Text Box: Edition 21 September 2003



Looking out of my office window at the moment the sunshine rays are pouring in.  What a pleasant surprise after the recent couple of weeks of miserable and rainy weather!!.


Let’s hope that’s a good omen for the coming spring and summer.  For myself, the cricket season starts in about 3 weeks and it’s hard to believe that the cricket grounds will be playable by then, but then again Hawkes Bay can get some very fine weather spells and is not such a bad place to live in in reality so here’s crossing fingers for fine weather ahead.


Actually I don’t mind the wet weather at all during the winter periods as that period tends to be my busiest for the year.  I’m quite happy in the sanctuary of my office  not having to suffer the weather elements.


Then the  summer comes along, it is not so busy, and I can enjoy the sunshine (hopefully) to a degree.


Could you get a better job?








Bankruptcy- Is it the right option to recover your debt?



Cutting costs in your Business




Pricing your Product  or Service



Independent Contractor or Empoyee

Medical. Health Expenses not deductible.

Donation Rebate changes



43 Ideas to Promote your Business



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Murray McLean , C.A. (Chartered Accountant)., Diploma in  Business Studies (Taxation Consultancy),   Diploma in Business Studies (Personal Financial Planning)  


133 Main Rd , Clive , New Zealand

P.O. Box 10 , Clive , New Zealand  

Office Telephone Number

 ( Hawkes Bay STD Code 06) 8700952  

Office Facsimile Number

( Hawkes Bay STD Code 06) 8700955  

Web Sites  

Email Address  


**  Institute of Chartered Accountants of New Zealand   (with Certificate of Public Practice)

**   Taxation Institute of New Zealand


            Page 1



 Bankruptcy is one of several options for a creditor seeking payment of  a judgement debt.     While bankruptcy is effective for business debtors (people who own a business) and for other types of asset rich debtors, taking bankruptcy action should be examined as to its effectiveness before a decision is made to carry it through.   Without sufficient assets that can be sold to repay debt, at best these types of debtors can only make time payments over the period of bankruptcy.

Bankruptcy can be an expensive option for a petitioning creditor, costing approximately $1,000 for a creditors petition, over and above the costs of obtaining an initial Order of Judgement.  As a debt recovery option, bankruptcy is sometimes an inappropriate and expensive choice by the petitioning creditor.

Petitioning creditors often become frustrated when the New Zealand Insolvency and Trustee Service (NZITS) investigates their asset-poor bankrupt’s financial situation, and reports back that there are simply no assets for repayment. This frustration can be avoided by creditors’ understanding the limits of what the NZITS can achieve with asset-poor bankrupts.

So what can creditors do pre-bankruptcy to help ensure that bankruptcy would be a good debt recovery situation?   They can do simple checks with credit agencies regarding the debtor’s financial and asset position.   If the results show that the debtor is a business debtor and/or asset-rich (including assets that were disposed of within two years prior to bankruptcy and possibly voidable) then creditors may wish to proceed straight to bankruptcy.   But if checks show neither of these conditions, then creditors should consider another judgement action debt recovery option that is ideally suited as a first step in this situation- an Order for Examination.

To access Orders for Examination, a creditor must first have an order for Judgement from the Civil Court (similar to bankruptcy).   Orders for Examination are by far the most commonly chosen judgement debt recovery option by creditors, and are much cheaper and less complex than bankruptcy.   The cost of the process is approximately $185-$230 depending on the amount of the judgement debt.   The judgement is served and must  appear at the District Court to be examined by a Registrar  (the creditor can attend if desired).   The examination involves a comprehensive means test and statement of assets and liabilities.   The judgement debtor makes a sworn statement as to its accuracy on completion.   If the means test shows an ability to repay, then this can be ordered by the Registrar either in full, or by instalments.   Non-compliance by the debtor is punishable by a Community Work Order.

This simple and inexpensive procedure will be just as effective as bankruptcy for debt recovery in most asset-poor cases, at a fraction of the cost and time of obtaining a bankruptcy order.   Alternatively, the means test may also identify whether the debtor is actually asset-rich and has equity in real estate or other major assets that can be realised by the NZITS.   In this situation a creditor can then make an informed and reasonable choice whether to invest the time and money required to make the debtor bankrupt.  



Do you know where to start? You know when something big goes wrong in your business when a contract isn't renewed, or a product line doesn't sell. But not every business owner knows when little things go wrong , that have a big impact on the bottom line.

When business is good, it can be easy to ignore the little things and spend your energy on the bigger picture. but when the economy takes a downturn, it really pays to take a good hard look at every aspect of your business.

Which of your customers are actually costing your money?     I'll bet there are more than you think. Customers who require a lot of support, who aren't satisfied with the work you do, who demand large discounts or special deals, who never seem to appreciate your service or product. Find out who they are - it may be time they looked elsewhere,  and you concentrated on the customers that value your company.

Don't take things for granted.    While it's true that long standing relationships with trusted suppliers can make things smoother and easier, you need to be aware of competitors' prices and services.  You want to be sure you're getting the very best deal you can on every transaction. And don't be afraid to ask for a discount.

Got a feeling that someone's not pulling their weight?  Think you might have to downsize, but don't know where to make the cuts? Keep track. Get people to write down what they do each day.    Find out who's doing what and how long it's taking them. Because without that knowledge, you'll end up hiring and firing on a hunch. And you might just lose your most valuable employees.

Negotiate, reduce, cut. But first, find out how much you're paying now. What does your phone cost per month - is there a cheaper plan out there?     How many color copies, faxes, printed and bound reports does your company produce each month?    Do you track and charge for them?      What about travel expenses?  Stationary supplies?  Rent?     Before you start cutting, you've got to know where to cut.  If you're not keeping track and recovering this type of cost, you're loosing money.

Big pictures are painted with small brushstrokes
Being successful during difficult economic times means paying attention to each small brushstroke that makes up the big picture of your profitability.  Because what you don't know will hurt you. And what you do know will help you build a stronger, leaner, more profitable company.  



IRD have now completely ceased all ACC activities.   IRD ceased processing for payments for ACC and SEA (self employed ACC Levies) from the end of July and all remaining ACC and SEA debt has been written off.  

If you file late returns for 2001 and earlier year, IRD will not bill you for SEA Levies nor will information be passes to ACC to enable them to bill you.  

If there is any activity that changes the earnings on which levies are calculated and this results in a refund of SEA, IRD will arrange with ACC to make a manual refund.  For employer refunds, you should contact ACC directly.

For the 2002 and subsequent years, income tax reassessments arising from changes to earnings  in the relevant key points (Withholding Payments, active Partnership Income, Self-employed Income, Expenses) on the IR3 return will result in information being passed to ACC for them to issue an amended invoice.



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.  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!





There is a trend to take staff on as independent contractors for a number of reasons:

·          Avoiding the need to pay ACC Levies by the employer

Can be laid off quickly if required
Ideal to get persons with expertise for specific projects
Saving the need to deduct PAYE and pay it to IRD

A distinction must be drawn between an employee and an independent contractor.   Payments to an employee constitute payments of salaries and wages which are subject to the PAYE system. An independent contractor, on the other hand, is taxed on the basis that he or she is carrying out a business.  

In determining whether a person is an independent contractor or an employee, it becomes for tax purposes a question of fact or law.   IRD and the courts have developed several tests for distinguishing between an employer and a contractor:

·         Control- the employer’s right to control the method of doing the work i.e. the employer’s right to choose, pay or control the employee.

·         Organisation or integration- is the type of work or the way it is done the same as work performed by other staff who are employees?  Is the work an integral part of the employer’s business?

·         Independence -  does the worker supply all the necessary tools?   Does he or she work from home?   Is he or she free to do work for other people as well?

·         Intention-   how are the payments for the work made?   Did the worker carry out the same activity as a self employed person (or as an employee) in the past?

·         Economic reality-   is the worker genuinely in business on his or her own account?  


Contractors are not paid holiday pay or sick pay and  with some exceptions (mainly commission sales agents) they are responsible for paying their own ACC Levies.
Contractors are not usually provided with fringe benefits such as company cars and health insurance- these are their own responsibilities.
Contractors are usually registered for GST and provide GST Invoices.
It is possible to control the work done by a contractor, but not the manner in which it is done.
A contactor may employ staff or subcontract work.
 A contractor supplies his own tools of trade.
A contractor is able to work for more than one person , although in practice there may be exceptions to this.
A written contract for service should exist.



The IRD's view is that expenditure incurred to remedy injury or disability to the human body is expenditure of a private or domestic nature, even if the expenditure is to enable the taxpayer to resume earning income by having his or her health restored.   Such expenditure is not incurred in the course of deriving gross income, nor is it an overhead or functioning cost in a taxpayer's business.   Instead, it is a health maintenance cost for the taxpayer as a human being.



Legislation has now been passed to increase the maximum charitable donations threshold from $1,500 to $1,890 for the 2002-2003 income year onwards.   The legislation was passed on 26 March 2003 and now means taxpayers can claim a maximum of $630 for this rebate from 1 April 2002 .  Donation rebates are not nowadays claimed in your Income Tax Return but instead on a separate IR526 Return which can be arranged to be sent direct to clients who can therefore make their rebate claims before their Income Tax Return is prepared.   If a claim is made one year the IR526 Form  is again sent out by IRD the next, but if no claim is made IRD will not forward it the next.  Clients should contact McLean and Co if they require such forms to be sent to their address so that they can claim Donation Rebates.  



1.    Advertise in the classified advertising section of your local newspaper. 
2.     Advertise in the Yellow Pages. 
3.     Approach your prospective customers over the phone. 
4.     Approach your prospective customers in person. 
5.     Approach your prospective customers through the mail. 
6.     Be a guest speaker at seminars and present on your area of expertise.
7.     Be a guest speaker on radio talk shows. 
8.     Build and maintain a customer mailing and contact list on database software.                                     
               9.     Build your image with well designed letterhead and business cards. 
10.   Design a brochure that best explains the benefits of your services. 
11.   Design a mail order campaign. 
12.   Design a point of purchase display for your product.
13.   Design a telemarketing campaign. 
14.   Design an image building logo for your company.  
15.   Design and distribute a regular newsletter or an industry update announcement.
16.   Send out email newsletters to existing and/ or potential customers. 
17.   Design and distribute company calendars, mugs, pens, note pads, bumper stickers, balloons, tee Shirts. other clothing, or other advertising specialties displaying your company name and logo or slogan.   18.   Design and distribute a free "how to do it" hand-out related to your industry (e.g. Tips for conserving energy in your home).
19.   Explore cross promotion with a non-competing company selling to your target market. 
20.   Explore ways to share your advertising costs using cooperative advertising.
21.   Use other forms of advertising-  newspapers, magazines, on radio, television, billboards, bus shelters, supermarket trolleys. 
22.   Follow up customer purchases with a thank you letter.  
23.   Follow up customer purchases with Christmas or birthday cards.
24.   Have your company profiled in a magazine or newspaper that is read by prospective customers.
25.   Hire an advertising agency or public relations firm.  
26.   Hold a promotional contest.
27.   Hold a seminar on your service, product or industry.
28.   Include promotional material with your invoices.
29.   Look for prospective customers at trade shows related to your industry.
30.   Look for prospective customers in associations related to your industry.
31.   Look for prospective customers at seminars related to your industry.
32.   Look for prospective customers in magazines and newspapers related to your industry.
33.   Package your brochure, price lists and letter in a folder for your customers.
34.   Place a sidewalk sign outside your store or office. 
35.   Place flyers on bulletin boards and car windshields.
36.   Place promotional notes on your envelopes, mailing labels.
37.   Place signs or paint logos on your company vehicle(s). 
38.   Prepare a video about your business.
39.   Prepare a list of product features and benefits to help you plan your advertising and promotional campaigns. 
40.   Prepare proposals offering solutions to your customers' needs.
41.   Provide free samples of your product or service.
42.   Provide public tours of your operation.
43.   Sponsor a charity event.



If we can assist further, please email McLean and Co. as follows: