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. Smoother Path for Small Business

  3. Current Tax Rates

  4. Rental Property Taxation

  5. Commerce Act 1986

  6. Minimum Wage from 1 April 2004

  7. Holidays Act 2003



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:

How Much is a Business Worth?    

Claim Your Rebates                         

Cutting Costs in Your Business       

Finding Customers                           

Keeping of Records                          



Newly self-employed people are set to receive a tax discount.

Self-employed who pay provisional tax in their first year of business will be eligible for a 6.7% discount on that tax as part of a raft of measures being introduced over the coming year to simply tax for small businesses.

Associate Finance Minister David Cuncliffe says the small business sector is a key driver of growth in the New Zealand economy but many struggle to make it past the first couple of years.

He says there's a need to give such businesses a hand up as they start out.

At the moment businesses don't have to pay tax on income earned during their first year until the second year, but then both year's payments can be due about the same time, which can be a real financial knock-back.

He says the new discount is being offered as an incentive to all first-year self-employed people and individuals who receive income from partnerships to make voluntary tax payments during their first year of business.

Mr Cuncliffe says he hopes businesses will avoid the later strain of paying two lots of income tax very close together, if they take up the offer which will result in a 6.7% discount for each dollar of tax paid during the first year, to be calculated when their end-of-year tax bill is prepared.

The minister says this incentive is just one of several ideas proposed by the government late last year in the discussion document 'Making tax easier for small businesses' and is the first to make it into a taxation bill. The bill is expected to be introduced within the next few weeks.

Other government proposals under active consideration include aligning provisional tax and GST payments, allowing small businesses to base provisional tax and GST turnover on GST turnover and helping small businesses with PAYE.

Mr Cullen says the tax discount incentive has received considerable support from the small business community and it's hoped that further announcements on the balance of the small business tax simplification proposals can be expected later this year.


We have updated our article on Current Tax Rates.    This can be accessed by clicking on the following link:




Generally, any income you receive from letting out property will be liable for income tax and must be included on an IR3 Income Tax Return.   This income could be from letting out land  or buildings, and in some circumstances, having flatmates or private boarders living with you, or caring for other people’s children in your home.


Expenses that Can be Deducted from Rental Income 

When you earn income from a rental property, there are often a number of expenses you incur.  The following examples are examples you may be able to deduct from your rental income for tax purposes:

Interest- you can only claim interest on the mortgage taken out for the purchase of the rental property

Legal fees- you can claim legal fees incurred in arranging a mortgage to finance the rental property, arranging a tenancy agreement, collecting bad debts


Insurance- on property, furniture and effects, mortgage repayment

Motor vehicle and other travel

 Letting agent’s fees and commissions


Repairs and maintenance

Accounting fees

Bank charges on rental bank account


 Landlord Association, Property Investors, related magazine subscriptions

Gardening, lawnmowing


What Expenses Can't be Deducted 

Some expenses cannot be claimed for tax purposes.   For example, you cannot deduct capital or private expenses from your rental income. 

Capital expenses are costs you incur to buy or increase the value of a capital asset. 

Private expenses are incurred for your own benefit, and are not connected with producing taxable income. 

Examples of non deductible expenses are:

The purchase price of the rental property
The capital part of any mortgage repayments
Interest on money you borrow for a purpose other than financing the rental property, even if you use the rental property to secure the loan
The cost of repairing or replacing any damaged part of the property, if the repairs or replacement make improvements to the property and increase its value.
Real estate agents’ fees and legal fees incurred as part of buying or selling the property
The cost of making and additions or improvements to the property.

These last three points may be added to the purchase price of the property and depreciation claimed on them, as part of the cost of the property. 


Selling the Property or Going to Live in it Yourself 

When you sell the property, or cease it as a rental and go to live in it yourself, there are depreciation recovery implications.   That is, you have to declare back as income all depreciation previously claimed as an expense.  

If you sell the property at a greater price than you paid for it, the depreciation recovery will be the full amount of depreciation previously claimed. 

If it is for a lesser amount, you should obtain a valuation of the depreciable assets on which you have previously claimed depreciation, and compare this with the initial cost of these depreciable assets to establish the depreciation recovery.

McLean and Co prepare Property Investment Financial Statements for a number of clients.   Please make contact with us if we  can assist you in this regard.



The Commerce Act establishes a Commerce Commission (also responsible for administering the Fair Trading Act) with the purpose of promoting market efficiency by fostering healthy competition, informed consumer choice and sound economic regulation. Commission activities include investigating and determining whether particular trade practices have the effect of restricting competition (anti-competitive practices) and can result in businesses being prosecuted where a breach is found.  Anti-competitive practices relate to supplying or acquiring goods and services and may involve an individual, two or more individuals, a company, or two or more companies acting together.                    

The Act prohibits behaviour intended to "substantially lessen competition" in a market or which has, or will probably have, that effect.  Such behaviour includes arrangements or agreements between competitors to prevent, restrict or limit the supply of goods and services from some other competitor and price fixing by competing organisations, except in the case of joint venture operations where goods are jointly produced or services jointly provided.   The term "market" means the New Zealand market for goods and services and for other goods and services that can, as matter of fact and commercial common sense, be substituted for particular goods and services. It is likely, the Commerce Commission states, that, for example, butter and margarine would be considered part of the same market for "spreads" rather than separate markets since the one can be substituted for the other.   Markets exist between wholesalers and retailers and between retailers and their customers, with some markets being seasonal, others regional, and others covering the whole country.  Parties engaging in prohibited behaviour can do so on the basis of a formal contract or as the consequence of a more informal "arrangement".  Whether contracts or arrangements have the effect of substantially lessening competition will largely reflect the market in question.  It is the effect of a contract or arrangement that is important; it is not necessary to show any intention to substantially lessen competition to establish a breach of the Act.   Where, following prosecution, a court finds that a contract or arrangement does have the effect of substantially lessening competition its provisions will not be legally enforceable.  

Similarly, provisions in contracts or arrangements between or among competitors intended to prevent or restrict the supply of goods and services to another competitor are prohibited.  Examples given by the Commerce Commission are: competitors banding together to prevent a supplier supplying other competitors with goods or services, competing suppliers agreeing to threaten a business so that it no longer buys from some other supplier, and members of a trade or profession not accepting businesses in the same trade as members because they provide their goods and services at a discount.  Provisions of this kind are referred to as "exclusionary provisions" and the prohibition will also apply where the business or businesses targeted are likely in the future to be in competition with at least one of the parties who have agreed to such a provision.  However, where a business or businesses are prosecuted, it is a defence to show that an exclusionary provision did not have the purpose, effect, or likely effect of substantially lessening competition.

In the case of price fixing, this need not necessarily involve agreeing on a final price but could involve such things as setting a price range or agreeing on maximum discounts.  Price-fixing is considered to be anti-competitive because it prevents customers from looking for lower prices. Limited exceptions apply (as in relation to joint ventures).       Resale price maintenance, restricting or eliminating competition on price, is prohibited.  Suppliers of goods and services can issue recommended retail prices but must make clear that these are only recommendations and need not be followed.  They cannot set a minimum price, either an actual or a discounted price.  The same applies to third parties who may not hinder or prevent someone from acquiring or supplying goods until that person or firm agrees not to sell below a specified price.

Businesses or persons with a "substantial degree of market power" are prohibited from using that power to prevent competition. Market power must not be used to restrict entry, prevent or deter competitive conduct, or eliminate competitors or potential competitors from the market in question or from any other market.

A number of exceptions apply in respect to anticompetitive practices, including any such practice that is specifically authorised by legislation and clauses in employment agreements or in contracts between sellers and purchasers of businesses that prevent the employee or seller from setting up in competition in the same area with their former employer, or with the purchaser, for a period of time (although overly restrictive clauses have on occasions been rejected by the courts).

The Commerce Act also covers acquisitions and mergers and should there be concern that a business acquisition might breach the Commerce Act, the person proposing to acquire the assets of the business or shares may seek authorisation from the Commission. The Commission must decline clearance for any acquisition or merger it believes would result in a substantial lessening of competition.  

In investigating complaints, the Commerce Commission has a right of entry power and can compel businesses to provide information to assist in proving the Act has been breached.   Where it considers this necessary, the Commission can ask the Serious Fraud Office to carry out an investigation.      



From 1 April 2004 the minimum wage increases as follows:

* For youths aged 16-17 the wage becomes $7.20 per hour, $57.60 for an 8
hour day and $288 for a 40 hour week

* For adults aged 18 and over the wage becomes $9.00 per hour, $$72 for an 8
hour day and $360 for a 40 hour week.


The Holidays Act 2003 comes into force on 1 April 2004.

Until 1 April 2004 the Holidays Act 1981 remains the law covering holidays and leave.

If you need assistance with your holiday and leave entitlements before 1 April 2004, please go here or ring the Employment Relations Infoline on 0800 800 863.

Who needs this information?

Anyone who has a paid job or who employs other people in paid work
Those wanting to find out about or going on holiday or taking leave of some sort
Both employers and employees who want to know what they can and cannot do, as well as the things they have to do, in the workplace
Anyone who wants to know the minimum requirements about holidays & other forms of leave
Anyone who needs to know what minimum employment conditions apply in New Zealand.

The passage of the Holidays Act 2003 continues the modernisation and review of employment relations legislation that began with the Employment Relations Act 2000.

These changes are designed to create productive and mutually rewarding workplace relationships.

The minimum rights set out in this section apply by law to all employees - full-time, part-time or casual. These rights apply even if they have not been included in employment agreements. You cannot agree to do away with any of these minimum rights, but you can agree to better ones.

The Holidays Act 2003 provides minimum legal entitlements to:

annual holidays
public holidays
sick leave
bereavement leave

The new Act replaces legislation that was difficult to understand and apply, that no longer reflected practice in many workplaces, and that was widely seen as not meeting the needs of employers and employees.

The new legislation is intended to create:

improved entitlements and more consistent arrangements for public holidays
separate entitlements for sick leave and bereavement leave
more certainty in holiday and leave calculations.
from 2007, improved minimum entitlements for annual holidays (sometimes known as “annual leave”).

The Holidays Act 2003 has two dates for implementation:

The majority of the provisions are in force from 1 April 2004.
The increase from three to four weeks' minimum annual holidays comes into force on 1 April 2007.

The new Act will affect every workplace differently. All employers will need to review their practices to ensure they meet the new requirements. This includes:

ensuring that they and their employees understand the public holiday provisions, which will apply from the Easter holidays in April 2004
ideally checking all employment agreements, and working through any required changes with employees or their unions
ensuring that records, holiday policies and procedures reflect at least the minimum provisions of the Holidays Act 2003
preparing to implement four weeks' annual leave from 1 April 2007

Click here for further information on:

Annual holidays
Public holidays
Sick and Bereavement leave
Managing transition between the Holidays Act 1981 and Holidays Act 2003
Employee entitlements on termination
Record Keeping


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: