sale, there are less taxable issues.

There has also been changes in interest deductibility for existing houses. This is getting phased out on houses purchased on finance as follows:

1st October 2021 – 75% deductible

1st April 2023 – 50% deductible

1st April 2024 – 25% deductible

1st April 2025 – no deduction

The Government are now working through the legislation which has not been passed, and submissions have now closed on the deductibility and treatment of new housing and what constitutes new housing. No doubt there will be considerable media commentary on this as matters evolve.

The current ring fencing of losses still apply in that rental losses have to be offset against future rental income.

 

Payroll 

There have been a number of changes to payroll legislation recently that will increase the cost to employers:

  • Sick leave increase – minimum sick leave entitlements are increasing from the 24th July 2021. Currently all employees are entitled to 5 days sick leave after six months continuous service. Employees will get an extra 5 days when they reach their next entitlement date, i.e. after reaching 6 months employment, or on their sick leave entitlement anniversary. The maximum amount of unused sick leave that an employee can carry over from previous years will be 10 days with the maximum entitlement remaining at 20 days.
  • Statutory holiday – a new statutory holiday has been introduced. This is Matariki Day and it will be first celebrated in 2022 with the holiday falling on the 24th June 2022.
  • Holiday pay calculations – the Government has stated it will adopt the Holidays Act Task Force’s recommendations on changes to the calculation for holiday pay. One of the main changes is that gross earnings used to calculate holiday pay will include all cash payments, apart from reimbursing allowances. This will include discretionary bonuses, for example, bonuses paid at Christmas time. Legislation is expected to be introduced in early 2022.

ACC

ACC rates have decreased over the years with the large investment portfolio ACC have, which has assisted in keeping costs of claims down.

ACC have delayed issuing invoices for a large number of entities and are now catching up, and people are now often faced with two years ACC levies. If cashflow is an issue they will spread payments out over several months without interest charges, or can have a longer period to pay.

Cover Plus Extra

This product gives individuals the opportunity to set their own level of cover and quotes can be obtained for this by either going online https://www.acc.co.nz/for-business/understanding-your-cover-options/optional-cover-coverplus-extra-cpx or contacting this office. It does give certainty and is particularly useful in the first year of business or where earnings are either far higher than you would want from ACC or far lower. The maximum earnings for ACC is $130,911 and the minimum is $36,816. There is a small premium to pay because of the certainty and the ability to fix earnings.

Livestock Values

The livestock national average market values for the Herd Scheme and the National Standard Cost (NSC) have been announced. These are attached. We now comment as follows:

            Herd Values:

  • Sheep – there has been a solid lift in sheep values, closer to the 2019 values.
  • Beef – these also increased by approximately 5%, but not as high as they were in previous years.
  • Dairy cattle – these have remained reasonably constant, although Friesian bull calves and R2 bulls have had a drop. Dairy Heifers have increased slightly, while cows have remained almost constant at $1,528.

National Standard Cost:

  • NSC values have remained much the same. The calculation for these are a combination of stock bred and livestock purchased.

In 2020 we tried to get as many farming entities as possible on to the Herd Scheme, but this is dependent on a number of factors:

  1. Income received during the financial year.
  2. Tax rates.
  3. Outlook for the industry.
  4. Individual plans for each farming entity.

The benefit of the Herd Scheme is that when you sell there is generally only a small taxable amount over and above the herd values. As we prepare each farmer’s accounts, we review what is the best option, taking into account individual circumstances.

Developmental Expenditure

The following development expenditure can be written off 100%

  • Fencing
  • Pasture renovation
  • Fertiliser not as part of significant capital activity
  • General Fertiliser
  • Legal fees regarding finance
  • Weed and Pest control
  • Re-metalling existing races

Developmental expenditure to be capitalised and depreciation rates:

                        Improvement                                                                                                             %

1

Preparation of the land for farming or agriculture, including cultivation and grassing

5

2

Regrassing and fertilising all types of pasture in the course of a significant capital activity that relates to a type of pasture with an estimated useful life of more than 1 year

45

3

Draining of swamp or low-lying lands

5

4

Construction of access roads or tracks to or on the land

5

5

Construction of dams, stopbanks, irrigation or stream diversion channels, or other improvements for the purpose of conserving or conveying water for use on the land or for preventing or combating soil erosion, other than planting or maintaining trees, whether or not on the land, for the purpose of providing shelter to the land

5

6

Construction of earthworks, ponds, settling tanks, or other similar improvements mainly for the purpose of the treatment of waste products in order to prevent or combat pollution of the environment

5

7

Sinking of bores or wells for the purpose of supplying water for use on the land

5

8

Construction of aeroplane landing strips to facilitate aerial topdressing of the land

5

 

Kiwifruit

  1. Kiwifruit plants can be written off at 7½% per annum.
  2. Licenses purchased can be amortised over the life of the licence. Currently Sun Gold Licenses have a seventeen year period and are amortised over this period.
  3. Please note, for taxation purposes these costs are amortised, and a full year’s amortisation applies, even if carried out towards the end of the financial year.

Private Adjustments

A number of years ago the Inland Revenue Department issued a change in claims whereby house costs generally were reduced from 25% to 20%, unless there are specific reasons for varying this. This includes insurance, power and repairs.

In addition, it is noted there is no claim for GST on employee’s house expenses as they are deemed to be rental houses. The rent proportion of their remuneration does not attract GST.

 

Sale & Purchase of Farms

Sale & purchase of farms are generally zero rated as a going concern, where there is a vendor and purchaser registered for GST. Care has to be taken in these agreements and generally you should not sign agreements without consulting both your solicitor and this office to discuss, as some vendors are not registered, while some purchasers do not wish to register.

 

 

 

 

Subdivisions and sale of Sections

There has been a large increase in the number of subdivisions being done from farms. Where the land being sold cannot be farmed as a viable business, or is not being used for other purposes, the purchaser generally should not be registered or is not registered, and therefore the vendor is liable to pay the GST. The GST can be claimed against the proportion of GST payable on the section for real estate fees, legal fees and subdivision costs.

For example:

Income

      Sale of Section at                                                                      $345,000

                            GST payable by vendor                                                                                                                        $ 45,000

Claims for vendor

      Subdivision costs                                                                      $   46,000

                            GST claimed                                                                                               ($  6,000)

      Commission, say                                                                       $   16,100

                            GST claimed                                                                                                ($  2,100)

      Legal fees, including legal fees for subdivision             $     3,450

                            GST claimed                                                                                                ($     450)                        ($   8,550)

Net GST Payable                                                                                                                                                                $  36,450

Sale of Farm Land within Ten Years

Generally, if the work is of a minor nature, or the land being subdivided can be farmed as a viable business, there would be no income tax payable. GST would generally be payable where the purchaser is not registered for GST.

Where a subdivision is going to be carried out, please check with the office to see what the position is.

Health & Safety

This remains a must do requirement with good introduction procedures signed off, regular meetings and continued awareness of keeping everyone safe.

Climate Change Healthy Rivers

Many farmers are working through this or have completed plans. Fortunately there are some very competent people to assist with these plans at a reasonable cost. However, the new rules do present challenges but we are confident farmers will meet these just as they have done before with other changes.

 

 

 

Farmers Party 30 June 2021

TWENTY FOURTH ANNUAL FARMERS WINTER PARTY

For the past 23 years the Farmers Winter Party has been a most successful annual event which, this year, is to be held on Wednesday 30th June starting at 5.30 p.m. It is anticipated there will again be a large crowd at the Otorohanga Club to enjoy an excellent evening.  This year will follow the same format as in 2020 in that it will begin with an “Oto-Expo”. This will be a chance for the farming community to meet and greet the many supporters of this social event.

We have been grateful for sponsorship by businesses in the past and we hope sponsors will continue to give this event their support.  Because of Covid-19 and last year’s drought conditions, it is even more important that we celebrate our relationships.

All sponsors who contribute agree this is one of the most effective sponsorship or advertising campaigns they subscribe to.   As business people, we all rely on farmers for their support and the opportunity to provide them with the products and services they require.  This partnership is likely to continue in the future and your support is greatly appreciated.  In addition, this is usually a great night out!  

We look forward to your support and attendance.  Please feel free to invite others who may wish to attend.  A notice and list of sponsors will be advertised in the King Country News prior to the event.

 

Cheyne Waldron

BAILEY INGHAM LIMITED

 

Waitomo News Article - Managing and monitoring cashflow - March 2021

The agricultural sector continues to face challenges with the global pandemic creating issues - just like it has for many other sectors throughout the New Zealand economy. 

Whilst there are many external factors that are not within farmers’ control, such as the economy and the weather, there are things that rural businesses can do to be more prepared for the seasonal ups and downs that farmers face. 

Managing and monitoring cashflow

Being able to monitor cashflow is crucial for any business.  It is essential that as a rural business owner you know what is happening with your cashflow and what is likely to happen in the future at all times.  Because of agriculture’s seasonal nature, and the scale of operations, most farming businesses require a line of credit, such as an overdraft, and other lending to successfully run their business.  Well managed cashflow monitoring reduces risk for banks and other lenders and often leads to better lending terms for the borrower.

How to manage your cashflow

One of the most important things that rural businesses can do is actively track your financials and monitor, each month, income and expenditure.  There are a number of online accounting platforms that can assist with keeping track of what is happening in your farming business. These include Cash Manager, Xero, MYOB, Figured, Farmax and Bank Link amongst others.  In addition, programs such as Microsoft Excel can also be used for producing cashflow forecasts and budgets.

Updating your cashflow forecast

It is important to continually update your cashflow forecasts, particularly as commodity prices are volatile and income is likely to need revising at various points during the season. A successful cashflow budget will have columns for each month of the year and rows to show each type of income and expense that relates to the farm business.  There should also be an opening and closing bank balance each month and this assists with seeing what the seasonal peaks in the overdraft are likely to be. 

Where to get help

Your farm accountant and bank manager will be able to assist with your cashflow forecasting.  If you don’t use online software your accountant generally will and they should be able to provide an actual cashflow statement for the previous season. This is always a good starting point for producing a forecast for next season.  Your annual financial accounts can be used to back up your forecast to see how realistic the cash result will be.  It is important to include things like income tax, asset purchases, living costs and other personal items such as school fees and life and medical insurance. All of these factors have an influence on the cash result for your business. 

Working with your bank

There has been a shift in focus over a number of years to ensure that banks are lending responsibly and that farmers have good strategies in place to deal with the seasonal and cyclical nature of farming.  Years ago banks did not necessarily require principal repayments on loans straight away but nowadays it is important that you are able to show the ability to pay back principal and interest from the start of any loan. 

Current Outlook

Dairy farmers can be well pleased with the results of the latest global dairy auction where prices across the board leapt an incredible 15%.  This is the eighth increase in a row and the eleventh increase out of the last twelve auctions. Last month Fonterra lifted its 2020/21 forecast Farmgate milk price by 20 cents to between $6.90 and $7.50.  After the latest dairy auction this is likely to increase further.  For dry stock farms prices are holding up surprisingly well considering Covid and export issues.  The global demand for food is set to continue, and while there are plenty of issues ahead, farmers who are able to monitor and keep a close eye on their farm finances should be able to weather any storm that comes their way.

Cheyne Waldron is a director of Bailey Ingham Ltd, Chartered Accountants, Otorohanga, Te Awamutu and Taumarunui

Farming Feature December 2020 - Land Transactions

Farming Feature December 2020 - Land Transactions

 

There is no doubt that residential property, including houses and lifestyle blocks, is in huge demand right now. There are many reasons for this including New Zealand’s Covid-19 status as a safe place to live, record low interest rates which are supporting people getting a mortgage, KiwiSaver first home withdrawals, and an increasing number of New Zealanders coming home from overseas with significant amounts to spend on housing. In addition, property is seen to be a tax effective and reasonably safe type of investment, and likely to be a better bet than the minimal interest rates being offered on a term deposit at present. This high demand for housing with limited supply available, has pushed prices to record levels.

Lifestyle Blocks

Lifestyle blocks are back in favour at the moment, with a high amount of demand and properties selling in quick fashion. We get a number of calls frequently asking about the GST implications for lifestyle blocks. Where the seller of the block is GST registered, then they must charge 15% GST on the value of the farmland that comes with the property. This makes the purchase more expense for the buyer.

Generally, our advice to people purchasing lifestyle blocks is that they must satisfy a ‘Business Test’ in order to claim back the GST on the purchase price. To satisfy a business test the land being purchased must be able to support a viable business and this can come in the form of a contractor’s depot or some sort of intensive farming, including intensive calf rearing or breeding chickens or going into horticulture. If a purchaser does register for GST in order to avoid paying GST on the purchase, then they will need to add GST when they sell the property, which may make selling the property more difficult in the future.

Subdivision of Farm Land

 

With lifestyle blocks in high demand, we are seeing a number of subdivisions being contemplated. If the subdivision is more than of a minor nature and the work being carried out takes place within ten years of owning the farm, then tax would generally be payable on the sale proceeds of the subdivision. Where a minor subdivision is being undertaken and the proceeds of the sale are not taxable, then the costs involved in the subdivision would generally be not tax deductible. The Inland Revenue Department look at a person’s history of selling property and intention when purchasing the farm, along with the size and scale of the subdivision when determining whether or not subdivision proceeds would be taxable. This part of the tax law is not straight-forward and good advice is essential.

Selling off the House and Section

 

We see a number of cases where a farmer purchases a farm and then sells off the house and section as this is surplus to requirements. If you are going to subdivide and sell off the house and section, you need to make sure that this is appropriately valued in the purchase agreement on the original purchase. The house and section fall under the bright line test and if it is owned for less than five years then any profits from the sale of the house and section will be taxable. Always check with your accountant and solicitor before signing any agreements to ensure that values listed in the agreement are correct.

Bright Line Test

The bright line property rule applies to properties purchased after 1 October 2015. If you sell a residential property that has been owned for less than five years, then income tax may be payable. The main exemptions to the rule are where the property sold is your main home, or the property has been inherited. The bright line property rule applies for property purchases on or after the 1st October 2015 through to the 28th March 2018 (and sold within two years), or if the property has been purchased on or after the 29th March 2018 and sold within five years.

Therefore, the bright line test applies to people’s rental properties, beach properties, as well as bare sections that can have houses built on them. It applies to where a house owner sells to a trust or another associated entity, or to the house owners’ children.

The Inland Revenue Department is currently matching peoples tax returns with property transactions and is contacting those who might be affected and asking tax advisors to do the same.

Our advice for anyone who is not sure about their tax obligations when they are selling land or a house is to always get good advice before entering into and signing any contracts.

Article by Cheyne Waldron, Chartered Accountant and director of Bailey Ingham Ltd

BNZ Scam Savvy Week - November 2020

Scam Savvy week is all about helping New Zealanders feel safer online.  BNZ have provided the following key points to make sure we are all well informed on the type of scams out there and the sign's to be aware of.

 

What is a scam? 

 

Scams are dishonest and deceptive attempts to trick you into giving away your money, login credentials, credit card details, or personal information.  In business, it could be the personal information of your customers or you as a business owner or operator.  There are many common scams that target all sizes and types of businesses.  If businesses can recognise their vulnerabilities and train their team, there is less chance of falling victim to a scam. 

Types of scams

Scams can come in many different forms from many places:

  • Email
  • Phone calls
  • Online shopping
  • Text messages
  • Mail addressed to you
  • Letterbox drops
  • Social media posts & messages But more commonly in business they are:
  • Invoice scams via email
  • Phishing
  • CEO scams
  • Ransomware
  • Technical support scams Types

Signs that something might be a scam

  • The deal is too good to be true.
  • The scammer wants you to take action quickly.
  • The scammer wants you to share personal or financial information.
  • The website isn’t secure and there are no contact details.
  • It contains links directing you to confirm information or login to a service.
  • Poorly written communications with spelling and grammar mistakes.
  • The scammer has asked you to keep the question or communication to yourself.

 

What is phishing? 

Phishing is an attempt (usually via email) to steal an individual’s personal or banking information.

Phishing emails usually appear to come from a well-known organisation and will ask for details such as bank card numbers, account numbers, or passwords.

 

 

What you can do

  • Never click on a link or attachment in an email from someone you don’t know or aren’t expecting.
  • You could hover over a link (be careful not to click on it) to reveal the link’s true destination. On a mobile phone, tap and hold to preview links. 
  • If you receive emails from a person you know, but they’re asking for financial payments or acting out of character, always call that person to verify that the email is from them.
  • Be wary of urgent requests for personal information, log-in details, or financial payments.
  • Look out for emails not addressed to you personally.
  • Be wary of poor spelling or grammar in emails as these can be indicators of scams. 

I hope the above has provided an insight of what’s happening out there at the present point in time.

 

 

 

Bailey Ingham Staff Supporting Pink Shirt Day - 2020

On Friday the 16th of October Bailey Ingham staff from our Otorohanga and Te Awamutu offices wore Pink for Aotearoa’s Pink Shirt Day.

A variety of pink was worn throughout the offices to support the global message to stop bullying by celebrating diversity and promoting positive social relationships.

 

 

 

 

Farm Development Expenditure - October 2020

 

Taxpayers engaged in the business of farming or agriculture are entitled to a tax deduction when they incur expenditure on the development of their farming land. Tax legislation has created specific categories of farm development expenditure and while some categories qualify for an immediate 100% tax deduction, others qualify for a progressive deduction (amortisation) over a number of years.

The following types of expenditure are 100% fully deductible in the year that the expenditure is incurred:

  • The destruction of weeds, plants or animal pests detrimental to the land.
  • The clearing, destruction or removal of scrub, stumps and undergrowth.
  • The repair of flood or erosion damage to the land.
  • The planting and maintaining of trees for the purpose of providing shelter or preventing or combating erosion.
  • The construction on the land of fences for agricultural purposes and the regrassing and fertilising of all types of pasture - so long as the expenditure is not incurred in the course of a significant capital activity.

A significant capital activity is defined to mean an activity that constitutes a change in the nature or character of the farming being undertaken on the land, such as a dairy or kiwifruit conversion.

Farm development expenditure that is not 100% claimable in the year that the expenditure is undertaken is amortised (similar to depreciation) over a number of years. A 5% amortisation rate applies to the following:

  • Preparation of the land for farming or agriculture, including cultivation and grassing.
  • Draining of swamp or low lying lands.
  • Construction of access roads or tracks to or on the land.
  • Construction of dams, stop banks, irrigation or stream diversion channels for use on the land.
  • Construction of earth works, ponds, settling tanks or similar improvements.
  • Sinking of bores or wells for the purpose of supplying water.
  • Construction of airplane landing strips to facilitate aerial top dressing of the land.

Development expenditure that allows a 10% amortisation rate include the following:

  • Planting of non listed horticultural plants on the land.
  • Erection on the land of electric power lines or telephone lines.
  • Construction on the land of feeding platforms, feeding yards, plunge sheep dips or self feeding and silage pits.
  • Construction on the land of supporting frames for growing crops.
  • Construction on the land of structures for shelter purposes.

The tax treatment of development expenditure is not always as simple as it appears. Farmers who are relying on a tax deduction should carefully consult with their accountant prior to the expenditure being incurred to ensure the outcome is known in advance.

David Bailey's Rotary Club Award - September 2019

David Bailey has been presented with an Honorary Membership from Robin Saunderson at the Otorohanga Rotary Club in recognition of his dedication and service to Rotary and our community.

Bailey Ingham Limited was also presented with a certificate of appreciation.

   

Rex Byles, Remco Pootjes, Pat Corboy, Glenis Coley, Bev Corboy, Dianne Murphy, David Bailey, Robert Ingham, Robin Saunderson, Trevor Coley, Ross Loomans

 

Tracey Hall becomes an Associate Director - October 2019

The Directors of Bailey Ingham are proud to announce that Tracey Hal has become an Associate Director of the firm, effective from 1 October 2019.

Tracey grew up in a dairy farming family in Otorohanga where she attended Otewa Primary School and then Otorohanga College. She completed her Bachelor of Management Studies Degree at The University of Waikato and started working at Bailey Ingham Limited in 2001 immediately after finishing her degree. She went on to further her study and gained admission to The Institute of Chartered Accountants in 2004 at the age to 25.

Tracey manages a team of staff at Bailey Ingham and enjoys helping them to learn new skills and further their knowledge. She has a wide range of clients from dry stock and dairy farmers to various business and investment clients and enjoys the challenges that each business provides. Tracey enjoys working closely with her clients by providing them the best service and helping them to achieve their financial goals.

Tracey lives in Pirongia with her husband and 2 boys aged 8 & 10. In her spare time she enjoys participating in a range of fitness activities. Particularly mountain biking with the family and discovering the many river rides and mountain tracks around the Waikato. She also enjoys keeping up with different sports especially the V8 motor racing and in particular Scott McLaughlin from the Shell V Power Racing Team.

Waitomo News Farming Feature - September 2019

Waitomo News Farming Feature

With Spring rolling around, it is a busy time for farmers with more mouths to feed on the farm and plenty to do. In a lot of ways this is good news for accountants who can get on with the job of preparing financial accounts without too much interruption from our busy farming clients! This month’s article focuses on some of the questions that we have been asked by our clients over the past month or so.

Providing Short Stay Accommodation

Some farmers and land owners can end up with a spare house on the farm which, rather than renting it out on a long-term basis, they are using for short stay or Airbnb type accommodation. This can be an excellent way of earning additional income for the farmer, while keeping options open with the house, should it be needed in the future for an employee. The key area of difference between long-term and short-term accommodation is that short term accommodation is subject to GST, while long term accommodation is not. This would mean for a GST registered farming entity, GST needs to be declared on this income. For non-GST registered entities, if the short stay accommodation income generates a turnover of greater than $60,000 per annum, then the entity will be required to register for GST.

Off-Road Petrol Rebates

Most farmers are now well aware of the opportunity to receive a refund of excise duty, which is charged on petrol purchases. The refunds apply where that petrol is not used on a public road, for example, for farm bikes and quads, or any other unregistered farm style vehicle. Petrol rebates can also be received where petrol is used for petrol powered pumps, mowers, chainsaws or petrol generators. A recent search I did on Google saw several companies in New Zealand that administer the petrol rebate service.

Paid Parental Leave

Paid parental leave is paid by the Government where time is taken off work to care for a baby or child that has come into your care. Paid parental leave is paid where the caregiver has worked an average of ten hours a week in at least 26 of the weeks in the year before the child is born. It is important to note that you can get paid parental leave if you are self employed. The amount of paid parental leave depends on what was being earned in the year before the baby is born. The minimum payment of paid parental leave is $177 a week before tax, with the maximum $586 a week before tax. Currently paid parental leave is paid out for 22 weeks and after the 1st July 2020 this increases to 26 weeks.

KiwiSaver – Prescribed Investor Rates

A prescribed investor rate (PIR) is the rate used to calculate how much tax people pay on their KiwiSaver income. Depending on the person’s income, the PIR can be either 10.5%, 17.5% or 28%. Generally, the 10.5% rate is only available if your taxable income has been $14,000 or less in one of the last two years. If a person’s taxable income in either of the last two years was less than $48,000, then the PIR rate should be 17.5%, and if the income is above $48,000 then the PIR rate is 28%. It is now more important than ever to ensure that your PIR rate is correct. If it isn’t then the amount of income from your KiwiSaver needs to be included in your tax return. The IRD had a major computer upgrade in April and all of this information they now hold for every tax payer in New Zealand, so if the correct tax is not being paid on your KiwiSaver investments, you will end up paying for this as the Inland Revenue Department will send you a bill. If in doubt talk to your accountant or KiwiSaver provider.

New Zealand Farming – Many Challenges but the Outlook is still Bright - July 2019

As we move into July the reporting season for agricultural businesses kicks into gear. This year the results will be mixed, with some farmers doing very well, while others will have struggled with increased on farm costs, a tough (dry) summer, a reduced dividend for Fonterra suppliers and for some, too much debt is also causing concern.

At the present time some farmers are struggling with a cashflow shortfall, and while this is common in winter, some are finding it difficult to get overdraft limits increased. We are spending a lot of time with our farming clients, as they work through getting their finances in order with the help of their bank and other farm advisors.

Tougher lending requirements are creating more hoops to go through for our farmers. This is mainly due to Reserve Banking requirements with the Bank revealing proposals late last year which could see the New Zealand banking sector requiring an additional $20 billion in reserves, in an attempt to position itself to withstand a one-in-two-hundred-year crisis. Rural bank managers are looking for good equity positions before approving additional finance, borrowers also need to ensure that budgets stack up with the ability to pay both interest and principal on any loans given out. In addition, borrowers need to be good communicators and show good results, business acumen and a history of reinvestment back into their business.

There is much being written and talked about regarding the effect of environmental considerations on the New Zealand agricultural sector. It is clear that both worldwide consumer demands and Government regulations are having a major effect on the agricultural landscape, and many of these requirements are still being worked through. These considerations have had a negative effect on rural property values which is causing concern for both lenders and farm owners.

Farmers also face labour and staffing challenges, increased compliance and administrative rules, along with increased costs facing their businesses.

Having said all that, on the plus side commodity prices remain strong, with sheep, beef and dairy prices all firm with the exception of wool. Global food demand has never been higher, and this is set to continue with the world population estimated to hit 10 billion by the year 2055. New Zealand has a population of approaching 5 million, but we produce enough food to feed 50 million. So as long as we can continue to farm in a sustainable way, our farmers still have plenty of reason to be optimistic about the future.

In the short-term winter for some is not much fun, but spring is only just around the corner and with newborn calves and lambs to look after and plenty of work to do both on and off the farm, our regions farmers will have plenty of opportunities to keep themselves busy, and their finances improving.

2019 Waikato Gala Dinner - Staff Achievements - May 2019

The Chartered Accountants Australia+New Zealand 2019 Waikato Gala Dinner was held on Friday 24th May. At this dinner three of the Bailey Ingham staff were recognised for their achievements, Jessica Quirk received her Chartered Accountant’s certificate, Donelle Burton her Associate Chartered Accountant’s certificate and Bridget Boshier received a milestone certificate for 25 years as a Chartered Accountant. Congratulations to all of you, we are so proud of you.

Taumarunui Office Team

The Bailey Ingham Taumarunui office is operated by Jayne Adams, Ashley Shrubsall and Rachel Crosbie. This office is open Monday to Friday 8:30 am to 4 pm. Ashley and Rachel are both based in the Taumarunui office, while Jayne one of our Associate Director’s works from that office on Wednesday’s.

Ashley started work in the Taumarunui office in 2014, she lives near Taumarunui and has a farming background. Ashley recently graduated from Massey University with a Bachelor of Accountancy and is working towards her Chartered Accountant’s qualification. Rachel joined our Taumarunui team in early May, she resides in Taumarunui and has a Bachelor of Business Analysis plus over 13 years’ experience in rural accounting. Jayne has managed the Taumarunui office since 2007 and lives on a sheep/beef farm near Te Kuiti. She is a Chartered Accountant with a Bachelor of Business (Accounting) and Associate Diploma in Agriculture and works from our main office in Otorohanga.

Our Taumarunui team welcomes all new and existing clients to visit or contact them at our office in Hakiaha Street.

 

Farming Change of Seasons - IRD Upgrade - May

May is the month where the farming seasons wind down - cows are being dried off and excess stock is sold before winter, while sharemilkers and contract milkers that are moving farms prepare for gypsy day around the last weekend of May. For accountants the new tax and reporting season is now underway and it has been a busy time getting to grips with the new IRD computer system, along with payday filing and other changes that have been taking place.

IRD Computer System Upgrade

The Inland Revenue Department closed its call centre and online presence over the Easter and Anzac break in what was one of the biggest IT projects ever undertaken in the NZ Government state sector. 19.7 million taxpayer accounts were transferred from the IRD’s Legacy computer system to the new system known as START. According to the Inland Revenue Department the transition went extremely smoothly and as a result the key changes to our tax system for individuals are as follows:

  • The tax refund process is now automatic and between the 20th May until the 31st July, all wage and salary earners whose only income is from employment, benefit or bank interest, will receive refunds automatically. In addition, all refunds will be direct credited to the individuals bank account. People who make donations now have the ability to claim their donation rebate online.
  • The downside to the new changes is where wage and salary earners have tax to pay, this will be calculated automatically by IRD and an account will be sent out. If the amount is under $50 Inland Revenue Department will write the amount off, otherwise taxpayers (who don’t have a tax agent) will have until February of the following year to make the tax payment.
  • The MyIR system now looks a lot different to what it did before the upgrade. There are some teething issues such as PAYE amounts due not agreeing to the amounts that employers submitted and in addition, where taxpayers pay provisional tax on the same day that GST is paid, the online GST return pre-populates the provisional tax automatically, so tax payers need to check that they do not pay their provisional tax twice.

While there will be teething issues and people work around the new system, overall the changes that the Inland Revenue Department have been making, do make sense and in time both employers and employees are going to be much better off with a simplified and much more modern online tax system.

Generally farmers are in a good space at present with the payout holding up reasonably well, and sheep and beef commodity prices are also reasonably firm. Many farms have recovered well from the dry summer and look to be well set up going into winter. Our advice to all farmers and business owners is to get your financial records in to your accountant as early as possible, so that they can make a start on these. Ensure that you keep your bank informed if you are going to have a deficit and will require additional funding. Don’t leave this to the last minute as your bank manager will not like these kinds of surprises. Have regular discussions with your accountant and farm advisor regarding your plans going forward and ensure that your staff get adequate time off to refresh and spend time with their families before the new season gets underway.

April 2019 Update

April sees the start of a new financial year for many businesses and a number of changes have been introduced that will affect employers moving forward.

Minimum Wage

On the 1st April the minimum wage rate was increased from $16.50 an hour to $17.70 an hour. The starting out and training wage also increased from $13.20 an hour to $14.16 an hour. The Government has also set indicative minimum wage rates of $18 an hour from the 1st April 2020, increasing to $20 an hour from the 1st April 2021.

Employees must be receiving at least the minimum wage rate for hours worked, even when employees are on a salary. This may mean that an employee’s pay needs to be topped up at certain times of the year if extra hours are worked. Non cash benefits such as the provision of accommodation on the farm that form part of an employee’s employment package, are included when calculations regarding minimum wage are made.

Payday Filing

Payday Filing became mandatory on the 1st April. Awareness of Payday Filing is very high and most businesses that we have been dealing with are well equipped for the changes that are taking place. Payroll software is proving popular as it is linked to IRD’s systems to allow the payroll information to flow directly to them. Payroll software also allows employers to keep track of employees days off (annual leave entitlements), public holidays worked (and days in lieu owed) and payslips are automatically emailed to employees after each pay run.

Other Changes

On the 1st April the Domestic Violence/Victims Protection Act 2018 came into force on the 1st April. This imposes new obligations on employers. On the 6th May new legislation covers rest and meal breaks under the Employment Relations Amendment Act 2018. Also on the 6th May 2019, ninety day trial periods for new employees will only be available to employers with fewer than twenty employees.

Changes in the Pipeline

There has been much spoken and written about the possibility of a capital gains tax on residential property. Proposals have also been made regarding the ring fencing of losses from residential property investment. The Government’s tax working group is still working through the details, but it is clear that the tax breaks from residential property that investors have had in New Zealand for many years, are coming to a close. Another of the proposals of the tax working group is to increase the threshold for when provisional tax applies from the current level of $2,500 of residual income tax to $5,000 a year, which will be advantageous for many small business owners on lower incomes.

Providing Accommodation as a Business

The Inland Revenue Department have produced a number of consultation documents to explain the tax implications of renting out your home, or a room in your home, with a focus on Airbnb and similar operators. This includes short stay accommodation, boarders and other types of accommodation. In general, if you are making a profit from renting out your house or a part of your house, then this needs to be declared in your tax return as income each year. Costs and expenses incurred in providing this accommodation can be claimed.

Heading into winter the feed situation on farms has improved with some good early Autumn rain. The payout forecast looks positive for dairy farmers, while drystock farmers will also be hoping that prices hold up well over the next twelve months. Kiwifruit and other industries are seeing a real resurgence.

Banks and financial institutions are closely monitoring their customers results and financial position, and more than ever, it is important to plan and forecast for the year ahead to ensure that good progress is being made for all types of farming businesses.

 

Rural Update March 2019

Rural Update March 2019

 

This month is traditionally the busiest month of the year for accountants with the deadline for filing 2018 tax returns falling on the 31st of March. This also coincides with the last month of the financial year for most businesses which is also a busy time, and in addition, this year there is a significant change coming up in the way that businesses have to report their employees’ earnings and other details to IRD - this is called Payday Filing.

 

Payday Filing

By now all employers should be aware of Payday Filing which comes into effect on the 1st of April. All employers should now be registered for Payday Filing and have adequate systems in place to deal with the new requirements. In a nutshell, from April 1, whenever an employee gets paid, employers must notify the IRD within two working days if they file their payroll information electronically, or within ten days if the payroll information is filed manually on paper forms. Many employers that we are dealing with are signing up with payroll providers and intermediaries such as PaySauce, Xero Payroll, MYOB Payroll (or one of the many others that exist) or they are simply contracting out the work to bookkeepers and accountants.

It should be remembered that in 1986 there was a more substantial change to our tax system when GST came in (and we got through that!), and once Payday filing settles down it will become normal practice.

 

Climate Issues

The farming season was going very well for most farming types, up until the end of January with good commodity prices and farms with plenty of grass and supplements on hand. The last month or so however has seen particularly dry weather, and each farmer now needs to have their own plan that suits their current feed and stocking position. Meat works are now particularly busy and beef prices have come down by approximately 50 cents a kg for cattle, which equates to around $150 less that a farmer receives for a bull or a steer, or approximately $100 less for a boner cow. Prices are still at historically good levels however, and if farmers are feeling the pinch then it is still the right decision to destock, with not a lot of rain forecast on the horizon. A lot of dairy farmers have moved to once a day milking to deal with the dry weather.

Our advice, as always, is to talk to your consultant and farm advisors and chat to the neighbours about what they are doing. Everyone is feeling the heat.

 

Rural News

The Farmers Weekly and Country News are full of articles regarding more regulations for farmers to deal with, compliance issues, healthy rivers and capital gains tax. Some of these matters will have to be addressed in time. We note that Federated Farmers are calling for stock agent companies to be regulated and we generally support this, as like lawyers, accountants and real estate agents, they do handle a lot of money and should be subject to money handling requirements. The large number of (perfectly honest) livestock agents that we deal with would, I’m sure, support some sort of regulation, as it gives them some guidance to work with as well.

 

Capital Gains Tax

We believe that the proposals on capital gains tax will get substantially ‘watered down’ and many organisations will be making appropriate submissions to the government. Some form of capital gains tax is inevitable, but in the medium term we do not see a lot of potential for an increase in rural land values, as these are currently at historically high levels anyway. As these are the values which will be used as a base to measure future capital gains we generally don’t see a big issue for current farm owners. But watch this space…

 

 

Article by Cheyne Waldron

Chartered Accountant

Bailey Ingham Ltd

Otorohanga

Payday Filing Newsletter - Dec 2018

From 1st April 2019 Payday Filing of employment information to Inland Revenue becomes mandatory. This change will affect everybody who employs staff. If you have some time over the Christmas break, you may like to consider how this affects you. However, we request that you do not ring us about this until after the 14th January 2019 when we are back at work.

What is Payday Filing?

  • This is the requirement to send the pay details of your employees to the Inland Revenue Department (IRD) every time you pay them. This will replace the current PAYE return that you file once a month (twice a month for large employers). For example, if you pay staff on a weekly basis, you will need to provide this information to IRD every week.
  • You will also need to provide employee details for new and departing employees to IRD. This information must be provided before any new employees’ first payday and includes
    • Start and end date of employment
    • IRD number
    • Contact details
    • Date of Birth (if provided to you)
  • How often you pay your PAYE etc is not changing – this will still happen on the 20th of the month following wages payments (or twice monthly for large employers)

 

Quick Summary:

Your business can deal with Payday Filing in one of four ways:

  1. Using a manual payroll system filing paper returns to IRD (only available to employers who pay under $50,000 in PAYE and ECST)
  2. Using payroll software
  3. Using a PAYE intermediary (this will generally be through a software provider)
  4. Instructing Bailey Ingham to manage your payroll and IRD filing obligations.

 

Following is more detailed information on the IRD requirements and the options available to you.

Payday Filing Options:

Paper Based

  • This option is only available to Employers with less than $50,000 PAYE & ECST deductions per year.
  • Payday information may be submitted on paper forms to IRD within ten working days. This must reach IRD in this time – so postal times need to be considered
  • These employers do have the option of paper filing twice a month – on the 15th and the end of the month.

Electronic Filing – three options:

  1. Direct from Payroll Software
    1. This requires payday filing compatible software. There are many providers who offer this. (See below)
  2. File upload via myIR
    1. Similar to the existing ir-File process that some of you may currently be using
  3. Onscreen via myIR (employers will manually key in information)

If you file electronically you must do so within two working days of the payday.

 

Making Payroll Easier:

 

Payroll Cycles

Review how often you pay staff. We have clients who pay staff several times during a month. For example, they may pay some staff weekly, others fortnightly and then some twice monthly. In addition, they may pay casual workers on an ad hoc basis. This potentially could mean that you are having to submit information to IRD many times during a month. We suggest you bring all staff into line, so they are all being paid on the same day and pay cycle, For example it may suit your business and employees to pay everyone fortnightly on a Tuesday. Thus, you will only need to payday file once every fortnight. We also suggest that you don’t pay your employees on a Monday – as there are several public holidays that fall on a Monday.

 

Use Payroll Software

There is a wide variety of products on the market to choose from. Most of these are web based and therefore do not require downloading onto your computer. One of the key benefits is that, when used properly, leave calculations become much simpler.

With the introduction of Payday filing, payroll software has become even more attractive. With many of them, once you have completed a pay run for your employees, you will simply be able to file the payday information with IRD by pushing a button.

There are many payroll software packages on the market – and it is important that you choose one that suits your business best. If you are already using an accounting software package (like Xero or MYOB), we suggest that you explore the options they offer, as many payroll packages will integrate with the accounting software. Many will offer free trial periods for you to get a feel for how it works. It is important that you have a good understanding of what cost is involved with each one. The price is usually determined by the number of employees you have. We have given an indication of the price in this newsletter, however please note that these may change, depending on your circumstances.

Here are some that we suggest you look at:

Paysauce

https://www.paysauce.com/

We have found this software to be quite suited to farming payrolls. It has the ability to enter hours worked each day which is useful for public holiday calculations. The cost is $5 per pay run plus $1.89 per payslip plus bank fees and GST.

MYOB Payroll Options

https://www.myob.com/nz/payroll-software/compare-payroll-software

MYOB has several different payroll software packages. If your payroll is relatively straightforward MYOB Essentials is probably suitable. The cost is $30 per month for up to 10 employees plus bank fees and GST. If you decide to use MYOB Essentials we may be able to get this at a discounted price for you.

Xero Payroll

https://www.xero.com/nz/features-and-tools/accounting-software/payroll/

The cost is $10 per month for one person + $1 per month for each additional person. You do however have to have a Xero accounting subscription also. If you do decide to use Xero, we may be able to get this for you at a discounted price.

Smart Payroll

https://www.smartpayroll.co.nz/

This is one of the most popular payroll packages in New Zealand. The cost is $20 monthly plus $0.99 per payslip for 1–5 employees plus bank fees and GST

 

PAYE intermediaries

Many of the software companies use PAYE Intermediaries. This makes the payroll process even easier. Once you have entered all your employees’ information and pay details an intermediary will do the following:

  • Deduct the total gross wages from your nominated bank account
  • Pay net wages to your employees
  • Email payslips to your employees
  • File all necessary paperwork with IRD
  • When your PAYE and other deductions are due to be paid to IRD, it will pay this directly (eliminating the need to for you to calculate what this payment should be and remembering to pay it.)

This may not suit all clients for cashflow reasons but is worth considering.

 

Services We Provide

At Bailey Ingham we manage the payroll for a number of clients. We are in the process of updating our systems in preparation for Payday Filing. If you would like us to manage your payroll, please contact:

  • Donelle Burton
  • Rosemary Johns
  • Lauren Hill
  • Bridget Boshier

We will shortly be updating our website with more information about Payday filing and links that may be useful.

Should you wish to email us about payroll – please do so at                                          This email address is being protected from spambots. You need JavaScript enabled to view it.     

Keep an eye out for information from the Inland Revenue Department. They are sending information out regularly and this will explain further what you need to do to meet your Payday filing commitments. You can visit their website for further information via this link

https://www.ird.govt.nz/payroll-employers/returns-payments/payday-filing/payday-filing.html

 

A Final Word

Unfortunately employing staff has become increasingly complex in recent years. Payday filing will make it a little more difficult in the short term. However, like the introduction of GST, Kiwisaver etc, it soon becomes a regular part of doing business. We are sure there may be teething problems initially, however we will be able to work with you to resolve these. We are confident that if you start using payroll software, you will quickly see the merits in using this rather than a manual system.

Please feel free to contact us in the New Year if you do have any queries.

 

Farming Update December 2018

Late Spring and early Summer has seen plenty of rain across the country. Good grass growth has kept farmers and contractors busy, and with Christmas just around the corner, there is a lot to think about both on and off the farm.

Pay Day Filing

Our office has been receiving calls from clients on a daily basis regarding the introduction of Pay Day Filing, which is compulsory for every employer from the 1st April 2019. The introduction of Pay Day Filing is one of the biggest shake ups facing employers in recent times. In a nut shell, the main changes are as follows:

  • That instead of filing an employer monthly schedule (IR348) every month, employers will file employment information every pay day, in line with the businesses payroll cycle.
  • Employers will have two main ways to file their payroll information with the Inland Revenue Department. This is through either filing electronically through Inland Revenue’s MyIR online services, or employers can file by filling out paper returns and sending this information in to Inland Revenue.
  • If you file electronically, then payroll information needs to be filed with IRD within 48 hours of paying an employee. If you file by paper, Inland Revenue needs to receive your information within ten working days after pay day.
  • Paper filing is only available if PAYE deductions are under $50,000 per annum, over that amount employers must file electronically.
  • Employees deductions such as PAYE, KiwiSaver, Student Loan, Child Support etc will continue to be paid to the Inland Revenue Department on the 20th of the following month (although some large employers will continue to have to pay twice a month, like they currently do).

Making Payroll Easier

Employers should consider whether they would be better off using a payroll software system to help with the administration and making the book work easier. There is a wide variety of products on the market to choose from. Most of these are web based and therefore do not require downloading onto your computer. One of the benefits of using a payroll software package is the way that annual leave, holiday pay and sick day entitlements and calculations can be done at the press of a button. Currently this sort of thing, for employers using a manual system, is prone to error and can be very difficult to calculate correctly. Record keeping involves a lot less paper, with employee and payroll information uploaded into the ‘cloud’.

Payroll Intermediaries

Another option for employers is to use a payroll intermediary. By using an intermediary, they take care of the IRD filing requirements and administers the payment of PAYE and other deductions to Inland Revenue. When using an intermediary, once employee information (remuneration package, tax code etc) is set up, the actual administration and payment of wages is reasonably straight forward. Most employees on farms are paid on a salary basis, so it is simply a matter of entering in any sick days or days off. Some payroll systems use an app which can be downloaded for employees who are paid on an hourly basis to enter their hours. The employer can then authorise these or they log in and enter the hours themselves. With days off and sick days entered each week, annual leave calculations can be done at any time at the press of a button. Pay slips are generated and can be automatically emailed to the employee. Customer service from the intermediaries that we have dealt with has been on the whole very good, with most intermediaries using a New Zealand based help line to assist with any queries or issues.

Some farmers and business people will prefer to continue dealing with their accountant for their payroll administration. Your accountant understands your business and is able to give payroll advice and a more personal service. Bailey Ingham, like many other firms, have been gearing up over the last few months to assist farmers to deal with the changes that are taking place.

Dairy Farm Values

A talking point that comes to mind as I write this article, is the discussion around the difficulty in selling farms in some areas, particularly in the dairy sector. It appears that the uncertainty facing the agricultural sector in regards to the drop in the dairy payout, environmental issues, Mycoplasma Bovis disease, along with compliance and health and safety issues are having a definite effect on farm prices. Some farmers that were thinking of selling are now deciding to hold off for the time being. Some are considering other farming options such as the option of 16-hour milkings, which can take away a lot of stress for both livestock and farmers alike. There is certainly plenty to think about and there are options to make life on the farm easier. The importance of having a good team around you to discuss options and alternatives is just as crucial as ever.

I would like to take this opportunity to wish all farmers and business people a happy, safe and stress-free Christmas and New Year.

New Zealand’s Top Accounting Firms Ranked

Each year accounting firms in New Zealand are ranked according to their size, along with rankings for revenue, as well as pro bono work. As you will see from the attached link that appears on the stuff.co.nz website, Bailey Ingham Limited rank 19th in New Zealand for size. We also rank 4th in New Zealand for regional firms and 1st in New Zealand for pro bono work. As you will see from the attached article, Bailey Ingham record over 1,500 hours of pro bono work a year, which works out at over 500 hours a year per partner, topping the list for accounting firms in New Zealand.

We note that Bailey Ingham currently have 55 staff on its payroll throughout our three offices, whereas the survey results show total staff of 42.

 

https://www.stuff.co.nz/business/industries/108756695/top-accounting-firms-how-they-rank.html

Anti-Money Laundering and Countering Financing of Terrorism Act

Anti-Money Laundering and Countering Financing of Terrorism Act

 

Phase two of the Anti-Money Laundering and Countering Financing of Terrorism Act 2009 (AML/CFT) means compliance for most accountants, beginning on the 1st of October 2018. Accountants are obligated under the Act to meet a number of requirements to help combat money laundering and terrorist financing and to help police bring the criminals who do it, to justice. The AML/CFT Act Phase 2 affects accountancy firms like Bailey Ingham Ltd because the services accountancy firms and other professionals offer may be attractive to those involved in criminal activity.

From the 1st of October 2018 Bailey Ingham, along with other accountancy firms, must assess the risk they may face from the actions of money launderers and people who finance terrorism, and must identify and report suspicious activity. To make that assessment Bailey Ingham needs to obtain and verify information from prospective and existing clients about a range of things. This is part of what the AML/CFT Act calls Customer Due Diligence.

Customer Due Diligence Requirements

Customer due diligence requires an accountancy firm to undertake certain background checks before providing services to clients. Accountants must take reasonable steps to make sure the information they receive from clients is correct and so we will need to ask for documents that prove this.

From the start of October, we will need to obtain and verify certain information from clients to meet these legal requirements. This information includes a client’s full name, date of birth and address. To confirm these details documents that we will be asking clients to provide will be:

  1. Drivers licence or birth certificate
  2. Bank statement or utility bill (less than three months old showing a client’s current address)

For companies and trusts we will need to obtain information including these details for all Directors, Shareholders, Trustees and named beneficiaries.

For certain clients or activities, we may also need to ask for further information. This may include information confirming the source of funds for a particular transaction.

How this affects Bailey Ingham clients:

Our engagement letters have been modified to include a section on the Anti Money Laundering and Countering Financing of Terrorism Act and the information that we need to obtain. We will ask all new clients to fill out forms and provide information. We will have forms for clients to fill out in the following situations:

  1. When a new client joins the firm.
  2. Whenever we become the registered office for a company.
  3. Whenever we form a new company.
  4. Whenever we become the independent trustee for a Trust.
  5. When an existing client starts a new business activity or introduces substantial funds into their business.

In addition to this, Bailey Ingham Limited has registered with the Department of Internal Affairs. This is so that we can report suspicious transactions if they occur. All accountancy firms must appoint a Compliance Officer, and for Bailey Ingham Ltd, Cheyne Waldron (one of the firm’s directors) has taken on this role. Bailey Ingham has completed a risk assessment and produced a AML/CFT Programme Manual with policies and procedures to help our staff comply with the Act.

While we understand that the vast majority of our clients and New Zealanders in general are honest, law abiding citizens, New Zealand as a country needs to play its part in tackling this world-wide problem.

Please discuss any issues or queries you may have with one of our friendly staff or partners – we would be pleased to assist and answer any questions you may have regarding the changes taking place.

Introduction of Pay Day Filing for Employers - September 2018

Waitomo News Article September 2018 - Introduction of Pay Day Filing for Employers

 

Over the past month all farmers and other businesses in New Zealand that employ staff would have received information from the Inland Revenue Department about the introduction of pay day filing.

From the 1st April 2019, instead of filing an employer monthly schedule (IR348) once every month, employers will now be required to provide (file) employees’ earnings information every pay day to the Inland Revenue Department.

The Inland Revenue Department are introducing pay day filing to reduce the long delay for some of the earnings information that it receives about wage and salary earners. Currently where an employer files PAYE information on the 20th of the month, some of this payroll information can be over forty days old as it relates to the previous month. The Inland Revenue use peoples’ earnings to calculate Child Support, Working for Families and other entitlements. Pay day filing will mean that the Inland Revenue Department are kept up to date with what people are earning on a weekly basis and therefore Child Support and other information will be calculated in a much more timely and accurate manner.

If an employer’s annual PAYE and ESCT (employer superannuation contribution tax) are greater than $50,000 a year, then the employer will need to file their weekly pay day and monthly information electronically, through MyIR, or by using compatible software. Those employers that have annual PAYE deductions of less than $50,000 still have the option of paper filing. In addition, all employers will now be required to provide new and departing employees address information, as well as their date of birth to the IRD.

Most large businesses already use a software provider (payroll program) to assist with their wage and PAYE requirements. Certainly, since the advent of KiwiSaver, which has increased the complexity of managing payroll, there has been a large increase in the number of farmers and businesses that are using payroll software or a tax agent. Software providers are now getting geared up so that they will be able to file pay day information at a touch of a button and for this reason it is likely that going forward, most businesses will be better off using a software package to assist with their wage and PAYE processing.

One thing that hasn’t changed is that businesses will continue to file employer deductions and pay the PAYE and other deductions over to the Inland Revenue Department on the 20th of the following month.

Payroll can be a very time consuming and tricky aspect of business administration, and many accountants and bookkeeping organisations are well placed to assist employers with the changes that are going on. Talk to your accountant or payroll provider to ensure that you will be ready come the first of April.

Our Taumarunui office is on the move!

As from the 16th July the Taumarunui office will be operating from 29 Hakiaha Street (between Bike Torque and Property Brokers).  The phone number will remain the same 07 895 7312.

The Taumarunui Office hours will be:

            Monday           8:30am to 4:00pm

            Tuesday           Closed

            Wednesday     8:30am to 4:00pm

            Thursday         8:30am to 4:00pm

            Friday              8:30am to 4:00pm

 

Jayne Adams becomes an Associate Director - April 2018

The Directors of Bailey Ingham are proud to announce that Jayne Adams has become an Associate Director of the firm, effective from 1 April 2018.

Jayne Adams works as a Chartered Accountant at Bailey Ingham in Otorohanga and manages their Taumarunui office. She has a rural background working in agriculture both overseas and in Te Kuiti and has worked in different local businesses giving her a diversity of experience.

Jayne is married to Chris and they live at Kopaki where they own a sheep/beef farm. They have four grown up daughters, who they have encouraged to make the most of their opportunities and all have undertaken tertiary education.

While raising her family Jayne went back to tertiary studies, this was challenging at times but she was fortunate to have great support from her family. Her qualifications include a Bachelor of Business majoring in Accountancy, Associate Diploma in Agriculture and a Bachelor of Applied Science majoring in Information Systems and Technology.

Her role at Bailey Ingham can be both challenging and fulfilling. It is a diverse type of work which involves working closely with the clients to assist them with their taxation and general business requirements. It is enjoyable working in communities like Otorohanga, Te Kuiti and Taumarunui as everyone is very friendly and most people know each other. Bailey Ingham provides accounting and business services plus offers great support to the local community.

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Our offices are located in Otorohanga, Taumarunui and Te Awamutu

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