TOTALACCOUNTING Chartered Accountants

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 TotalAccounting Newsletter in which we discuss current taxation and business matters. We trust you find it informative.  



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



  1. Claiming of Various Business Expenses- IRD Regulations

  2. Borrowing Money 

  3. How to Defend a Mortgagee Sale



Special And Protective Clothing

You may claim the cost of protective clothing necessary for you to follow your business activity.

This could be -

  1. a uniform required by your franchisor/ controlling employer.
  2. clothing to protect you from injury in doing your job - for example miners' special boots.
  3. clothing to help you do your job or which is generally worn by people in your occupation - for example painter's overalls, farmers gumboots.

Everyday type clothing  and footwear which will be worn to places other than your business/ underclothing is not claimable. In some cases the cost of  everyday clothing, over and above "normal" requirements is also allowable if it is needed because of conditions peculiar to the business activity type. Television personalities, public entertainers and models' are some examples of persons who may claim this extra expense for this reason.

Laundering and Dry Cleaning

The cost of laundering or dry cleaning the types of clothing mentioned above may be claimed as a deduction.


You may claim the cost of travelling from one job to another. as long as you go directly from the one job to the other job. The cost of travelling from your home to your work and back, if your home is your work base,  is  not allowable.


Educational costs which help you keep up with modern developments or to maintain your knowledge or skill in your business activity are claimable, such as the cost of short refresher courses -travelling expenses to these are claimable too. 

Reference Books, Journals, Periodicals

The cost of journals, periodicals and information services used for reference purposes and to keep up with developments in your work may be claimed as a deduction. 

Tools Of Trade, Technical Instruments And Equipment

To qualify as a deduction the cost must relate to tools, instruments and equipment necessary in carrying out your business activit.

Medical Examinations

If your business activity  requires you to have a periodical medical examination  you may claim a deduction. This could apply to  aircraft pilots, professional drivers etc.

Licence Fees

If you have to have a licence to engage in your business activity you can claim the cost as a deduction. 

Professional Association Subscriptions

You can  claim for subscriptions, fees or levies paid to trade or professional unions or associations. 



Borrowing money is one of the most common sources of funding for a small business, but obtaining a loan isn't always easy. Before you approach your bank for a loan, it is a good idea to understand as much as you can about the factors the bank will evaluate when they consider making you a loan. This discussion outlines some of the key factors a bank uses to analyse a potential borrower.   

Key Points to Consider
These are
some of the key points your bank will review:

1. Ability to Repay/Capacity
The ability to repay must be justified in your loan package. Banks want to see two sources of repayment -- cashflow from the business, plus a secondary source such as collateral. In order to analyze the cash flow of the business, the lender will review the business's past financial statements. Generally, banks feel most comfortable dealing with a business that has been in existence for a number of years because they have a financial track record. If the business has consistently made a profit and that profit can cover the payment of additional debt, then it is likely that the loan will be approved. If however, the business has been operating marginally and now has a new opportunity to grow or if that business is a start-up, then it is necessary to prepare a thorough loan package with detailed explanation addressing how the business will be able to repay the loan.

2. Credit History
One of the first things a bank will determine when a person/business requests a loan is whether their personal and business credit is good.  Most banks have access to this information. Therefore before you go to the bank, or even start the process of preparing a loan request, you want to make sure your credit is good.

If you have been late by a month on an occasional payment, this probably will not adversely affect your credit. However, if you are continuously late in paying your credit, have a credit that was never paid and charged off, have a judgment against you, or have declared bankruptcy in the last 7 years, it is likely that you will have difficulty in obtaining a loan.

In some cases, a person has had a period of bad credit based on a divorce, medical crisis, or some other significant event. If you can show that your credit was good before and after this event and that you have tried to pay back those debts incurred in the period of bad credit, you should be able to obtain a loan. It is best if you write an explanation of your credit problems and how you have rectified them and attach this to your credit report in your loan package. 

3. Equity
Financial institutions want to see a certain amount of equity in a business. Equity can be built up in a business through retained earnings or the injection of cash from either the owner or investors. 

Don't be misled into thinking that start-up businesses can obtain 100% financing.    A business owner usually must put some of her/his own money into the business. The amount an individual must put into the business in order to obtain a loan is dependent on the type of loan, purpose and terms. For example, many banks want the owner to put in at least 20 - 40% of the total request.

Example: A new business needs a $100,000 to start. The business owner must put $20,000 of her own money into the new business as equity. Her loan will be $80,000. The debt to equity ratio is 4:1. Note also that this is only one of many factors used to evaluate the business -- just having the right debt/equity ratio does not guarantee you'll get the loan. 

4. Collateral
Financial institutions are looking for a second source of repayment, which often is collateral. Collateral are those personal and business assets that can be sold to pay back the loan. Most loan programmes require at least some collateral to secure a loan. If a potential borrower has no collateral to secure a loan, he/ she will need a co-signer that has collateral to pledge. Otherwise it may be difficult to obtain a loan.

The value of collateral is not based on the market value. It is discounted to take into account the value that would be lost if the assets had to be liquidated.

5. Experience
A bank is likely to give more crebility to a loan applicant if the borrower has experience in the purpose of the loan rather than no experience at all.  It may be advisable to indicate to the bank that the borrower intends to hire people who know the business or take on a partner that has the appropriate experience. Regardless, applicants are advised to take some time to work in the business first, and some training classes in the industry.

Questions Your Bank is Likely to Ask

The key questions the bank will be seeking to answer are as follows:

  1. Can the business repay the loan? (is cash flow greater than debt service?)
  2. Can you repay the loan if the business fails? (is collateral sufficient to repay the loan?)
  3. Does the business collect its payments for services rendered?
  4. Does the business control its stock?
  5. Does the business pay its accounts to suppliers?
  6. Are the business owners and managers  committed to the business?
  7. Does the business have a profitable operating history?
  8. Does the business match its sources and uses of funds?
  9. Are sales growing?
  10. Does the business control expenses?
  11. Are profits increasing as a percentage of sales?
  12. Is there any discretionary cash flow?
  13. What is the future of the industry?
  14. Who is your competition and what are their strengths and weaknesses?.



If you fail to make the payments due under a mortgage on your home, the lender (the "mortgagee") has the right to recoup the loan amount through exercising the powers contained in the mortgage contract. Usually this is done through the power to sell the property.

The mortgagee must, however, fulfil certain strict legal requirements, including serving you (the "mortgagor") with the proper notice. If these requirements aren’t met then you may be able to apply to the court for a remedy.

Mortgagee must serve you with notice before taking action

Before taking action the mortgagee must serve you with a notice under THE  PROPERTY LAW ACT. This notice must adequately inform you of:

  • the nature and extent of the default complained of (that is, the amount by which you are in default)
  • the date by which you must remedy the default
  • the rights that the mortgagee is entitled to exercise if you don’t remedy the default by the specified date

The date specified must be at least four weeks from the date on which the notice is given. But if the mortgage contract specifies a period for this that is longer than four weeks, the date specified in the notice cannot be earlier than the end of that longer period.

If you receive a notice from your mortgagee that does not comply with the legal requirements, you may be able to apply to the court for an injunction to prevent the sale going ahead. Further, if the mortgagee exercises the power of sale before the date specified in the notice, you may also be able to apply to the court for a remedy.

The mortgagee’s duty to obtain the best price

The mortgagee has a statutory duty to take reasonable care to obtain the best price reasonably obtainable as at the time of sale. If the mortgagee breaches this duty, you can apply to the court for a remedy.

To satisfy the duty the mortgagee must adequately market the property, which may involve advertising outside the local area, giving notice of the property’s advantages (including the potential for any development), and setting a realistic reserve price based on the property’s valuation.

Three ways of exercising the power of sale

The mortgagee can exercise the power of sale in one of three ways:

  • sale through the High Court Registrar
  • sale through public auction
  • a private sale

Your right to redeem the property

There is a small degree of protection afforded to you, the mortgagor, through the "redemption price" – this is the price at which you may redeem the land to be sold. At any time before the Registrar’s sale you may pay the redemption price or the amount due and owing under the mortgage; the mortgagee must then release the mortgage.

The redemption price is set by the mortgagee, and must be specified in the mortgagee’s application to the Registrar to conduct the sale. Any advertisement for the mortgagee sale must state that the redemption price is available at the Registrar’s office and can be obtained before the auction.

If there is a Second Mortgage over the Property
If there is a second mortgage over the property, the first mortgagee owes, in exercising the power of sale, a duty to the subsequent mortgagee to obtain the best price possible for the property.





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