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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.

Dealing with and adjusting to Change - March 2018

Recently in our office we have had a number of discussions with people involved within the agricultural sector, from farmers through to farm consultants, as well as other professionals such as solicitors, bankers and other chartered accountants. These discussions have revolved around the changes taking place that are affecting all aspects of society and the economy, but in particular the agricultural sector.

We have seen in the past ten or so years huge changes in climatic conditions, regulatory and environmental changes and challenges; changes in the economy, including within New Zealand and overseas; international pressures and influences; changes in labour supply and issues affecting that; health and safety; online information and social media; and in addition, personal circumstances have changed with people requiring more flexibility, time off and changes to their working hours.

What all this means for our farmers today is that they require additional flexibility within their farming systems, to adapt to and respond to these changes.

One such discussion I had regarded a dairy farmer in the Waikato who was considering installing an in-shed feeding system. The farmer had been putting off this for over ten years, worried about the cost (which was totally understandable). When the farm had originally been purchased, a decision was made not to install in-shed feeding systems as the farmers type and style of farming did not warrant this. Ten years later the farmer has now made the decision to adjust his farming system due to changes in the availability of labour, the changing climate, health and safety issues and labour costs regarding the use of feed pads etc, and the additional flexibility that it will provide for his farming system.

What this means is the farmer did not necessarily make the wrong decision ten years ago, however circumstances do change and what was right ten years ago is not necessarily right today.

As accountants we see businesses from all areas of the spectrum, needing to develop to move forward in todays world. Business owners today require more visibility of their numbers than they ever did before. Online programs like Xero, Cash Manager, MYOB, just to name a few, are now the way forward for many people, giving them instant access to monitor their results and compare these to the budgets that have been set at the start of the year. The role of the accountant has been changing for a long time from that of a book keeper, to a business advisor. Not only are accounting systems changing, but people are looking at their business structure and utilising more flexible structures such as Trusts, Companies and Limited Partnerships. There are several advantages that these structures give over the traditional farming partnership.

It is normal human nature to resist or be wary of change. Modern business and farm owners should consider that change is not necessarily a bad thing, and that all stake holders in a business need to be carefully considered and their views respected when making decisions going forward. Good advice and assistance from professionals like chartered accountants can certainly help in the decision making process.

Property Transactions and Tax

Much has been written in the media about the recently implemented ‘Bright-Line Test’ which has been introduced by the Government as a tax on residential property purchased on or after 1 October 2015. Under the new Legislation if residential property is sold within two years, then the seller may have to pay tax on any gain made.

This article discusses property transactions in general. Property tax can be a grey area and the tax treatment of different property transactions will depend on their individual circumstances.

Dairy Farmers - Is there light at the end of the Tunnel?

August was not a good month to be a dairy farmer, with Fonterra slashing its forecast milk payout to $3.85 per kilogram of milk solids, down from its previous forecast of $5.25. This followed Open Country Dairy, New Zealand’s second largest milk processor, who reduced their payout forecast to under $4 in July.

The reasons behind the fall in prices are well known, and are mainly to do with supply and demand - too much supply globally and simply not enough demand. International dairy prices had fallen to their lowest level in the 7 year history of the Global Dairy Trade auction, and at a payout of $3.85, dairy farmers are predicting large losses for the current season. Dairy New Zealand is suggesting that the average dairy farm owner will lose up to $250,000 this season, though this won’t be the case for everyone. Every farmer’s situation is unique and financial results will depend on each farmer’s cost of production, debt levels and the actual production that they achieve.

While farmers are very resilient people, this is a very difficult time for those involved in the industry. Particular focus should go on the following:

  • Understanding your current financial position and the areas that need addressing
  • Increasing income (through production) where possible, by better farm and pasture management
  • Decreasing and deferring certain costs without adversely affecting farm and herd values. Focus on what you can control in the farm business.
  • Continuing to pay your accounts on time. Farm servicing businesses are also feeling the pain right now. Remember that they have to pay wages and pay for stock each month.
  • Look after yourself and help others wherever possible. Employees will be feeling the strain during this busy time, while sharemilkers and contract milkers will be the same and in addition will be under financial pressure. Ensure you have good support networks in place and advisors you can talk to.
  • Communicate often with your advisors, employees, your accountant, bank manager, family and other stakeholders. There is nothing wrong with asking for help and advice.
  • Remain positive, but realistic. Don’t be afraid to make hard (but well-informed) decisions, sooner rather than later. Make sure you have a plan.

Many of the farmers that I have talked to are lowering stock rates to reduce feed costs wherever possible. There will be far more focus on per-cow rather than overall production. Most farmers will be taking a targeted approach to fertiliser, which for one season, shouldn’t have too much impact on future production. Capital expenditure and repairs and maintenance will be deferred, and farmers have to be realistic about what personal expenditure they can afford in the next 12 months until cashflow improves. Many sharemilkers will require assistance with the possibility of sharing costs or assisting with cashflow over winter.

Good news may not be too far away, however. Some analysts now believe that the slump in dairy prices might be coming to an end, and this has been backed up with the latest two Global Dairy Trade auctions showing a rebound in prices. The lower kiwi dollar and lower interest rates will also assist New Zealand farmers. Commodity prices are cyclical and indications are that the current season may be one where the final payout ends up higher than what is currently predicted.

Medium and long term the outlook is still positive for agriculture but for those in the dairy industry this season will surely go down as one of the toughest on record. Those that survive (and the majority surely will), will come through this stronger than ever and better prepared for whatever comes at them in the future.

Dairy Farmers

Dairy Farmers – Plan for the Worst & Hope for the Best

Fonterra’s recent payout cut to $4.50 per kilogram for the current season is another kick in the guts for our nation’s dairy farmers. While the $4.50 is a forecast at this stage, it appears that it is unlikely to increase before the final payout is announced later in the year. Most experts are picking that next season’s dairy payout will not be significantly higher and this will cause further cash flow problems for farmers over the next year or so.

When thinking about the current situation facing dairy farmers, my mind went back to an article that I wrote in May 2003 when farmers faced a similar position. What I wrote then and what still applies today is that farmers must have a plan in place in order to get through the next couple of seasons intact.

Bridget Morgan becomes an Associate Director

The Directors of Bailey Ingham are proud to announce that Bridget Morgan has become an Associate Director of the firm, effective from 1 April 2015.

Bridget’s relationship with Bailey Ingham began in 1985 when she completed a week’s work experience while in the 7th form at Te Kuiti High School. She was head girl in her final year. After completing her studies at the University of Waikato, Bridget has worked for Bailey Ingham ever since apart from a two year stint working in the United Kingdom.

Tax not the only consideration for Accountants

As Chartered Accountants in the rural sector we consider a lot of factors when we prepare a set of accounts and file tax returns for our farming clients. One of the things that is very important is viewing the client's entire family situation, not only in the respect of saving tax but also ensuring that other entitlements and savings are considered. We also need to read the market, look at where incomes are going in the future and plan accordingly. Some of the things we look at are discussed below.

2014 - A Year of Contrasting Fortunes

With Christmas just around the corner it is time to reflect on another year which seems to have come and gone very quickly. And how the fortunes have changed for our regions farmers over the past twelve months. The start of the year saw dairy prices at all time highs with Fonterra forecasting an $8.30 payout (which ended up even higher), beef prices remained flat at $4 and lambs were averaging $90.

Since then the demand for sheep and beef, particularly from the United States has resulted in export beef prices hitting their highest levels in twelve years. Lamb prices are around $100 and wool prices have also increased. Sheep and beef farmers are heading into 2015 with renewed optimism. On the downside, the dairy sector has seen a swing of fortunes that no one really predicted. Key economies like China and Russia have stopped buying with the milk payout plummeting to below $5. Volatility continues to plague the dairy sector which makes forecasting and budgeting extremely difficult.

Farming Feature - Oct 2014

Outlook Positive for Sheep & Beef Farmers

Record prices for beef, improved lamb price forecasts and a kind winter and early spring have Waikato and King Country drystock farmers well placed for the season ahead. Beef prices have been rising for five consecutive months and are now at record highs - currently up 41% since April. Beef and Lamb New Zealand's new season outlook is forecasting lamb prices to lift 5% to an average of $103, up from last season's $98, while wool prices have lifted between 50 cents and $1 per kilo in the last twelve months.

Beef prices in particular have been driven by huge demand out of the United States where farmers have come through two droughts and cattle numbers have dropped. Elsewhere in the world the demand for protein continues to increase. In addition the weakening New Zealand dollar is helping our farmers with the US dollar trading at 77 cents, down from 88 cents in July.

North King Country Farmer - Aug 14

Keep a Close Eye on the Finances

The drop in the forecast dairy payout means that farmers are going to need to look at their finances even more closely over the coming season. Cash flow forecasts need to be updated at a milk price of $6 per kilo which is a drop of over $2 from last season. This will have a significant effect on farmers spending and will have a flow on effect for service providers and retailers in rural areas.

2014 Farmers Party

Bailey Ingham organise the annual Farmers party. Photos from the 2014 event:

Waitomo News - Record Keeping - May 2014

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.

North King Country Farmer November 2013

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.

North King Country Farmer January 2014

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:

Waitomo News - Trusts - April 2014

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.

Waitomo News - Tax - July 2014

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.

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