Welcome to the Vision Accounting e-newsletter for March 2016. This is a great way for us to share important information you need to know, helpful tips and hints and practical resources to help you in business for 2016.
What's very important?
Risk and Reward
Targeting the cash economy
Inland Revenue’s crackdown on ‘cashies’ continues with their focus on undeclared cash in the construction and hospitality sectors. Last year, the Auckland region saw the most activity. Inland Revenue are now widening their reach. They’ve been trying to change attitudes among ‘tradies’ and subcontracting businesses and their efforts seem to be getting results.
Inland Revenue acknowledge people trying to cheat on tax are in the minority but stress that they’re a very expensive minority. The so-called ‘hidden economy’ is a cost to all New Zealand taxpayers, who carry more than their fair share because of it. There’s another hidden cost too, as business owners who are meeting their tax obligations find it hard to compete with operators who can undercut on quotes because they don’t pay tax.
What’s this have to do with you, you may ask. Because we’re sure you’re up to date with your tax obligations. In which case: sweet.
However, if you are in the situation of having under-reported – or unreported – income, now is a great time to straighten it all out. We want to help you make sure your returns are accurate and timely and, as far as possible, help you avoid penalties and use of money interest on any tax owing.
If you think you might have got yourself into a mess with your tax, declaring it early and taking action to correct it goes a long way toward setting you apart from deliberate tax evaders. You may have made a mistake or filed an incorrect tax return, left out some income from your return or incorrectly claimed expenses. We can help you make a voluntary disclosure which may reduce shortfall penalties by up to 100% and protect you from prosecution.
Setting the records straight
Inland Revenue have signalled they will be looking at businesses’ record keeping systems. Key targets will be that all jobs and all income are being recorded and that GST is being handled properly. Recent prosecutions indicate that PAYE records are another hot topic, along with the corresponding employment records. If sketchy records are a quick way to set off the IRD alarm bells, this could be a great time to do a sense check on your records and systems.
As a business owner you’re required by law to keep certain records. Poor record keeping lets you down just in terms of the penalties that apply for record keeping failures (up to $12,000). Inadequate systems also make it harder for you to keep track of what you owe, how much you have already paid, to whom and what for and who owes what to you. You lose track of things, miss key deadlines and your costs increase in proportion to how much of a nightmare it is to straighten it out.
With the advances in online systems of recent years, many businesses have overhauled their systems and are in good shape to pull out regular management reports that detail their position clearly. However, there may still be areas where things fall through the cracks.
This applies particularly in industries such as construction where large amounts stay on the table as retentions until the job is completed and it is difficult to keep track potentially across several tax years. At the other end of the scale, the high volume and high speed cash transactions of the hospitality sector can also punch holes in the records.
If you are still making do with the basic systems you started out with, it is possible that your business has outgrown them and they now constitute a business risk. We can help you to look at this and do something about it, if necessary.
What's you need to know
If you're self-employed you can use the Inland Revenue mileage rate to calculate the cost of using your motor vehicle for business purposes. Last year the commissioner reviewed the mileage rate for the 2015 tax year and decreased it from 77 to 74 cents per kilometre.
Paid parental leave
From 1 April 2016, there are further changes to paid parental leave.
The amount of paid parental leave that eligible people can take will be extended from 16 weeks to 18 weeks.
Parental leave payments will also apply to more workers. Eligibility will be extended to people in less-regular jobs, in particular to people who have recently changed jobs, seasonal and casual workers, and workers with more than one employer. 'Home for Life' caregivers and people with similar permanent care arrangements will also be eligible.
This Month's Top Tip
Get organised for the close of the year end 31 March 2016.
As mentioned in the past, this is the time to look at your Debtors ledger, are there any bad debts that need writing off? Why pay tax on unrecoverable income unnecessarily? If they are not written off by the 31st of March 2016 then we have to keep including them in your financial accounts.
Stock take – do a pre-check, to reduce the BIG task of counting everything at the end of the month. Is there stock that is just not sellable (unfortunately) write if off now, put it aside and take it off your stock records. Are there unopened boxes of items, write or highlight the quantity on the outside, so you can count them quickly on stocktake day. Tidy up, makes it easier to get to things. Need help getting sorted? Remember my last month’s newsletter, we know a lovely lady who can get you organised. Try and sell it, which is the easiest way for not having to count it. Could a pre-stock sale be in order, to shift some of that slow stock and turn it into cash (which is so much easier to count). Need a hand? Find some enthusiastic students, we may know a few that are keen for some extra pocket money.
Get your accounting records in order, so that you can bring things into us in a timely manner, which will enable us to provide you with meaningful financial information upon which you can base your decisions on. Help us to help you.
Sharing news from my clients with my clients
Buying a house is the biggest investment most of us make, so it is important to get it right. Knowing the right questions to ask and engaging expert advice will help you make a sound investment for your future. Start with asking the Real Estate agent and the vendor whether they are aware of any issues, but also get things checked out for yourself.
What needs to be checked?
For all properties, regardless of age and design, basic checks should include:
- the condition of the roof (rust, broken tiles, patching)
- plumbing, including water pressure – check all taps and showers
- the condition of drainage systems – are there any signs of flooding from a partially blocked sewer or storm water drain?
- electrical wiring – check the switchboard and power points for any discolouration
- the condition of the piles (underfloor supports)
- insulation – in the ceiling space, in the walls, under the floor
- the condition of fences, paving and driveways
- evidence of house movement, such as cracked window sills and doors that don’t close properly
- any alterations that do not appear on the plan (plans usually can be obtained from the local council for a small fee).
Is a pre-purchase building inspection advisable?
A pre-purchase building inspection is advisable for all properties, but essential for homes that may be at risk of leaking. If the property has any potential signs of leaking, engage an experienced building expert with weather-tightness expertise to inspect it. If the house you are thinking of buying has any obvious weather-tightness risks, ask the building expert to report specifically on this. If the property is an apartment or in a townhouse complex, ensure the whole complex is inspected for weather-tightness and not just the unit you are interested in. If other parts of the complex are leaking then you will be liable for a share of their repair, even if your own unit is weathertight.
If you are a vendor and if the house has the typical cladding that is often associated with weathertight issues, it may be advisable to obtain a pre-sale property inspection report. This can highlight any issues that the property may have, so you can remedy these and provide proof of these remedies, and saves any issues arising during the process of selling, when you have already invested in advertising campaigns with an agent, which puts pressure on everyone around.
Introducing Kevin O’Connor of Inspector Homes Ltd.
Kevin O’Connor has been in the building industry for nearly 30 years with residential building experience including new housing, alterations, additions and renovation work.
Commercial construction experience includes concrete formwork, foundations and interior finishing and fit-outs. Kevin ran his own construction company for many years, was a Registered Master Builder and also a Licensed Insulclad Installer. He has extensive experience in Plaster/Monolithic type cladding systems, roof maintenance issues and Council Consent & Building Permit issues.
Over the last twelve years he has been involved in the House Inspection Industry and the documenting of maintenance issues for prospective home buyers and vendors and has enjoyed working with investors, real estate agents, lawyers, and lending institutions.
So if you are contemplating purchasing or selling a property, contact Kevin on 021 510 341 and he will assist.
We offer the service of a one on one meeting to review your financials and help set you up for a strong 2016.
This one meeting can make a huge difference to the cashflow and profit of your business.
If you would like to schedule a business review meeting, or have a no-obligation chat – we’re happy to help.
Thanks, and have a great month,
Virginia and the team at Vision Accounting
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