Employers: Is Your Record Keeping Up To Scratch?

Many farmers would be aware of the action that has been taking place in the dairy sector focusing on employer maintenance of accurate time and wage records by the Ministry of Business, Innovation and Employment's (MBIE) Labour Inspectorate. Between December 2013 and April 2014 the Labour Inspectorate (previously known as the Department of Labour) visited 44 farms finding that 33 were in breach of employment laws. The Ministry has been taking action against farmers that are not complying with the legal requirements with non-compliance attracting fines of up to $10,000 for an individual and $20,000 for a company. Most of the breaches relate to insufficient record keeping and breaches of the minimum wage. It has become clear that this is an area that many farmers need to improve on and the start of the new season is a good time to make this happen.

Taxing Times Ahead for Dairy Farmers

The higher dairy payout brought about by an improvement in commodity prices and general economic conditions has been good news for the economy and particularly dairy farmers who will have higher incomes in the current season. While each taxpayer’s position is different, in general most dairy farmers will need to start thinking about provisional tax and acting accordingly to ensure that they don’t end up with a large debt owing to the Inland Revenue Department as well as costly Use of Money Interest charges.

Start Planning for Next Year

It is great to see some early summer rain, which will put farmers in good stead for the rest of the season. As we approach Christmas, now is a good time to start planning ahead for next year.

Make Hay While the Sun Shines

The current farming season may go down as one of the best ever in recent memory with high commodity prices and excellent weather conditions combining in what should be a bumper season for many in the agriculture sector.

When things are going so well it is easy to forget just how quickly things can change. Agricultural commodity prices tend to be very volatile and despite the fact that the products that we produce and export are of excellent quality and that the world population continues to increase (and we all need to eat!), we should always be mindful that dairy and meat prices may suddenly go out of favour almost overnight.

Other risks to the agricultural sector include increasing interest rates, increasing farmworking costs, a continuing higher dollar, environmental and climate issues and increasing overseas production.

Without trying to be too pessimistic this article attempts to reinforce the fact that it is important to build up your financial reserves now or in farming terms, make ‘hay while the sun shines’. Some things to think about:

Be Aware of your Responsibilities as a Trustee

As accountants we are often asked to give advice on business structures, including family trusts. Trusts continue to be very popular in New Zealand where it is estimated that there are between 300,000 and 500,000 in existence. The exact number is unknown, because unlike companies, there is no central register of trusts. Many trusts simply exist to own the family home and where they have no taxable income, they do not need to register with the Inland Revenue Department.

While there is no standard definition of a trust the most common way of describing how a trust works is that a trust is a relationship between trustees (in whose name property is held or dealt with) and people called beneficiaries who are intended to enjoy the benefits of that property.

Individuals, business people and farm owners form trusts for various reasons including asset protection, provision for family members, farm succession, ease of management, and the ability to appoint trustees to assist with decision making, to name a few. Trusts may also provide tax advantages but recent changes to tax law have reduced some of these.

In general trusts work very well but it is very important to consider the responsibilities of being a trustee. This article briefly looks at some of these.

Is Tax Really a Burden for your Farming Business?

Rural accountants across the country will have their hands full over the next six months dealing with their dairy farming clients' high levels of income for the season just completed. There will be some dairy farmers particularly in the Waikato thatsuffered from the drought; however with the record payout level most will still show excellent surpluses. What this generally means for dairy farming businesses is a hefty tax bill.

As accountants, one of the main reasons we are employed is to help our clients minimise their taxation obligations. Generally we do this through structuring our client's affairs carefully and claiming the maximum amount of deductions available.

At the end of the day if your business is making good levels of profit then you will also be paying tax. Unless you have substantial tax losses or have a high amount of off farm income, the only way your business will grow is by making good profits, paying the right amount of tax, reinvesting the after-tax profits and keeping your personal expenses to a reasonable level. From our experience this is one of the keys to a successful farm business.