Accounting                    Taxation                      Business Advice and Development Assistance                              P.O. Box 10 , Clive        133 Main Rd, Clive          Tel. (06) 8700952         Fax. (06) 8700955 

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Welcome again to the McLean and Co. Newsletter in which we discuss current taxation and business matters. We trust you find it informative.  Any feedback would be welcomed.

McLean and Co. is a home based chartered accountancy practice based in Clive, Hawkes Bay.    Readers are invited to peruse the practice website lists services provided, gives contact details and indicates how to become a client, contains an extensive base of articles on business and taxation matters,  and has links to other websites that may assist your business.    Being a small firm itself,   McLean and Co. strives to provide a personal and professional service largely to a self employed person and small business client base.  Enquiries are welcomed.



We are happy to accept new clients.  Please contact ourselves at the contact points highlighted above if we can assist you in your accounting and taxation requirements. Our website lists information required for this in the following link:



  1. Relevant Business and Taxation Articles.

  2. Stocktakes- Change of Requirement

  3. Tax Discounts for Small Businesses

  4. Why Business Systems are Important and Need your Attention

  5. When Not to Register for GST



The McLean and Co. website contains an extensive number of articles prepared by McLean and Co. relating to taxation and business matters.    Here are a selection that will be of interest:

Borrowing Money                           

Family Trusts                                  

Financial Management Planning     

Cutting Costs in Your Business     

Improving Cashflow                        



The law change effective 31 March 2003 means that some small businesses won't have to do a stocktake from  31 March 2003.

Up until that date\ every year on balance date, all businesses with trading stock had to value it for tax purposes which meant doing a stocktake. But with the law change you no longer need to if:
your turnover (total gross income) for the year is $1.3 million or less, and
you can reasonably estimate that your trading stock on hand at balance date is less than $5,000.

When you enter your closing stock figure in your financial statements, you simply use the same figure as your opening stock.

The new law affects the 2003 and future income years.

Please note that even if you qualify for this simplified method for valuing trading stock, you don't have to use it - it is optional. You are still entitled to do stocktakes and get a true value for your trading stock if you want to.




Starting a small business will become less taxing from April this year when a 6.7 percent tax discount becomes available, Associate Revenue Minister David Cunliffe says.

The tax discount, available from April 1, will be open to many self-employed people and members of partnerships in their first year of business.

"The discount is designed to reduce some of the financial strain that small businesses face in those vital first three years of business. Mr Cunliffe says.

"When they begin paying provisional tax, often in their second year of business, people can be hit hard by having to make payments of two years' income tax very close together - one for the previous year and one for the current year. That can be a real strain for some small businesses."

Mr Cunliffe says the government has introduced the discount to relieve this problem by encouraging people who are starting up in self-employment and partnerships to make early payments of tax in the year before they begin to pay provisional tax.

"Those who choose to do so will receive a 6.7 per cent discount for each dollar of tax paid during the first year, to be calculated when their end-of-year tax bill is prepared. In this way they will have less tax to pay in year two and will save money as well."

The discount is one of several measures designed to make tax easier for small businesses.

"Similar measures in the pipeline are aligning provisional tax and GST payments, allowing small businesses to base provisional tax payments on GST turnover and helping small businesses with PAYE," Mr Cunliffe said.

Who Qualifies For The Tax Discount?

To qualify, individuals must:

be either self-employed or a partner in a partnership;
derive gross income predominantly from a business (and not interest, dividends, royalties, rents or beneficiary income);
not be required to pay provisional tax in the income year in question;
make a voluntary payment of income tax before the end of the income year (31 March for a March balance date taxpayer);
elect to receive the discount within the timeframe for filing a return of income for that income year;
not have been liable to pay provisional tax in the previous four years; and
not have received an early payment discount within the last four years - if they have a four-year break during which they do not receive income from self-employment or a partnership they become eligible again.

Once they have made a voluntary payment they must keep the lesser of the following in their income tax account until terminal tax date for the income year:

the amount of voluntary payments made before the end of their income year; or
the amount of terminal tax for the income year.

Those who are provisional taxpayers before they begin receiving self-employed or partnership income will not be entitled to the discount.

The discount is not available to taxpayers who merely stop paying provisional tax, rather than stop deriving business income. For example, a business that has a tax loss would not qualify for the discount.



Having effective business systems in place lowers the risks your business faces (or to put a positive spin on it, good business systems increase the chance of your survival!). Good business systems also increase the value of your business, lower your stress levels and increase your customers' satisfaction levels. So, if you don't have clearly documented systems, you're making your business much harder to run than it needs to be - and much less effective.

In any business, consistency is paramount. Often the real value of a business is in the systems they have. McDonalds would have to be the easiest example to use – as you can imagine, they have a ‘system’ for everything. But as you know, every time you go to a McDonalds, you (should) get the same thing, the same service and the same experience.

In the same way that a big part of the reason you go to McDonalds is that you know exactly what you'll get, your customers want to know that some aspects of your business are systemised. It lowers their own risk, and increases their perception of how organised and professional you are.

There are four main types of systems, each of which will give you more control and your customers more confidence.

1. Financial systems, where you have:

computerised accounting records
cash flow forecasting and management
a rational, clear price structure
creditor and debtor control.

2. Marketing systems, where you have:

documented how to deliver a consistent experience
professionally designed brochures, leaflets, or website
targeted your marketing to identified key groups
a system for gathering customer feedback
a customer loyalty programme in place.

3. Employment systems, where you have:
a plan if staff or you get sick or injured
a process to protect from staff fraud
competitive pay and benefits
more than compliance based training
a Health and Safety Plan

4. Business systems, where you have:

an endorsement or rating by an accreditation body
a strategic plan in place
a Business Plan in place
a plan in place in case of a disaster
a technology plan that will help achieve your business goals.

How does your business rate?
Do you have effective systems and processes in any or all of these areas?   If not, start by getting all your staff to write down what they do and how they do it.   That way, you'll have at least documented what happens in your business so it's not just in the head of you or your staff. You'll also have a basis for analysing and improving your systems.  And you may find you already have a range of good business systems in place (that you haven’t identified previously).

To Conclude:

Systems set you free.
One of the main reasons for developing business systems is that efficient systems liberate you to spend time working on your business rather than in it. Good systems take some effort to establish, but they free up your time once they’re established.

Systems give you greater independence.
Good business systems will make your business stronger, more efficient and easier to run. This is a real strength if something should happen to you (such as an accident) that prevents you from working in the business for a time.

Systems make your business more marketable.
Good systems will also make your business far more attractive to a possible buyer because they enable the business to be transferred



One of the decisions that all businesses have to make not long after starting up is when and if to register for GST.

The first consideration is do you have to register? In New Zealand, the threshold is turnover or sales of $40 000, while it is $50 000 in Australia. However, that does not have to be the end of the story.

If the business is profitable, and it registers for GST, it will be likely to pay GST to the taxation authority. Being profitable is not a bad thing. Quite to the contrary. However, it does change the scenario from a loss-making business, where you might choose to register for GST in order to claim the GST refunds. This provides another source of capital for a growing, loss-making business. 

Your business competes with other businesses. If your turnover or sales are close to the threshold, or not far past it, you might consider not registering for GST. In the case of being over the threshold of $40 000 for New Zealand, or $50 000 for Australia, you might consider breaking up your business into two discrete business units.

If your business is competing with larger businesses that have to pay GST, imagine the benefit to your business if you can offer a price that does not include GST? Or imagine if you charge the same price as other businesses but do not pay GST. The unpaid GST component represents increased profit.

So how do you achieve this? Although taxation laws do allow business operators to manage and organise their business affairs to suit themselves, this usually means the particular business structure or entity chosen and the management style implemented. It is not carte blanche to do anything you feel that is in your interests.

The issue being referred to here is commercial reality. If it can be shown that the only or dominant reason that a particular change in operations is made is to obtain a taxation benefit, then the change can be challenged under Anti-Tax Avoidance Measures.

So, it would be wise to think of ways that a business may be reasonably separated into discrete business units. For example, are there local and overseas customers? Can the overseas customers be serviced from another company, and therefore not have to be charged GST? They cannot claim the GST charged by another country, and the higher price to them may make them think about using your service.

If there are adult and children's classes for martial arts classes, can they be split up into different companies, with neither company having to register for GST? If the customers are private individuals, and not businesses that can claim GST, why keep the business large and have to pay GST, whether or not you can recover the GST from the customers in your pricing?

If you have an arts and crafts school, can you separate the arts from the crafts? Are there different teachers? What is the commercial reality for the change?

If you are exporting products, they will be exempt from GST. No tax planning is required in the case of export of products. So we are talking about services that are provided in one country for the benefit of overseas customers or clients.

The information provided in this email newsletter is for informational purposes only.   McLean and Co. accept no responsibility for the opinions and information expressed in the information provided and it is provided "as is" without warranty of any kind.    The user assumes the entire risk as to the accuracy and use of this document.   Readers are asked to seek professional advice pertaining to their own circumstances.    The McLean and Co. email newsletter may be copied and distributed subject to the following conditions:
All text must be copied without modification and all pages must be included.
This document must not be distributed for profit.    


If we can assist further, please email McLean and Co as follows: