INDEX
-
Relevant
Business and Taxation Articles
-
Student
Loans- Paying them off faster
-
Salary
and Wages Earners- Who have to contact IRD for their 2003 Income Tax
Returns?
-
Child
Support Changes
-
Depreciation
of Fixed Assets
-
Pricing
your Product or Service.
RELEVANT
BUSINESS AND TAXATION ARTICLES
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:
NEW CLIENTS
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:
STUDENT
LOANS- PAYING THEM OFF FASTER
The following site
has a Student Loan Calculator to indicate how quicker Student Loans can
be paid off with extra payments.
SALARY
AND WAGE EARNERS- WHO HAVE TO CONTACT IRD FOR THEIR 2003 INCOME TAX RETURNS?
Most salary and wage earners don't need a
Personal Tax Summary. So if you are not included in either of the following
lists, and we haven't contacted you, relax - there's no need to get in touch
with us.
Who must contact IRD
|
Who should contact IRD
|
You
will need to contact IRD if:
 | You
received income between $38,000 and $60,000 with more than $200 of
interest taxed at less than 33%.
| Your
total income was over $60,000 with more than $200 of interest or
dividends taxed at less than 39%.
| You
paid child support through Inland Revenue and received more than
$200 in interest or dividends.
| You
have a Student Loan, earned over $15,496 and received more than $200
in interest or dividends. |
| | |
If
any of these apply to you, in the tax year ended 31 March 2003 request a
Personal Tax Summary online from the 1 July 2003. |
There
are some people who should contact IRD, because they may get a refund.
You should contact us if:
| You
are able to get a low income rebate for example - the child rebate
and/or received less than $9,880 in salary and wages.
| You
received less than $38,000 and were paid dividends.
| You
had more than one job during the year.
| You
didn't work a full income year.
| You
are able to deduct expenses from your income. |
| | | |
If
any of these apply to you, in the tax year ended 31 March
2003 use the Personal
Tax Summary calculator to check if you are due a
refund. |
CHILD
SUPPORT CHANGES
Two child
support changes took effect from the start of the child support year, 1 April
2003.
The
first change increased the minimum amount non-custodial parents are required
to pay to financially support their children from $663 a year, to $677.
Even if the paying parent does not receive any income, they are still required
to pay a minimum amount to financially assist the rasing of their children.
The
highest taxable income IRD use is based on 2.5 times the average New
Zealans income. This has been increased from $86,684 to $90,823.
The
first payment based on the new assesments is due on 20 May 2003. All
customers were advised in February and March this year about their new
assessments.
DEPRECIATION
OF FIXED ASSETS
Depreciation
is the term applied to the permanent reduction in value of a fixed asset and
it arises in connection with all fixed assets (except for land) for the
following reasons:
|
|
Normal
usage or wear and tear
|
|
|
Obsolescence,
caused by a more modern and more efficient machine becoming available
|
|
|
Passage
of time.
|
Depreciation
is a means of allocating the cost of a fixed asset over its estimated useful
life.
The cost must be spread over the years of the assets useful life and
this cost is charged against the income earned in all accounting periods
between the purchase and the sale of the asset.
Depreciation
is essentially an estimate.
Its assessment is based on several factors which cannot be measured
with any degree of certainty.
To decide on a depreciation policy an Accountant must estimate the
approximate life on the asset and also make allowance for the residual value
(i.e. the amount that will be received when the asset is eventually disposed
of.
It
should be decided as to whether the loss should be shared evenly in each year,
or whether in some years the asset is used more than others.
As such there are two main depreciation methods:
|
|
Fixed
Instalment Method.
Depreciation is calculated at a fixed rate on the cost price of
the asset.
|
|
|
Diminishing
Value Method.
Depreciation is based on the book or written down value (which
is the original cost less all accumulated depreciation to date).
One of the advantages of this method is that it automatically
makes allowance for residual vale, as the amount of depreciation
becomes smaller each year and the asset is never completely written
off.
|
Assets
are recorded in the Balance Sheet at their written down value.
It is wrong to regard balance sheet figures for fixed assets as
representing their realisable value, as this may not be the case.
PRICING
YOUR PRODUCT OR SERVICE
The
primary goal of business is to make a profit.
But many businesses fail
to do so because they don't know how to effectively price their products or
services. Pricing is a pivotal element in achieving a profit and is one factor
that businesses can control.
Before setting prices, you must understand your service or product's market,
distribution costs, and competition. Remember that the marketplace responds
rapidly to technological advances and international competition so you'll
constantly be keeping abreast of the factors that affect pricing, being ready
to quickly adjust.
Retail Costs And Pricing:
A
common pricing practice among businesses is to follow the manufacturer's
suggested retail prices. Though suggested retail pricing is easy to use, it
may be problematic. Merely pricing the product or service in this way may
either create an undesirable price image, or not be mindful of the
competition.
Competitive Position:
Another
pricing strategy takes a little more research and business management ability.
Consider who your competition really is (another business) and set your
pricing accordingly. Don't try to compete with a larger company's pricing,
Why? Large firms buy and contract in large volumes and with a broader customer
base so their cost per unit or an increment of time will be less. Instead,
highlight other factors, like customer service. Customers will often pay more
for a good or service if they get courteous, prompt and personal service. Make
it a goal to be a friend to all your customers so that they feel like a name,
not a number.
Pricing
Below Competition:
Let's
say you want to hit the pricing issue head on regardless of the giants in the
marketplace. Many shrewd vendors have been quite successful using this pricing
strategy. Since this angle reduces the profit margin per sale, your
business should reduce its costs only if you can fulfill other factors.
These include obtaining the best prices possible for the merchandise, locating
the business in an inexpensive location or facility, closely controlling
stock; limiting your lines to fast moving items. If you're going to
"price at the lower end of the market," it also makes sense to
design advertising to concentrate on "price specials" and to keep
special service to a minimum. Remember that time is money.
Pricing
Above the Competition:
This
strategy is always any business owner’s dream and occurs when price is not
the customers' greatest concern. You can concentrate on developing a loyal
network of buyers. What considerations are important enough for customers to
justify paying higher prices? These include service pluses such as delivery,
speed of service, satisfaction in handling customer complaints, knowledge of
product or service, and, above all, helpful and friendly employees. Also
consider the most convenient location. Also keep in mind the pull of exclusive
merchandise that you have advertised.
Service,
Material and Labour Cost Components:
Materials,
labour, and overhead make up the total cost of any product or service whatever
your business. This is the cost of materials found in the final product. For
example, the wood and other materials used in the manufacturing of a chair are
direct materials. Needless to say, labour is the cost of the work that goes
into the manufacturing of a product. The direct labour costs are derived from
multiplying the cost of labour per hour by the number of hours needed to
complete the job. Remember to use not only the hourly wage, but also include
other employee costs you have to incur such as ACC Levies, holiday pay and any
other employee benefits.
Overhead
Costs:
Any
costs not readily identifiable with a particular product or service should be
considered overhead. These include repairs and maintenance, heat and light,
depreciation, insurance, administration wages, accounting and legal services,
rent, advertising, bank charges, interest and transportation are also
overhead costs.
Your pricing structure and policy are major components of your public image
and are crucial to securing and keeping your clientele. Cost, plus operating
expenses, plus desired profit, equals the price of the good or service you
sell. The key to success in a business is to have a well-planned strategy.
Establish your policies and constantly monitor prices and operating costs to
insure profit. Accuracy increases profits!