McLEAN AND CO.
P.O. Box 10 , Clive 133 Main Rd, Clive Tel. (06) 8700952 Fax. (06) 8700955
New Zealand Trade and Enterprise Grants
Technology NZ Grants
Some Pertinent Tax Questions and Answers
ACC- Things to Advise them about www.mcleanandco.co.nz/Page113.htm
Ten Step Strategic Plan www.mcleanandco.co.nz/Page131.htm
Creating Cash Flow Projections www.mcleanandco.co.nz/Page138.htm
How much is a Business worth? www.mcleanandco.co.nz/Page116.htm
43 Ideas to Promote your Business www.mcleanandco.co.nz/Page97.htm
BUSINESS STRATEGY FOR 2005
What is your business strategy for 2005? Have you got one?
In general terms, economic commentators suggest that while the economic outlook for the next year looks positive, there is a real need for business to develop and maintain a competitive edge. Economic commentators suggest that businesses should prepare themselves for growth in 2005 by becoming lean and mean and competitive.
Growth in business prosperity requires a two pronged attack in increasing sales and becoming more efficient in costs.
Efficiency areas to consider in your business may include:
differing expenditure on discretionary itmes. For example, it may be more appropriate to reduce debt (i.e. financing costs) rather than updating motor vehicles.
avoiding personal expenditure in your business. It is suggested that business owners draw a regular and fixed salary amount and incur their own personal expenditure in accordance with their personal budget.
addressing business productivity. This may mean investing in new technology, looking at employees to identify performance which is below par, to increase business productivity.
IS IT A GOOD IDEA TO PAY OFF CREDIT CARD BILLS WITH SAVINGS?
Indeed it is a good idea. Earning one or two percentage points of interest on your savings, while paying double-digit interest rates on your credit card debt, gets you nowhere fast. To add to the injury, you pay income tax on the meager savings interest, and you canít deduct the credit card interest from your income taxes.
So, seriously consider paying off high-interest credit cards or hire purchase loans with savings. Pay off the cards with the highest interest rates first. Be sure to keep enough money in an emergency fund or in available cash advances to cover three to six monthsí worth of living expenses.
SOME SPECIAL TAX RELATED INFORMATION RELATING TO THE TSUNAMI
These are special rules that only apply to donations made in relation to tsunami relief appeals.
To claim a rebate for any donation made to any of the various appeals for aid for the tsunami victims, the donation must have been:
|$5 or more;
||made to an approved
||acknowledged by a receipt or other proof of payment|
For further information about claiming a rebate for donations.
Many of the major relief organisations are encouraging people to make donations to them by making a deposit at one of the banks. If you make such a deposit you will be able to claim a donation rebate provided you get a deposit receipt from the bank clearly showing the donation.
Some of the approved organisations have set up a system where you call an 0900 telephone number and a predetermined amount will be automatically debited to your telephone account. Inland Revenue will accept a copy of your telephone account showing the donation or a receipt issued by the organisation as evidence of your donation.
Other groups have established an 0800 service to receive donations. These donations will need to be supported by an official receipt from the organisation, or a copy of the bank deposit receipt showing the name of the organisation to whom the donation was made. Again the group must be included in one of the approved donee organisations.
Some groups and businesses are offering to raise funds, or to collect money which will be passed on to "approved charities" to aid victims of the tsunami. For example, some supermarkets have a scheme encouraging their customers to include an additional amount added to their grocery bill which will be passed on to various relief organisations. Where these amount appear on the supermarket docket showing as "Tsunami donation" Inland Revenue will accept this as evidence of your donation where the value is $5 or more.
Generally "bucket appeals" do not provide receipts, therefore you will be unable to claim a rebate for these donations. However, if you do obtain a receipt, and the donation was made to an approved donee organisation then you will be able to claim a rebate.
NEW ZEALAND TRADE AND ENTERPRISE GRANTS
Enterprise Development Grants
NZTEís Enterprise Development Grants are available for entrepreneurs, start-ups and established businesses to employ mentors, undertake advanced management or technology training, get specialist advice, or undertake market development activities.
You can read NZTEís online guidelines and criteria and information on assessment of applications. You can also download a brochure on the grants (PDF 541kb), and an Enterprise Development Grant application form (MS Word).
Growth Services Fund
NZTEís Growth Services Fund offers financial support for high growth potential firms to purchase external advice, expertise, and market development services. The fund is intended to help with new initiatives and new directions aimed at having a significant impact on the business leading to substantial, sustained growth. Co-funding of up to 50 percent is offered.
Enterprise Network Grants
NZTEís Enterprise Network Grants are available for groups of businesses working together to build capacity or undertake international market development activity.
TECHNOLOGY NZ GRANTS
Funding to develop R&D projects
Technology New Zealand helps companies undertaking Research and Development (R&D) projects which result in new products, processes or services. Its SmartStart programme supports the investigation and resolution of early stage barriers to R&D projects. SmartStart funding may cover project design and planning, assessment of technology gaps and opportunities, advice and guidance, feasibility studies, and investigations into technology-related R&D projects.
Funding to access Technical Advice
Technology New Zealandís Technet (Expert Access) Programme provides funding for businesses to have short-term access to experts from crown research institutes, universities or research organisations.
Funding for Feasibility Studies on R&D projects
Technology New Zealandís Technical Assessment Project provides partial funding for businesses to undertake feasibility studies before committing to R&D projects.
Grants for Research and Development Projects
Technology New Zealandís Grants for Private Sector Research and Development (GPSRD) programme provides part-funding for small and medium-sized businesses to carry out R&D aimed at developing new products, processes and services, or adapting existing products, processes and services to meet new customer demands or reach new markets. Grants of up to $100,000 can be made, to fund up to 33.3 percent of project costs.
Grants are also available to develop research and technology skills in your staff.
Grants to Develop new Technology
Technology New Zealandís Technology for Business Growth programme provides part-funding for projects that move companies towards high added-value, high-margin, technology-based products, services and production processes. Projects should increase the industryís technology capacity, encourage business growth and international competitiveness, or help improve management of technological innovation. Grantsto fund up to 50 percent of project costs.
Grants for Maori Research
The Foundation for Research, Science and Technology offers research funding for Maori collectives. The funding supports innovative and technically-challenging research and development projects.
SOME PERTINENT TAX QUESTIONS AND ANSWERS
I rent a house with three other people. I also work from home and have a small office in a loft. Do I still claim GST on the office expenses based on the entire house floor area even though I only pay for a quarter of it? And does sharing expenses with other people affect what I can claim on electricity, phone etc?
If you are in business for yourself and you have an office at home, you can claim a proportion of the household expenses that relate to your business, but only to the extent that you have paid those expenses.
In your case, you will need to apportion your claim based on the portion of the expense that you have paid, and also adjust it to reflect the business portion of the expense. In many cases that apportionment may be based on floor area.
As you live in a rental property, you may be able to claim a proportion of your household insurance and your electricity in your GST return. If you buy business assets that you use in your office, you can claim these too - no apportionment is necessary unless the assets are also used privately.
Des is a self-employed painter. He has a home office in a rental property he shares with three other people. The floor area of the office is 10% of the total floor area of the house. Over the year, Des pays his share of the household insurance and electricity. As Des has only paid one-quarter of these expenses, his claim would be based on his share, adjusted to reflect his business use. During the year, Des also buys a computer for business purposes, which he keeps in the office. Des calculates his GST claim as follows:
|Expense||Amount (GST inclusive)||GST content|
|Insurance (ľ share)||$252||$28|
|Electricity (ľ share)||$585||$65|
|10% claim based on floor area (to Box 13 of the GST return)||$83.70||*$9.30|
|Computer (to Box 12 of the GST return)||$3,240||*$360|
*Amount Des claims.
|Rent paid for a house used as a private dwelling is
exempt from GST.
||If Des also uses the computer privately, he will
need to make a "private use adjustment".
||A computer is not deductible for income tax
purposes, but Des would be able to claim depreciation.|
Claiming telephone expenses:
If you have a phone that you use solely for business purposes, you can claim the GST on the line rental (again based on the portion of the expense that you have paid) and on any business toll calls.
If you use the phone partly for business and partly for private use, you will need to make a "private use adjustment".
I have just bought a business personal computer (PC) on hire purchase. What percentage of the interest can I claim?
If you use the PC solely for business purposes, you can claim 100% of the interest charges in your income tax return.
If you use the PC partly for business and partly for private purposes, you can claim some of the interest charges. You need to make a private use adjustment to remove the private, non-deductible portion. A good way to do this is to base your claim on the hours the PC is used.
Paul, a financial consultant, buys a PC on hire purchase. Most of the time he uses the PC in his business, but sometimes his son plays games on it. Paul works out that over a week he uses the PC for 20 hours and his son uses it for 5 hours.
The interest charges on the hire purchase agreement for the year amount to $700.
The private use percentage is (5/25) 20%.
Paul claims the interest charges as follows:
|Less private use adjustment (at 20%)||$140|
|Equals Paul's interest claim||$560|
1. Hire purchase interest accrues over the term of the agreement. You may claim the interest accrued during the income year but not claim the hire purchase interest relating to a later year "up front". When you are completing your return, get a statement from your financial institution showing how much interest has accrued for that particular income year - and base your claim on that figure. Keep the statement as part of your records.
2. The above example is an illustration only - the percentages involved may differ from case to case. Each case must be considered on the facts.
I have left the corporate world and now run a business from home. Is it true that I can claim up to 20% for clothing etc., for my business? A friend of mine advised that her accountant said that she can do this. I do have to dress differently - now smart casual as no longer require my suits - my clients come to my office at home, so I do have to look good.
As a general rule, expenditure on clothing, particularly "conventional" (everyday) clothing, is considered to be a private expense and therefore not deductible. However, if you buy any of the following types of clothing for business purposes, you may be entitled to a deduction:
|protective clothing (eg overalls, work boots)
||a uniform (ie clothing with a business logo on it).|
In rare cases, conventional clothing may be deductible. You can only make a claim if:
|you are required to incur the expense (ie without
this particular clothing you would not be able to operate your business),
||the expense is abnormal expenditure (eg way beyond a
person's "normal" expenditure on clothing).|
Each case must be decided on its own
facts. Please note that these principles apply both to deductions
for income tax purposes and deductions for GST purposes (input tax).
Could you please e-mail me the rate for depreciation for a vehicle used in business?
There are a number of depreciation rates for motor vehicles. You can find a list of rates on Page 78 of the Inland Revenue Guide Depreciation (IR 260).
My office is 10% of the total house area and that is the percentage my accountant says I have to use for claiming against electricity. I have been in business for nearly 18 months. I have electricity accounts for the previous full 12 months when I was out in the normal workforce. Based on the units used (not the dollar value) over a corresponding period, I can prove that my electricity consumption is up 30% since working from home.
Why can I not use this as a basis for my home calculation?
It is likely a person's electricity consumption will increase once he or she starts working from home. However, you can't always assume that the increase is caused solely by the home office. For example, household heating systems might get more use when someone works from home. But in many cases the heating systems warm other parts of the house as well as the home office.
In situations like this an adjustment is still needed to establish the deductible proportion of the electricity expenses. The floor area calculation is a good way of making the adjustment.
Sometimes people install a meter in their home office. That way they can establish exactly the amount of business power consumed. It might be a good idea to install a meter if your home office does consume a lot of electricity and the floor area calculation does not give an accurate apportionment of the total expenses. If you have a meter, you need to keep a record of the readings to support your claim.
I use about a fifth of my home for business purposes, but my whole double garage is used to store stock. Can I count this as part of the percentage of my home I use for business?
Yes, you can claim for your garage. Assuming you use floor areas to calculate the business proportion of your house expenses, simply include the floor area of your garage in the calculation. Note that if part of the garage is used for non-business activities (for example, storing a private car) the calculations will be different.
Susanna works from home running a catalogue gift company. She has an office inside her house and she also uses her garage for storing trading stock. Her total home expenses for the tax year are $9,500. The relevant floor areas are (square metres):
House (including the office) 100
Susanna calculates her deductible home office expenses as follows.
Area of office (Office + garage) 35
Area of home (House + garage) 125
$9,500 @ 28% = $2,660.
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