TOTALACCOUNTING Chartered Accountants

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

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

 
EMAIL NEWSLETTER MAY 2015
 

Welcome again to the TotalAccounting 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. Budget 2015 Announcements

  2. Trustees Duties 

  3. Beating a Housing Bubble (maybe Auckland/ Christchurch)

 

BUDGET 2015 ANNOUNCEMENTS

The Government’s 2015 Budget announced May 21, 2015 includes tax proposals aimed at supporting children in poverty, ensuring compliance with the tax rules and strengthening the tax rules. The Budget includes proposals to:

- address child support penalties debt;
- increase the in-work tax credit and the abatement rate from 1 April 2016;
- strengthen the tax rules for property;
- repeal the $1,000 KiwiSaver incentive payment; and
- clarify that payments made by MSD to social housing providers for the provision of social housing are GST-exempt.

Also included in the Budget is extra funding allocated to IRD to pursue aggressive tax planning, property compliance and hidden economy initiatives.

For more information see the Budget 2015 announcements.

KiwiSaver

The Government has announced its intention to repeal the $1,000 kick start payment for new enrollees. The change is expected to come into effect from 2pm on 21 May 2015.

Media statement – KiwiSaver $1,000 kick-start payment to cease

Child Support

Two measures were announced to address child support debt. These aim to encourage liable parents to re-engage with their child support obligations and strengthen Inland Revenue’s ability to work with parents to help control and manage their child support debts:

  • extending the write-off of monthly incremental penalties to more parents. This will apply from 1 April 2016; and
  • an amendment to the penalty write-off tests to adopt a more pragmatic “fair and reasonable” test. The “fair and reasonable” test is proposed to apply on a discretionary, case-by-case basis from 1 April 2016.

Media statement - Forgiving debt to encourage child support payments

Children in Hardship

A proposed amendment was announced to increase the rate of the in-work tax credit and increase the Working for Families tax credits abatement rate from 1 April 2016. This is part of wider changes proposed by the Government and more information on this can be found on the Budget 2015 website.

Social Housing

A proposed amendment was announced to clarify that payments made by the Ministry of Social Development to social housing providers to the extent the payments relate to the provision of social housing are GST-exempt. This is consistent with payments for residential accommodation more generally. This is part of a wider package on social housing initiatives and more information on this can be found on the Budget 2015 website.

Property

Government has announced three tax-related proposals aimed at improving compliance in the property investment sector.

  • A New Zealand IRD number will be required as part of the land transfer process.
  • As part of the land transfer process, non-resident buyers and sellers must also provide their tax identification number from their home country.
  • Non-residents will also need a New Zealand bank account before they can get an IRD number in order to buy a property.
  • Gains from residential property sold within two years of purchase will be taxed, unless the property is the seller’s main home, inherited from a deceased estate or transferred as part of a relationship property settlement.
  • An extra Budget allocation to Inland Revenue for investigating aggressive tax planning, property compliance and hidden economy initiatives.

Media statement - Extra property tax measures

Fact sheet – Property tax measures

Full coverage of all Budget 2015 announcements can be found at http://www.treasury.govt.nz/budget/2015

 

TRUSTEES DUTIES

If you are a Trustee of a Trust you should be aware that you have the following duties

  • most duties are contained in the Trustee Act 1956
  • must be familiar the terms of the Trust Deed, all issues affecting the Trust, and the assets administered by the Trust
  • to act in accordance with the Trust Deed
  • have a duty to make prudent investments
  • to maximise the assets and minimise the liablities of the Trust to the best of your ability and within the law
  • must not spend money unnecessarily or without proper authority- if they do the beneficiaries have the right to hold them personally liable for any financial loss brought about by their mismanagement
  • should act in the best interest of all beneficiaries and treat all beneficiaries with the same degree of fairness
  • to act with the same care, diligence, prudence and good judgement expected of business people managing the affairs of others
  • may employee professionals to assist the Trust
  • Trustees must work together, and share responsibility for any wrongdoing and mistakes made.  All Trustees are accountable to the beneficiaries
  • Must not benefit personally from being a Trustee.  If the Trust Deed permits, they may be entitled to reasonable reimbursement for expenses they incur in carrying out their role as Trustee
  • must keep full and proper Accounts.  The beneficiaries, or their authorised agents, may access the Accounts on request. Other information about the Trust should also be made available to beneficiaries on request.
  • should avoid, if possible, any situation where a conflict of interest might arise.  Where it cannot be avoided, the trustee' interests should be declared, and those Trustees should not take part in negotiations or decision making. For example, Trustees should not vote on a decision in which they have a personal involvement, such as leasing land from a Trust

 

BEATING A HOUSING BUBBLE (MAYBE AUCKLAND/ CHRISTCHURCH)

How do you recognize signs of a housing bubble? 

That’s the question many prospective homebuyers -- and current homeowners -- are asking themselves these days. As home prices rise steeply in some areas, many wonder if residential real estate is falling prey to the same kind of wild speculation that has led to the stock market’s spectacular downfall a few years back.

Any time there’s a disconnect between prices and the underlying value of homes, as measured by their market rents, there’s the potential for a bubble.

If home prices are rising much faster than rents, that’s a strong indication a bubble is forming.

If home prices are rising while average rents are falling  the bubble is pretty much unmistakable.

What could trigger a collapse?
Identifying a bubble and actually predicting when it will burst are two very different matters.  The nature of a bubble is to feed on itself, with rising prices convincing more and more investors that prices can only continue to rise.

Higher interest rates could be enough to knock many of the nation’s real estate markets off their perches. Economists say hard shocks to local economies will be the trigger. Others dismiss any talk of a bubble, noting that a relatively strong economy could keep prices on the rise for years.

How to reduce your risk?
So what should you do if you’re thinking of buying a home in a market that seems overvalued?  The possibility of a bubble alone should keep you from becoming a homeowner. After all, prices could continue to rise for many years, or values could plateau rather than falling. Even if they do drop, who’s to say you would be willing to buy then? Falling markets often scare buyers even more than rising ones, and the fear could keep you from buying for years.

If you’re financially ready to buy a home and willing to stay put for awhile, you can reduce your risk from a real estate bubble in the following ways:
  • Look for undervalued properties. Even in the wildest markets, there are ugly ducklings -- flawed homes that others overlook. If the defects are fixable, you might be able to get a relative bargain and be in better shape than your neighbours should prices fall.
  • Buy defensively. Homes in good neighbourhoods with good schools tend to hold their values better.  Single-family homes usually fare better than flats, which often are the first to lose value in a real estate recession and the last to regain it during a recovery.
  • Stay put. Find a home you can live with for awhile. The people who get hurt the most during real estate recessions are those who are forced to sell, usually because of a job change or because they couldn’t really afford the home in the first place. If you can hang on to a home for five to 10 years or more, you improve your chances of being able to ride out a downturn and at least break even when you sell.

 

 

TOTALACCOUNTING 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

FOR PROPERTY INVESTMENT AND TAX INFORMATION PRESS HERE

FOR FRANCHISE INVESTMENT AND TAX INFORMATION PRESS HERE

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