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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.

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