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McLEAN AND CO.
McLEAN AND CO MARCH 2007 NEWSLETTER
is a voluntary, work-based savings initiative to help you with your
long-term saving for retirement. It's
designed to maintain a
regular savings pattern. It
is administered by Inland Revenue Department.
many people, KiwiSaver will be work-based. This means you will receive
information about KiwiSaver from your employer, and your KiwiSaver
contributions will come straight out of your pay.
you Get When you Retire
Super provides for a basic standard of living in retirement, but it may
not be enough for the kind of retirement you want.
KiwiSaver is intended to complement NZ Super.
government has created the framework for the KiwiSaver initiative, to
help New Zealanders financially prepare for retirement.
There is a range of membership benefits to encourage you to get
saving, including a $1,000 tax-free kick-start and subsidised scheme
fees. Some people may also be eligible for help with the deposit on
their first home.
membership is voluntary and open to all
you are 18 years or over and start a new job from
are some exceptions to automatic enrolment. You won't be automatically
enrolled if you:
you are automatically enrolled and decide to opt out you can do so from
the end of your second week of employment. To opt out, fill in the opt
out form in the information pack you will get from your employer.
you opt out, any contributions already deducted from your pay will be
you are in a job already you can join directly through a scheme provider
or your employer. This also applies to government employees working
overseas. Those who are, for example, self-employed, under 18 or on a
benefit can join by contacting a KiwiSaver scheme provider directly.
AND CO MARCH 2007 NEWSLETTER
KiwiSaver you can choose a savings scheme to suit you. There will be a
range of scheme providers and several investment types, from
conservative risk to growth funds. You can change KiwiSaver schemes but
can only belong to one scheme at any time.
If you don't want to choose your own scheme IRD will allocate you
a default scheme, or to your employer's preferred scheme, if they have
one. You can change this later if you wish. The
Government has named the six default providers they intend to appoint
for people who join KiwiSaver without nominating a preferred savings
scheme. They are- ASB, AMP,
ING, Mercer, AXA and Tower.
KiwiSaver to Help Pay your Mortgage
scheme providers could offer a mortgage diversion option. After you've
been with a scheme for 12 months you can choose to have up to half of
your regular contribution go towards the mortgage on your home. The rest
would go to your KiwiSaver account. Mortgage diversion may be available
for new and existing mortgages, but can only be used towards the
mortgage on your main home (not an investment property or holiday
home).Once your mortgage is paid off, all contributions would go to your
KiwiSaver account. Employer contributions cannot be diverted to your
find out more about mortgage diversion, talk to your scheme provider.
Home Deposit Subsidy
offers a first home deposit subsidy of $1,000 each year of membership in
a scheme, up to a maximum of $5,000. To be eligible you must have been
saving through a KiwiSaver scheme for at least three years and meet
criteria. Income and house price caps will apply.
first home deposit subsidy is administered by Housing New Zealand and
will be available from 2010. To find out more visit the Housing New
you cannot access your savings until you're 65 or have been with
KiwiSaver for five years - whichever is later. But there are
special circumstances when you may be able to make a withdrawal
(excluding the government contribution of $1,000). Special circumstances
you move permanently overseas, you can also withdraw your funds 12
months after you leave. This includes the government kick-start
contribution of $1,000.
your savings mature you can withdraw them in a lump sum. Alternatively,
some KiwiSaver schemes may offer other options. If you die before you
are 65 your savings will be paid to your estate.
cannot borrow against your savings.
main KiwiSaver responsibilities include:
AND CO MARCH 2007 NEWSLETTER
can also contribute to their employees' KiwiSaver accounts. These
contributions can count towards your minimum contribution of 4%, and are
also exempt from specified superannuation contribution withholding tax
(SSCWT) up to a cap of whichever is less: your contribution or 4% of
your before-tax pay. Employers
already offering registered superannuation schemes can apply to the
Government Actuary for an exemption from enrolling new staff.
Your KiwiSaver Account with your scheme provider is
kick-started with a $1,000 tax free contribution from the government.
Each pay day your contribution is deducted from your pay for investment
through your KiwiSaver account. You can choose to save 4%, or 8% to
speed things up. The amount you contribute each pay is based on your
before-tax pay. After a year in KiwiSaver you can take a break from
saving, called a contributions holiday. Employers can help their
employees to save, with tax-free contributions to their KiwiSaver
accounts (limits apply-refer above). The amount you save each pay is
calculated on your before-tax pay.
you are automatically enrolled your savings will be deducted from your
first pay. If you're already in a job and opt in to KiwiSaver, your
savings will start as soon as your employer starts making deductions.
Once your contributions have started, Inland Revenue Department will
hold them for three months while you decide on your KiwiSaver scheme and
investment profile. Your contributions are then paid, with interest, to
your KiwiSaver scheme provider for crediting to your KiwiSaver account -
along with the $1,000 tax-free government contribution. Inland Revenue
Department then regularly passes your contributions to your scheme
Regular Savings Amount
you are self employed, talk to your scheme provider about your
contribution rate. If you are an employee, your savings will be 4% of
can make lump sum payments whenever you like. Once you've made a lump
sum payment you can't withdraw it until your savings mature. You can pay
lump sums directly to your scheme provider, or to Inland Revenue
Breaks from Saving
you've been saving with KiwiSaver for 12 months you can apply for a
savings break, called a contributions holiday, of between three months
and five years. There is no limit to the number of times you can take a
contributions holiday. If you suffer financial hardship within the first
12 months of saving, talk to Inland Revenue Department. You may be
eligible for an early contributions holiday.
you take a trip overseas or in
AND CO MARCH 2007 NEWSLETTER
FINANCIAL PLANNING SERVICE
extend the range of services to our clients we have entered into a
business arrangement with Jim Hubble, a certified Financial Planner with
22 years experience in comprehensive financial planning.
Jim is home based
and can assist you with your personal or business risk management; he
can help you develop a personal financial plan and if required construct
a suitable retirement or investment portfolio for you.
Jim will provide an initial consultation free of charge and with no obligation. To avail yourself of this service all you have to do is complete the enclosed questionnaire entitled “Business Financial Health Check” and return it to McLean and Co by mail or fax. (0ur fax. No. is 8700955)
GETTING PAID ON TIME
Here are 12 ways to make sure your invoices are paid on time.
invoices out promptly. Send them with the goods, or on the day the
service is completed, instead of waiting until the end of the month.
agreement on payment terms when you make a
new customers fill out a credit application form stating your conditions
of trade. It pays to have the wording checked by a lawyer to ensure it
covers everything correctly. You can get hold of a sample form quite
easily by applying for hire purchase facilities at a large store, but it
may not be applicable to your situation or may not be legally watertight
so it’s best to seek help.
sure the payment terms are spelled out clearly on your invoices (eg
‘Payment due on June 20’ or ‘Payment within 20 calendar days
please’). Also include a statement saying: 'Please pay on this invoice
as no statement will be sent.'
the terms for some of your customers, or for new customers – eg if
your payment terms are 14 days from the date of the invoice, reduce them
to seven days.
minimum amounts of business a customer must buy before you’ll give
them goods or services on credit. This reduces the time and paperwork
costs involved in sending out accounts for tiny amounts of money.
Alternatively, you could send friendly reminders regarding your terms,
pointing out that the credit facility might be cancelled if business
continues under the stated minimum.
up promptly when invoices aren't paid by due date. Be polite but firm.
If you haven't the time to do this yourself, then appoint someone to do
it for you.
the average age of your Debtors
and set yourself the goal of reducing this age by a set target every
month. If your customers or clients have been taking advantage of you
because of your previous laxity in invoicing, then you may need to
re-educate them. Do this politely so you don't offend customers:
for a deposit (even a small amount) so you do have something. Some
people get a deposit that covers their expenses. This tactic at least
allows you to stay in business.
offering a discount for prompt payment. Discounts aren’t a good option
for low-margin businesses, but can be an option for high-margin
operations. You have to work out whether the use of money gained earlier
is worth the discount you're offering. Never give the discount if
the person has missed the due date for the discount offer (some will try
charging interest on late payments. But remember, this is only
enforceable if the customer is aware of this penalty before the deal is
struck. Ask a lawyer to write the contract wording for this tactic, and
be careful how you apply the rule: it’s easy to lose customers if
you’re too inflexible.
selling your debtors to
a finance company. That way, instead of having to wait 30 days or more
until an invoice is paid, you receive your money upfront from the
finance company which, in turn, will collect the money from your
customer. The finance company will of course charge you a commission for
this service. There are
risks, though. The finance company might be heavy-handed and antagonise
your customers. Have a talk to them first about their collection
AND CO MARCH 2007 NEWSLETTER
TO INCREASE YOUR PROFIT
In business, your profits are your reward for your
endeavours. In fact, profitability is the only reliable measurement of a
business' success. Profits are the very lifeblood of a business. They
fuel growth, support the owners, provide for the well being of the
staff, and ultimately determine the success or failure of the business.
So how can you increase your profits?
The objective is either to expand
You should ensure that:
Warning - Be wary of dropping prices to boost
Warning - Before changing your supplier, consider the level
of service you are receiving as well as the cost
You should aim to keep costs under your control:
You must be aware of your income and expenditure. Proper
books and records are essential for monitoring the trends and patterns
in your business.
It is not necessary to produce a full profit and loss
account every month, rather select the key factors that will best help
you understand how you are doing, e.g. chargeable hours,
McLEAN AND CO MARCH 2007 NEWSLETTER PAGE 7
Without a doubt, proper insurance
cover is vital for peace of mind and for the future prosperity of your
business. But how do you select the covers that are right for your
business, at the right price?
If you’re running a business
from home, or freelancing with home as your base, don’t assume that
your normal household insurance will meet your business needs – the
chances are it almost certainly won’t. Even
so-called ‘home with business cover policies’ will leave you exposed
in a number of key areas. One
thing to check if you are basing yourself from home- many insurance
companies insist on separate insurance for plant items
(that is, your home contents insurance does not provided cover
for these) if they are used in business activity.
Or if you’re renting office
premises, don’t assume that the landlord’s
insurance will cover your business – again, it’s not likely.
In any event, it makes good sense
to keep your business covers separate from any other arrangements – it
will make claiming easier should you have to, and as business insurance
premiums are tax-deductible, having stand-alone business policies make
it easier to account and claim for them.
Whatever insurance cover you have
got, check it in detail to see that it matches what you need. . You’ll
probably need Fire, Damage
and Theft Insurance. But
beware, even today, some insurance companies still treat portable
business equipment like laptops and mobile phones with great suspicion
and won’t cover them at all – never mind that for most of us believe
they’re now essential everyday business tools! And
if they do cover them, they’ll sometimes exclude cover for Accidental
Damage – the most common claim for this type of equipment.
And if you carry cash you’ll have to consider insurance
pertaining to the Carrying
Even more importantly, there are
some key areas that ordinary policies simply won’t include, like Business
standard fire and natural disaster policy may not pay
for the costs of temporarily re-housing you if something awful like a
fire or flood devastates your business premises.
So what about
your business? Who
is going to pay for suitable
business accommodation and all its related costs like heat, light, rates
and so on? Unless
you’ve got proper Business
Interruption cover, you are.
Any business, no matter how
small, needs to consider Liability
insurance. Designed to cover the cost of compensation awarded to people
who become ill or injured in connection with your business, Liability
is a business insurance fundamental.
Public Liability Insurance protects you against the cost of being
sued by a member of the public injured in connection with your business.
Any business that offers advice
of any sort to its clients ought to think about Professional Indemnity cover – which means that if you’re
sued for having made a mistake, you’re covered for the costs both of
defending the case and any award made against you.
In an increasingly litigious society, this is protection well
worth having. What many people aren’t aware of is that no matter how
“right” you might be in such cases - and even if this is proven in
court - the cost of defending any claim, no matter how ludicrous, can
run into thousands. With a Professional
Indemnity policy in place, it’s taken care of – without a
PI policy, you pay. The
problem is, the PI policies most generally available are designed for
big business, with multi-million pound levels of cover – and premiums
to match. For the smaller business, it’s unaffordable overkill.
The answer is to seek out the smaller, more flexible insurer that
recognises that the small business customer wants lower levels of PI
cover and lower premiums.
Income Protection Insurance is an important insurance type to
consider. It provides
ongoing income if there are breaks if the business owner is unable to
work due to health factors, and therefore is important to achieve a
continuing income stream. ACC will generally only cover you for an
accident, so what about stoppage from business activity due to a health
problem that is not an accident?
If you haven’t got the right
insurance protection, your business can be vulnerable. Getting reliable
advice from experienced, qualified professionals is the key to selecting
the insurance that’s right for you, whether through an independent
broker or directly from an insurer who can offer flexible, affordable
McLEAN AND CO MARCH 2007 NEWSLETTER PAGE 8
DUE DATES AND CHANGES TO GST RETURNS
GST Return and payment due dates will be changing for taxable periods
ending on or after
30 November- the due date remains 15 January
31 Marc- the due date will be 7 May
This is the first stage of
aligning the due dates for GST and Provisional Tax payments.
As part of this alignment
IRD will be changing the GST Returns in a two stage process.
The first stage will occur in April 2007 with the removal of the
carbon copy of the Return.
OF MONEY INTEREST RATES
Use of money interest rates
charged by IRD increased from
MOTOR VEHICLE EXPENSES-
DEDUCTIBILITY/ KEEPING LOGBOOKS
Motor Vehicle Expenses are generally deductible:
To claim this deduction, adequate business records
must be kept. This
particularly applies to motor vehicles which are used partly for
business purposes and partly for other purposes. Where
insufficient records are maintained, Inland Revenue Department are
required to limit the allowable deductions for all motor vehicle
expenses (including depreciation) to a maximum of 25% of the amount
A taxpayer need only keep a logbook recording total
distances travelled and the reason for business trips, in any
consecutive 90 days in a year which reflects average proportion of
travel. The proportion
of business use established can be used for a period not exceeding three
years. If actual
business use fluctuates to a degree of
20% more (or less) than the previous records, the logbook ceases
to apply i.e a new logbook record of three months should be prepared.
The logbook can apply to a replacement vehicle if it is representative
of the business use of the previous recorded vehicle.
Motor Vehicle expenses can only be claimed by self employed persons from their work base. Travel between a taxpayer’s home and place of business, if his/her business base is not the home, are not claimable for tax purposes.
If we can assist further, please email McLean and Co. as follows:
CONTACT McLEAN AND CO. BY EMAIL BY CLICKING ON THIS LINK
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