Edition 20 April 2003


Welcome again and Hi


Yes!!!!  Its that time again.  The tax season!!!! Time to shift up a gear, put in the hours etc.  IRD have informed me that they intend to send the 2003 annual returns on the following dates:

1 April to 5 April 2003

Claims for Personal Rebate- these go direct to yourselves and you can file them immediately

8 April to 11 April 2003

Company, Trust, Partnership Income Tax Returns direct to our address if we hold agency for your affairs

14 April 2003

Family Assistance end-of-year statements direct to yourselves

17 April to 5 May 2003

Individual Tax Returns direct to our address if we hold agency for your affairs

16 May to 22 May 2003

Summary of earnings for wage and with-holding payment earners direct to our address if we hold agency for your affairs  

I’m looking forward to assisting you with your tax requirements this year and will have all IRD documentation on hand to do so after the above dates








Company Incorporation/ Advantages/ Disadvantages Existing Business



Company Incorporation/ Advantages/ Disadvantages Existing Business cont.



Family Assistance



Claim your Rebates !!!!

Changes to the rebate Claim Process- Childcare and Housekeeper Rebates



Ten Tips for Winning Sales

New Additions to our Website


Visit our web site for

·         A comprehensive Knowledge Centre with taxation, accounting and business articles

·         Links to other useful business websites.

·         Past client newsletters

·         Documentation required for tax return preparation


Just visit





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


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McLean and Co. offer as part of their services assistance to their clients with company incorporation and would be happy to assist you in company incorporation and your subsequent accounting and taxation requirements. 

The setting of up a business entity as a company  may not be appropriate and necessary for all business entities for self employed persons and small business firms.  Here are some of the advantages and features and disadvantages of the company structure:


Can have any number of business owners (shareholders) providing varying levels of investment capital and personal services.   A sole trader is limited to one  and a partnership normally will have fewer partners than the business owners of a company.

·         Provides limited liability,    Claims against the company fall on the company, not the shareholders.    That is there can be a separation of business risk from the shareholders personal assets.    A company allows shareholders to limit their maximum possible liability for the debts of that company.    If a shareholder holds 50 $1.00 shares in a company, that shareholder's liability for the company's debts is limited to $50.00 (liability can be increased in situations where shareholders and directors provide guarantees to Banks or other Financial Institutions to cover the company's borrowings)     Similarly, shareholder's loans to the company can also increase the potential risk in the event of financial collapse of the company.    This situation is to be contrasted with the position of a sole trader or partner in a firm, where their liability for the debts of that business is unlimited.

·         Registration of the Name.   Once a name is approved by the Registrar of Companies no other company can be registered with an identical or near identical name.    There is no register for unincorporated bodies such as sole traders or partnerships.

·         Separate legal entity.    An individual can not enter into a contract with himself but a shareholder can enter into a contract with the company.    As a consequence of this a shareholder may be employed by the company and may also loan money to the company on the same basis as any unrelated party.

·         May offer tax advantages when the tax rates for companies and individuals differ e.g. tax rate for companies is 33c in $, whereas tax rates for individuals differ (19.5c to $38,000, 33c $38,000-$60,000, 39c over $60,000).

·         Taxation and employing Relatives.     By introducing family members as employees and/or as shareholders income splitting is possible to enable tax less tax to be paid at the higher rates.     Approval from the Inland Revenue Department is required to allow a claim for wages paid to a spouse of family of a sole trader or of a partner in a partnership.   Restrictions are placed at the hourly rate which can be paid.     With a company there is no such restriction.    The amount of remuneration paid is to be in keeping with the value of the work undertaken.

·         Tax-Dividend Imputation.     With the introduction of dividend imputation from the 1st of April, 1988 , double taxation has been removed.     Companies now pay tax at 33c in the dollar on any profit earned after allowing for shareholders salaries.      If the company's tax paid profit is later distributed to shareholders as dividend they get an imputation credit for the tax the company has already paid on their behalf.

·         May confer the impression of greater credibility and that the business is “serious” and there for the long term.





·         Continuity.     If a director pulls out, or a shareholder wishes to sell part or all of his or her shares, the company is not affected with a new director or shareholder.     This would be different with a sole trader or partnership.     Both of these business forms would have to create a new entity.

·         Provides more options for funding e.g. raising of equity, venture capital.  

·         Borrowing.     Arranging security for a loan can be both cheaper and easier for a company than an individual.    A company may grant a floating charge over its assets, both present and future, by the granting of a debenture.     Individuals, on the other hand, cannot do this and must grant specific charges over specific assets.    A company can grant a charge over its undertakings whereas an individual would have to provide a detailed schedule of all assets to be charged for the charge to be effective.    Under the debenture, new assets acquired by the company would automatically be covered by the charge and existing assets sold in the course of the business would be released from the charge.     In the case of an individual where a new asset was acquired a new charge would have  to be prepared.   Similarly where an asset was sold a release would have to be executed to release the asset from the charge.

·         Security for Shareholders Loan.    It is possible for a shareholder to have their lending to the company secured by way of a debenture.    In the event of the company experiencing financial difficulties, eventuating in a wind up of the company, the debenture holder would stand to rank ahead of the unsecured creditors in distribution of the residual assets.

·         Easier to sell part of company than a sole trader or partnership business structure- just sell some of the shares.  

·         Distribution of the Company's Loss Amongst Shareholders.    It is possible to separately register the company with Inland Revenue Department with Loss Attributing Qualifying Company (LACQ) status.     In the event of the company experiencing a tax loss in a future year, this loss can be distributed to the shareholders (in the same year).     The result is, losses which would otherwise be held within the company, awaiting future profits to offset these losses, can be used immediately by the shareholders to reduce their individual personal tax liabilities.     An example of the use of an LACQ company is the purchase of a rental property which is heavily mortgaged or a forestry company from its start up.        In the early years both situations are likely to have losses.   These losses would be able to be distributed year by year to the shareholders-  with LACQ status these distributions would not be possible.



·         Does not protect you from personal liability as a director.    If it can be shown that you continued trading when the company was insolvent you can be held to be personally liable for the debts of the company.

Directors must be fully aware of the financial operations of the company to prevent it trading while insolvent.
Does not provide any opportunity to spread business income to family members on lower marginal tax rates other than through legitimate wages.
Business losses have to remain in the company (unless the company is a loss attributing qualifying company) and cannot be offset against a shareholder’s taxable income from other sources.
A public company has to declare financial results publicly and has to be audited.
Depending on profit levels in first year, may have to start paying income tax earlier than other business structures.





To be eligible for family assistance the person looking after the child needs to be either:

·          A New Zealand resident and have been living in the country continuously for at least 12 months at any time. They need to be a tax resident in New Zealand when they apply for family Assistance payments, or

·          Caring for a child who is both resident and present in New Zealand .  

Family assistance cannot be granted if the person applying:

·          Is in New Zealand illegally

·          Is here on a visitor’s permit

·          Only has a temporary work permit, or

·          Is here on a study grant  

Families can register for Family Assistance at any time of the year.   To apply, have your IRD Number handy and call 0800-257-773 and request a Family Assistance Registration Pack (IR200).   The Family Assistance (FS1) Application Form is found in the pack.   The information that you will have to supply when completing the FS1 is:

·          Details about yourself and your partner (if applicable)

·          IRD Numbers of child/ children in your care- you can get IRD Numbers by completing an IR594 Application Form, also in the pack

·          An estimation of your income for the year

·          Birth Certificate of child/ children- if child/ children do not already have an IRD Number

·          Any other information about other income you receive (e.g. self employment)  

There are two options for receiving Family Assistance payments.   To receive payments fortnightly, taxpayers need to estimate to IRD how much they will earn in the year they are applying for the payments. The other option is to receive a lump sum payment at the end of the year, in which case an estimation of income is not required.  

The table below shows how much you can earn and still be eligible for Family Assistance:  


Number of Children (18 & Under) Living at Home

Total Family Income (Gross)

Weekly Income Before Tax
























McLean  and Co notice that a number of clients do not claim the rebates they are entitled to.  These specifically relate to Donations, Childcare and Housekeeper.  These are not claimable on Income tax Returns nowadays, but instead of a separate form,  IR526 Claim for Personal Tax Rebate, which clients can arrange to be sent direct to themselves and claim before they bring their business financial documentation into McLean and Co for their yearly Income Tax return preparation.  

The following can claim rebates:

·          Individuals (not companies, trusts or partnerships)

·          People who have earned taxable income in the period they are claiming for

·          People who are in New Zealand at any time during the tax year (including non residents and absentees)  

As long as you have a receipt for them, you can claim a Rebate for donations of $5 or more, in any one year the maximum you can receive is $500 for donations totalling $1500 or more.   Your partner can claim a rebate of up to $500 for donations you made over $1500 as long as he or she fits  the criteria above.   A rebate can be claimed for each receipted donation  of $5 or more to:

·          An approved charitable organization

·          An approved New Zealand religious organization

·          Medical research schools and universities

·          Approved overseas aid funds

·          State schools, school Boards of Trustees and Parent Teacher Associations. To qualify, the school must be a state school (this includes integrated schools) or be approved as a charity for tax purposes.   These payments must be donations, not payments of school fees  

If you paid for Childcare you can claim this rebate if one of the following applied to you:

·          You were a single parent, and your child was under 18 or unable to work because of a disability

·          You and your partner were both working (this does not apply to couples who are separated)

·          You and your partner were disabled or physically unable to care for the child  

Please note that you can’t claim this Rebate if you live in a communal home, such as a rest home or a hospice.  

You can claim the Housekeeper Rebate if you (or your partner, if you’re married) were disabled or physically unable to do for housework, and paid for a housekeeper.  

The maximum you  can claim under the Childcare or Housekeeper Rebate is $310 for payments totalling $940 or more, and 33% of qualifying payments.  If you have a partner who is eligible to claim the rebate, you can each claim a portion of the Rebate- for example, you can claim half.  

To register and to obtain Claim for Personal Tax Rebate forms ring IRD at 0800-377-774, and have your IRD Number handy.  

IRD will normally continue sending these Claim Forms to you every year if you filed a claim for the previous income year.  



Taxpayers who claim a Childcare Rebate this year will notice a few changes to the claim process. The most important changes for people claiming Childcare and Housekeeper Rebates is that IRD now require all receipts to be attached to the IR526  Rebate Form.   

 Claiming taxpayers should therefore ensure that they receive them from your childcare institution or housekeeper  




1.       Clarify your value propositions.  Make sure you can clearly articulate to prospective customers the business outcomes they will derive as a result of using your product or service. Be precise- numbers, percentages and time frames make your value proposition even stronger

2.       Target a specific market segment.    Don’t chase every available opportunity.   Focus and increase your knowledge and expertise in a particular market segment. Learn as much as you can about their business needs, terminology, issues and marketplace trends.

3.       Prepare ad infinitum.   Before you meet any new prospect, research their business.   Find out what’s important to them, their challenges, goals and strategic imperatives.

4.       Create seductive ideas.   Use your brain and think for your prospective and existing customers.    A seller who consistently brings business ideas to the relationship becomes indispensable- winning contracts with minimal competition and at full dollar value.

5.       Slow Down, Lean Back.    Don’t try to rush sales, even if you’re desperate. Customers feel your push and immediately erect a wall of resistance.   On first sales calls do NOT lean forward.   To maintain a consultative approach you must LEAN BACK.   Lean back, slow down, and you’ll get the business sooner.

6.       Pursue Quality, not Quantity.   Make fewer sales calls, but better ones.   Focus all your efforts on preparing for the meeting. Determine the next logical step. Think about what you need to make the outcome a reality. Test every idea you come up with from your customer’s perspective.   Think- if I said or did this, how would my customer interpret it or react?

7.       Minimise Opportunity Leakage.   Unless customers can explicitly state the business value of your offering in concrete terms your opportunity can easily evaporate into thin air- even if they appear highly interested.  To increase your order rate, ask questions such as:    Why would this help you?    What value would you get from this service?   What are the primary benefits you would realise from my product/ service?   This cements the value in their brain.

8.       Make Follow Up Meetings Concrete.   Don’t leave a meeting without scheduling your next one- or you may never catch up with your customer again.  The longer it takes to reschedule, the more their desire for the offering fades.   Get the meeting on both your calendars now, even if its just to talk on the phone

9.       Always debrief your sales calls.    Ask yourself:    What went well?   Where did I run into problems?   What could I do next time to get better results?   This will assist you in improving your technique.

10.    Reframe your attitude.   Stop blaming the economy or anything else for your problems.   There are many things totally within your control.  Approach all tough sales situations with a “what’s possible” or “how can I” mindset.   Accept 100% responsibility for your sales successes and continually be on the lookout for creative approaches to take your business to the next level.    




We  have recently added the following to our website:  

Hawkes Bay Commerce and Attraction Sites


Hawkes Bay Community Service Organisations


2003 National Standard Costs for Specified Livestock


Eight Steps to Starting a Business


24 Low Cost ways to Market Your New or Existing Business



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