1. From 1 April 2011 clients will no longer be able to use investment losses such as from rental properties to reduce their income for WFFTC purposes (prior to that only those in the business of renting property couldn’t deduct losses).
2. The definition of WFFTC income will also include an extra nine types of income:

• Attributable trustee income e.g. trust income which hasn’t been allocated to beneficiarie
• Attributable fringe benefits e.g. a car
• PIE income other than registered superannuation schemes such as Kiwisaver and retirement benefit schemes
• Passive income earned by children (includes interest, dividends and rent). Amounts over $500 per child will be included as family income, as per this IRD example: Johnny is gifted $15,000 from his parents in April 2011. This money is invested in term deposits. At the end of the year (31 March 2012) Johnny receives a letter from the bank showing he earned $600 interest. As the total interest earned by Johnny is over $500 his parents will need to include the amount over $500 (ie; $100) as part of their family income for the year 1 April 2011 to 31 March 2012.
• Worldwide income received by a non-resident spouse
• Tax exempt salary or wages under specific international agreements
• Income equalisation deposits made by you, your trust, or a company controlled by you or your trust
• Certain pensions and annuities – includes 50% of payments from life insurance policies or a superannuation fund (excludes NZ super)
• Other payments received from any sources that are used for your family’s day-to-day living expenses (but only if the total amount from those sources is more than $5,000). An example of this might be board received, income from parents, or “soft-loans” from friends or family.

This last point is particularly grey and many accountants think totally impractical.

Having worked in tax for 30 years I suppose I shouldn’t be surprised but making tax this complicated is just downright crazy. The more you make tax law difficult to comply with, the less chance you have of taxpayers being able to follow the rules and the whole system falling into disrepute, especially given the IRD’s woeful lack of resources available to be able to police the system.

If you need help with your WFFTC, contact Nick on 0800 ASK NICK or email nick@abac.co.nz.

Now when you telephoned your lawyer he or she would tell you to ask your accountant first because they knew that a change in shareholding could bring about dire tax consequences which can be very costly indeed. You could miss on  all your company tax losses completely. In addition, the tax credits which accumulate when the company pays tax (and which you can use to reduce your personal tax bill when you withdraw profits from the company) could be eliminated and if you own one of the new Look Through Companies (LTC’s) the flow of your losses can be adversely affected.

So what you thought may save a few $ in fees could in fact cost you tens of thousands of dollars. Better get your accountant to sort these things out for you. A good accountant will probably throw in this type of task for free, especially if they are your registered office, file your annual return for you, and make sure you comply with all of your statutory records requirements under the Companies Act so you can relax sure in the knowledge you’re in good hands.

Now if you don’t dare to speak to your accountant because they’re so darned expensive don’t just lie back and take it – find one who’ll give you a fixed price and build in all such minor but irritating duties!

If you need help with your company shareholding (or just want to reduce your accounting fees) contact Nick on 0800 ASK NICK or email nick@abac.co.nz.

Some say there are 8 really persuasive words in the English language, some 10 or 12 and one or two even 108 or 120 but I like the 16 most persuasive words used in advertising & direct mail as below:

• You/Your
• Guarantee
• Easy
• Results
• Fun
• Now
• Save
• How to
• Money
• Love
• Benefit
• Proven
• New
• Health
• Free
• Safe

Now you might think you’re pretty good at writing copy or you may think so daunting a prospect that you’d rather take your mother-in-law out to dinner, but either way, using as as many of these words as you can will make it very easy – just build your sentences around the words – here, let me demonstrate:

“You will save money, love to use, have fun and enjoy proven results with the new super this and that now available in 6 new easy to use safe styles, guaranteed for 10 years, and comes with free accessories so healthy it’ll benefit you for years to come”.

There you are – easy peasy – used all bar one of the words in one sentence in a few seconds! And in addition, they’ll make sure you avoid the No. 1 mistake in advertisements. Which is, you ask? Putting your name at the top and then just listing out the services you provide. Is that persuasive? I think not! Who cares about your name unless you’re a global brand? And listing out your services? Come on now! I recently saw 15 adverts in one magazine for accountants. All bar two had their names and what services they provided. Tax returns? Accounts? You don’t say!

If you need help with your marketing contact Nick on 0800 ASK NICK or email nick@abac.co.nz.

1. If you know how much a customer is worth to you over the period they continue to buy from you it can makes a huge difference to how you treat and regard them. This helps us to take a long term view in doing the best possible job to look after and nurture customers and add value to each and every transaction with them rather than, like some badly advised business owners, maximising the value in today’s sale – in other words, screwing as much out of them as possible.

2. In addition, if you know how much an average customer is worth to you, you know exactly how much you can spend to acquire a new customer. Say a customer is worth $20,000 to you. How much would you spend to get that customer? $5,000? $10,000? Now $5,000 may be the first two year’s worth of profit but wouldn’t that be worth it, assuming you could finance the loss of initial profit. So armed with that information you can now look at your marketing expenditure as an investment, not a cost, such that the MORE you spend the better off you are! Isn’t that fantastic?

To calculate the lifetime value of your average customer or client you need to know the average sale per customer, your gross profit margin, the number of times a customer buys annually from you and the number of years the average customer stays with you, as below:

Piece of cake right? Get out there and start investing in marketing!

If you need help with working out the lifetime value of your customer contact Nick on 0800 ASK NICK or email nick@abac.co.nz.

So what sort of business information does a typical business owner need? These are the more common types which I normally recommend:

What information do you have available in your business? Are you still just using the traditional measures of what cash you have in the bank and comparing turnover with that achieved in previous years? All this really useful information is easily available with good systemsand some decent accounting software, so come on, get up to date by contacting Nick on 0800 ASK NICK or email nick@abac.co.nz.

And the beauty of it is that it’s a win-win for both of you! Jay Abraham, the famous and successful US marketer, has a sound piece of advice when it comes to setting up “host” relationships: “Be generous with the host company when setting up the deal. If you can’t get the host company to pay for the mailing, offer to pay for it yourself. Or offer them 60% instead of 50%. Or offer them 100% until they double their money, and a lower percentage thereafter. Offer them whatever it takes to get them to do the joint venture with you. What do you care how much they make, since you’re investing so little up front and have so much to gain yourself”?

Over the years when I’ve explained this truly effective technique to clients I get many blank looks as they think it’s all too hard, despite the examples I produce from real businesses showing that in fact it’s like everything in life, it just takes a little effort and imagination. Now imagine how thrilled I was to see this pavement sign outside a local shop which I immediately captured with my mobile ‘phone:
Isn’t that fabulous? So simple, so low-cost and so straightforward and yet so effective! It costs the shoe shop nothing, not one cent, so they’re happy little bunnies. And neither, of course, does it really cost the pedicurist anything either, just their time. But the return for the pedicurist, if she does a good job, is huge taking into account the lifetime value of a typical customer – even at $50 per visit, monthly for even three years is $1,800! What a local and very simple example to explain joint-venture marketing to clients.

• If you don’t know what to write, don’t worry unduly, just pick on an area you know well, the sort of thing you’re probably discussing regularly with customers or staff. This could be the key frustrations customers suffer when dealing with suppliers in your industry, tips on how to get the best out of your product or service or how the customers can reduce costs or save time etc. Google is a great source of ideas and inspiration.

• Blog regularly by getting into the habit. I’ve conditioned myself to blog in the same as I’ve conditioned myself to keep fit – if I don’t do it I start to worry and actually feel guilty! The more you do, the easier it becomes.

• Keep them as short as possible. This isn’t easy and takes practice, but the less you write the easier it will be to read and keeping them short doesn’t mean you are short-changing your readers as writing concisely and to the point will be far more effective and informative.

• Make your blogs as easy to read as possible without excessive technicalities or jargon as these will just confuse your readers. Youngsters are useful here as they will be able to pick out words they don’t understand. No children or nieces or nephews of 10 -14? Email them to me, I’ll get my younger two to read them through.

• Write your blog as though you were speaking to a down-to-earth client or customer, not as you would have done whilst you were at school trying to please your English teacher. Not as far as text language maybe, but short easy-to-read sentences, bullets and “chunking”, breaking it down into small easily digestible parts.

• Try and focus on areas of interest to your readers which may not be the same as yours. Initially, you may have to suck it and see, or look at other blog sites but when you’ve done a few blogs you’ll find that some topics or areas are much more popular than others, so write more on these.

Starting to blog is like going to the gym or for a run on a winter’s night – it’s a scary thought but once you get out there you enjoy it, so don’t delay or prevaricate, just do it! If you need help with your blogging contact Nick on 0800 ASK NICK or email nick@abac.co.nz.

–Comes January and everyone starts experiencing the after-effects of over-indulging. Your computer too feels the pain.  Perhaps it isn’t so much Christmas wine and chocolate but the result of viruses, document hoarding and other accumulative hangovers.  Detox your computer to get it working faster, safer and more efficiently.

• Clean it.  Literally.  You’ll be amazed what appears when you tip that keyboard upside down (only use anti-static wipes or a soft brush.  NOT water!)
• Remove clutter, delete unwanted documents off the desktop  and tidy up your folder structure
• Remove any programs that are no longer required
• Empty your recycle bin!
• Check that all necessary updates have been installed
• Is it time to look at upgrading to Microsoft Office 2010 or 365…?
• Update your security passwords!
• Double check your antivirus protection is up to date and won’t expire while you’re on holiday
• Make sure your firewall is active
• Perform a last minute virus scan – check out Spybot Search & Destroy
• Perform a disk cleanup and disk defragmentation (set this to run overnight as it may take several hours)
• Perform routine backups of all files and settings
• Archive files offsite

Computer systems vary.   If you use an external IT provider to manage your computer requirements then liaise with them as to what they have planned and what you can carry out yourself.  And remember… your computer needs a holiday too – make sure to shut down and turn off before you leave the office!

– Recent years have seen a surge in popularity in the short-stay rental of holiday homes.  The internet has made it easier to list, book and review baches and cribs which are available when owners aren’t in residence.

Inland Revenue have recently issued a paper proposing new rules on mixed-use assets (including holiday homes) where there is a mixture of business and personal use, with revised criteria that should be adhered to when booking out the bach.  But until the rules are formally changed, the current policies still apply.

Firstly, it’s vital that your intentions are bona fide.  You must market the holiday home in a commercial manner such as setting up and using a website for the property, registering the property with a reputable holiday home website or listing the property for short stay rental with local real estate agencies.  These efforts cannot be seen to be ‘token’, you should be accepting offers from suitable renters.

Secondly, your own (plus family and friends’) use of the property must be diarised so you can determine the days in a year that the property was available for renting out.
If the property is owned by an individual or a family trust the expenses relating to the property including the utilities (power, rates, insurance), maintenance and interest on debt will be apportioned according to the number of days in a year the house was available for rent.

There are GST issues too.  Short stay accommodation is a taxable supply for GST purposes so if the annual rent you are receiving exceeds $60,000, the owning entity (individual, partnership, company or trust) is required to register for GST and return GST on the outputs (rent) and inputs (expenses and improvements) made and received.  This threshold may seem high but some do have more than one holiday home in the same entity! This threshold includes the market value of free or cheap use of the bach by persons associated to the owner.

The value of the property becomes a taxable supply when registration occurs and when the property is sold or the entity de-registered.  Both the income tax and GST issues can be quite tricky so we recommend consulting us to make sure all the tax bases are covered correctly.

While the above court cases centre on high profile companies, they do hold valuable lessons for all businesses, big or small:

• Although directors can rely on expert advice, they cannot abdicate their own fundamental responsibility to review and approve a company’s financial statements.
• Directors must have sufficient knowledge of conventional accounting practices and must apply that knowledge based on information they received as directors.

Sections 131 to 138 of the Companies Act 1993 outline the key responsibilities of a director and it is a good idea to familiarise yourself with them. For example:

135 Reckless trading
A director of a company must not— (a) agree to the business of the company being carried on in a manner likely to create a substantial risk of serious loss to the company’s creditors; or (b) cause or allow the business of the company to be carried on in a manner likely to create a substantial risk of serious loss to the company’s creditors.

137 Director’s duty of care
A director of a company, when exercising powers or performing duties as a director, must exercise the care, diligence, and skill that a reasonable director would exercise in the same circumstances taking into account, but without limitation (a) the nature of the company; and (b) the nature of the decision; and (c) the position of the director and the nature of the responsibilities undertaken by him or her.

Sections 373 to 386F deal with offences and penalties and as in the news recently, include custodial prison sentences, good view of the harbour or otherwise!

So how does this apply to you?

As a director you have a responsibility to everyone that relies on your company’s financial statements. Therefore it is also your responsibility to fully understand what your financial statements mean and thus ensure the best possible return for everyone. There are many entrepreneurial Kiwi’s out there but when it comes to financial matters and accounts, they change the subject or just take a “she’ll be right” attitude. Take some time to understand these, get a decent accountant who’ll explain things to you and set up some regular reporting systems – in the long run, your business will be so much better for it!

If you need help with your finances, systems or reporting contact Nick on 0800 ASK NICK or email nick@abac.co.nz.