McLEAN AND CO. Chartered Accountants

Accounting                               Taxation                                   Business Advice and Development Assistance                                        

 P.O. Box 10 , Clive         133 Main Rd, Clive           Tel. (06) 8700952          Fax. (06) 8700955 

Email murray@mcleanandco.co.nz                                  Website www.mcleanandco.co.nz

 
EMAIL NEWSLETTER  APRIL 2012
 

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

 

NEW CLIENTS

We are happy to accept new clients.  We would be happy to assist colleagues and acquaintances as new clients.

 

 

INDEX

  1. Industry Benchmarks

  2. IRD Initiatives for Cash Businesses

  3. Minimum Wage Rates from 1 April 2012

  4. School Children and Deductions for PAYE

 

 

INDUSTRY BENCHMARKS

A benchmark is a standard or reference that allows comparisons to be made. The ranges have been chosen so that most businesses in an industry are within or close to the published benchmark range.  Industry benchmarks have been developed to help you assess your business performance by comparing your business with others in your industry.  They also provide guidance on what figures IRD expect to see reported for the majority of businesses in your industry.

 

Performance Benchmarks

Performance benchmarks are a type of industry benchmark. These benchmarks provide key financial ratios for your industry to help you work out if your business performance:

 

How Industry Benchmarks have been developed

Statistics New Zealand has calculated the industry benchmarks using information provided on your Financial Statements and Tax Returns.  All businesses supplying Financial Statements and Tax Returns are included in the calculation of standard performance range, where the turnover for those businesses is up to or less than $10m.

IRD supplies each business's Financial Returns and attachments to Statistics New Zealand, who use this information to calculate the industry benchmarks.  Statistics New Zealand does not return any information about any specific business data to IRD, nor anything that could be used to identify any individual to Inland Revenue.

You can find the formulas Statistics New Zealand used by going to:

How to work out your business performance ratios

If the industry benchmarks have been published for your industry, you can find the formulas used and definitions of terms with your industry-specific information by going to:

Find your industry benchmarks

 

Performance Benchmarks

Industry benchmarks can help you to:

The benchmarks will give you a better picture of your competitive position.

 

How IRD Uses Industry Benchmarks

IRD uses industry benchmarks, amongst other indicators, to identify businesses that may not be returning all their income or that may be overstating their expenses.

Information reported in your Financial Statements and Tax Returns is compared with the benchmark for your industry. This is to check if you're within the expected industry benchmark range for your reported turnover.

IRD identify your industry by:

Your business could be outside the industry benchmark range due to a number of possible factors affecting business performance and this may not always be clear to IRD.  For example you may have higher costs or lower selling prices than most other businesses in your industry. If the reason is not clear to IRD, they may ask you to confirm information you have reported in the Return and explain why.  IRD may also use the industry benchmarks amongst other indicators to identify businesses that may be avoiding their tax obligations by not reporting some or all of their income.

If you think a mistake has led to you reporting outside the industry benchmark range then:

Find out what you can do to correct a mistake in your tax affairs

 

 

IRD INITIATIVES FOR CASH BUSINESSES

Sixteen cash-dominated industries including Restaurants and Electricians are being targeted by IRD as part of its crackdown on the underground "cash" economy.  IRD has released "benchmarks" or expected financial ratios for a range of industries, including Cafes, Painters or Decorators, Electricians, and Taverns and Bars.  Benchmarks for up to 34 more industries are expected later this year.

IRD assurance manager Tony Morris said the benchmarks were part of a 10-year plan to target the "hidden economy". Cash trade jobs, crimes and wages under the table are thought to cost the Government more than $7 billion a year in lost tax. Although the IRD will not put a figure on the hidden economy, it is aiming to collect an extra $600 million tax over the 10-year period, and last year netted an extra $120m for its efforts.  Morris said the benchmarks would highlight what sort of gross profits businesses in various industries were expected to earn.  Being outside a benchmark did not mean a business was dodging its tax obligations but could reflect other reasons such as insufficient product markup or difficult trading circumstances.  He hoped business owners would see the benchmarks as a tool.  "A lot of people in these industries, they think they know what everyone else is doing in the industry and they think they have to do the same as them to remain competitive. The benchmarks are one way for IRD to give some transparency so they can see where they fit in the industry."

 

 

MINIMUM WAGE RATES FROM 1 APRIL 2012

New minimum wage rates take effect from 1 April 2012.  

The new adult minimum wage rates (before tax) that apply for employees aged 16 or over will be:  

  • $13.50 per hour, which is
  • $108.00 for an 8-hour day,
  • $540.00 for a 40-hour week.

 The new entrantsí minimum wage rates and the training minimum wage rates (before tax) will increase to:  

  • $10.80 an hour, which is
  • $86.40 for an 8-hour day or
  • $432.00 for a 40-hour week.

   The new entrantsí minimum wage applies to a person who:  

  • is 16 or 17 years old, and
  • has not completed three months or 200 hours of employment, whichever is shorter, and
  • is not supervising or training other workers, and
  • is not subject to the training minimum wage.

The training minimum wage applies to people who are required by their employment agreements to undertake recognised industry training involving at least 60 credits a year.

There is no statutory minimum wage for employees under 16 years of age.

 

SCHOOL CHILDREN AND DEDUCTIONS FOR PAYE

If you hire a school child and they earn less than $2,340 for the whole year, they will get back all the tax they've paid.  In these cases you can choose whether to add the child to your payroll or not. So if it your information (after discussing it with the child) that they will not earn more than $2340 for the year, you can pay them wages without the deduction of PAYE.  These wages will still be a deductible expenses for your business.

If you expect them to earn over $2,340, they'll need to complete a Tax code declaration (IR330) and be included in your payroll.

 

 

 

McLEAN AND CO KNOWLEDGE CENTRE AND ARTICLES ABOUT TAXATION AND BUSINESS IN GENERAL PRESS HERE FOR BUSINESS STARTUP KNOWLEDGE CENTRE PRESS HERE
FOR INFORMATION ABOUT COMPANY INCORPORATION PRESS HERE FOR PREVIOUS MONTH EMAIL NEWSLETTERS PRESS HERE

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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.    

 

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