EDITION 23 APRIL 2004  

Welcome again and Hi


Hello again!!!!


Once again another taxation year has come along  and I am addressing the following comments to my March 31 taxpayer clients, which is the vast majority of clients.

I am looking forward to providing the service to prepare your business Financial Statements and Income Tax Returns this year  yet again and look forward to catching up with you when you have your information available.  

Your Tax Returns are forwarded to ourselves usually in April and if you had any income from Wages, Salaries National Superanuation and Benefits (including ACC Corporation) then your Summary of Earnings showing this remuneration is sent to ourselves late May.  Once this is received I am in a position to receive your information and process your Tax Returns on your behalf .


Kind regards








Smoother Path for Small Business

Fair Trading Act 1986



Commerce Act 1986



The Business Plan



Taxpayers should Call if Tax Records Lost in Floods

Current Minimum Wage by Law



Wages and Time Records

Free Postage for Tax Payments

Paying School Children to Work in 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 April  2004 Newsletter




Newly self-employed people are set to receive a tax discount.

Self-employed who pay provisional tax in their first year of business will be eligible for a 6.7% discount on that tax as part of a raft of measures being introduced over the coming year to simply tax for small businesses.

Associate Finance Minister David Cuncliffe says the small business sector is a key driver of growth in the
New Zealand economy but many struggle to make it past the first couple of years.

He says there's a need to give such businesses a hand up as they start out.

At the moment businesses don't have to pay tax on income earned during their first year until the second year, but then both year's payments can be due about the same time, which can be a real financial knock-back.

He says the new discount is being offered as an incentive to all first-year self-employed people and individuals who receive income from partnerships to make voluntary tax payments during their first year of business.

Mr Cuncliffe says he hopes businesses will avoid the later strain of paying two lots of income tax very close together, if they take up the offer which will result in a 6.7% discount for each dollar of tax paid during the first year, to be calculated when their end-of-year tax bill is prepared.

The minister says this incentive is just one of several ideas proposed by the government late last year in the discussion document 'Making tax easier for small businesses' and is the first to make it into a taxation bill. The bill is expected to be introduced within the next few weeks.

Other government proposals under active consideration include aligning provisional tax and GST payments, allowing small businesses to base provisional tax and GST turnover on GST turnover and helping small businesses with PAYE.

Mr Cullen says the tax discount incentive has received considerable support from the small business community and it's hoped that further announcements on the balance of the small business tax simplification proposals can be expected later this year.



This Act, the basis of consumer protection, applies to traders, shops, government agencies and state-owned enterprises and extends to advertising outside New Zealand by residents who supply goods or services within New Zealand . It is concerned with matters such as product safety, pricing, and financing and requires the Commerce Commission to make available, or help others to make available, information about the rights and obligations under the Act of anyone engaging in trade.    

The Act forbids misleading conduct in relation to trade generally and, in particular, in relation to the supply of goods and services - their nature, characteristics, suitability for purpose and quantity (and in the case of goods, the manufacturing process) - and in relation to employment - applicable terms and conditions, for example.     

When supplying or advertising goods and services false or misleading representations are unlawful so it is not permissible to claim that a product will do something it is not capable of doing nor that it is made of something of which it is not made (labelling regulations apply in respect to the fibre content of textile goods and the cleaning of textiles and garments). Likewise false sponsorship or endorsement claims must not be made, nor false representations about a product's country of origin (labelling regulations apply to clothing ns footwear).  

Trade marks must not be forged and a trade mark resembling some other well known trade mark must not be used to mislead or deceive.       

                                   (continued next page)


FAIR TRADING ACT 1986 cont  

Bait advertising is unlawful and therefore clear, not misleading, pricing is required.  For example, if a sale advertises 50% off everything then everything must be reduced by 50%.  Or if GST is not included in the price quoted then that must be indicated. And price reductions must be genuine.  It is not lawful to increase the price of an item in order to reduce it by a large amount soon after. For many goods the Commerce Commission considers it is only after a higher price has applied for a 30-day period that a reduction of this kind can be made.  

Goods or services advertised at a specified price must be available for a reasonable period and in reasonable quantities, having regard to the nature of the market in which business is carried on and the nature of the advertisement.  Suppliers prosecuted under this provision have a defence if they can establish that they offered to supply or have someone else supply the same or equivalent goods or services, that the customer accepted the offer, and that the goods or service were supplied accordingly. A contradictory message provided at the end of an advertisement or in a small notice in a shop is unlawful and if any additional charges apply these must be made clear, as must any additional cost where interest or credit free finance is offered. If additional finance costs are not brought to the purchaser's notice the price to be paid will be the same as the cash price. Goods and services must not be promoted by offering gifts and prizes unless the gifts and prizes are provided and provided in the way they were offered.  

Referral selling - providing a rebate or commission to someone purchasing goods or services if that person provides the names of other prospective customers - is unlawful as is demanding or accepting payment for goods and services ahead of supply if there is no intention to supply the goods and services or if what is supplied is materially different from what was ordered. Pre-paid goods or services must be supplied within specified period or within a reasonable time if no period was specified.  

Physical force, harassment, or coercion must not be used when supplying or advertising goods and services nor in connection with sales of land. Trading stamp schemes are prohibited and pyramid selling schemes as defined in the Act must neither be operated nor promoted.  Goods bearing a false trade description may not be imported into New Zealand .  

The Minister of Consumer Affairs can set minimum safety product standards and has done so for bicycles, children's nightwear, cigarette lighters, toys, cots and baby strollers.  The standards do not apply to goods clearly identified as being for export only.  The Minister can also ban unsafe products and require a supplier to recall products that do not comply with a product safety standard or which are likely to cause injury.  In such cases the supplier may also be required to repair or replace such goods and/or to explain to the public why a product is being recalled.  

The Commerce Commission is authorised to conduct searches (after obtaining a search warrant) to determine whether or not contraventions of the Act are occurring but it is recognised that reasonable mistakes may be made and certain defences are available. For example, it is defence to a prosecution for a supplier to prove that reasonable precautions were taken and due diligence exercised to avoid contravening the Act and that the contravention was due to someone else's act or omission - a genuinely advertised pricing mistake would fall into this category.  

Prosecutions under the Act can attract a fine of up to $100,000 (for a company) and $30,000 (for an individual), plus costs.  Anyone breaching the Act can be ordered to pay for and publish corrective information and statements.



The Commerce Act establishes a Commerce Commission (also responsible for administering the Fair Trading Act) with the purpose of promoting market efficiency by fostering healthy competition, informed consumer choice and sound economic regulation. Commission activities include investigating and determining whether particular trade practices have the effect of restricting competition (anti-competitive practices) and can result in businesses being prosecuted where a breach is found.  Anti-competitive practices relate to supplying or acquiring goods and services and may involve an individual, two or more individuals, a company, or two or more companies acting together.                     (continued next page)


COMMERCE ACT 1986 cont.

The Act prohibits behaviour intended to "substantially lessen competition" in a market or which has, or will probably have, that effect.  Such behaviour includes arrangements or agreements between competitors to prevent, restrict or limit the supply of goods and services from some other competitor and price fixing by competing organisations, except in the case of joint venture operations where goods are jointly produced or services jointly provided.   The term "market" means the New Zealand market for goods and services and for other goods and services that can, as matter of fact and commercial common sense, be substituted for particular goods and services. It is likely, the Commerce Commission states, that, for example, butter and margarine would be considered part of the same market for "spreads" rather than separate markets since the one can be substituted for the other.   Markets exist between wholesalers and retailers and between retailers and their customers, with some markets being seasonal, others regional, and others covering the whole country.  Parties engaging in prohibited behaviour can do so on the basis of a formal contract or as the consequence of a more informal "arrangement".  Whether contracts or arrangements have the effect of substantially lessening competition will largely reflect the market in question.  It is the effect of a contract or arrangement that is important; it is not necessary to show any intention to substantially lessen competition to establish a breach of the Act.   Where, following prosecution, a court finds that a contract or arrangement does have the effect of substantially lessening competition its provisions will not be legally enforceable.  

Similarly, provisions in contracts or arrangements between or among competitors intended to prevent or restrict the supply of goods and services to another competitor are prohibited.  Examples given by the Commerce Commission are: competitors banding together to prevent a supplier supplying other competitors with goods or services, competing suppliers agreeing to threaten a business so that it no longer buys from some other supplier, and members of a trade or profession not accepting businesses in the same trade as members because they provide their goods and services at a discount.  Provisions of this kind are referred to as "exclusionary provisions" and the prohibition will also apply where the business or businesses targeted are likely in the future to be in competition with at least one of the parties who have agreed to such a provision.  However, where a business or businesses are prosecuted, it is a defence to show that an exclusionary provision did not have the purpose, effect, or likely effect of substantially lessening competition.

In the case of price fixing, this need not necessarily involve agreeing on a final price but could involve such things as setting a price range or agreeing on maximum discounts.  Price-fixing is considered to be anti-competitive because it prevents customers from looking for lower prices. Limited exceptions apply (as in relation to joint ventures).       Resale price maintenance, restricting or eliminating competition on price, is prohibited.  Suppliers of goods and services can issue recommended retail prices but must make clear that these are only recommendations and need not be followed.  They cannot set a minimum price, either an actual or a discounted price.  The same applies to third parties who may not hinder or prevent someone from acquiring or supplying goods until that person or firm agrees not to sell below a specified price.

Businesses or persons with a "substantial degree of market power" are prohibited from using that power to prevent competition. Market power must not be used to restrict entry, prevent or deter competitive conduct, or eliminate competitors or potential competitors from the market in question or from any other market.

A number of exceptions apply in respect to anticompetitive practices, including any such practice that is specifically authorised by legislation and clauses in employment agreements or in contracts between sellers and purchasers of businesses that prevent the employee or seller from setting up in competition in the same area with their former employer, or with the purchaser, for a period of time (although overly restrictive clauses have on occasions been rejected by the courts).

The Commerce Act also covers acquisitions and mergers and should there be concern that a business acquisition might breach the Commerce Act, the person proposing to acquire the assets of the business or shares may seek authorisation from the Commission. The Commission must decline clearance for any acquisition or merger it believes would result in a substantial lessening of competition.  

In investigating complaints, the Commerce Commission has a right of entry power and can compel businesses to provide information to assist in proving the Act has been breached.   Where it considers this necessary, the Commission can ask the Serious Fraud Office to carry out an investigation.    



The business plan is your pathway to profit. It can mean the difference between success and failure. A business plan with goals and actions can guide you through turbulent economic times with alternative channels which you can fall back upon as changes dictate.

Through the development of a business plan, you will identify your areas of strengths and weakness, and you will spot opportunities and threats which may loom on the horizon. You will review competitive conditions of the marketplace and isolate opportunities and situations that seem advantageous to your business.

The business plan will communicate your understanding of the industry in which you operate, the competitive situation in which you operate, the capability of your management, the capacities of your particular business, event he suitability of your location. It will make reasonable assumptions and forecasts of your expectations concerning sales, expenses, cash flow and attainment.

The following outline of a typical business plan can serve as a guide. You can adapt it to your specific business. Breaking down the plan into several components helps make drafting it a more manageable task.


Give a detailed description of the business and its goals.
Discuss the ownership of the business and the legal structure.
List the skills and experience you bring to the business.
Discuss the advantages you and your business have over your competitors.


Discuss the products/services offered.
Identify the customer demand for your product/service.
Identify your market, its size and locations.
Explain how your product/service will be advertised and marketed.
Explain the pricing strategy.

Financial Management

Explain your source and the amount of initial equity capital.
Develop a monthly operating budget for the first year.
Develop an expected return on investment and monthly cash flow for the first year.
Provide projected income statements and balance sheets for a two­year period.
Discuss your break­even point.
Explain your personal balance sheet and method of compensation.
Discuss who will maintain your accounting records and how they will be kept.
Provide "what if" statements that address alternative approaches to any problem that may develop.


Explain how the business will be managed on a day to day basis.
Discuss hiring and personnel procedures.
Discuss insurance, lease or rent agreements, and issues pertinent to your business.
Account for the equipment necessary to produce your products or services.
Account for production and delivery of products and services.

Concluding Statement

Summarize your business goals and objectives and express your commitment to the success of your business.



IRD has advised that  taxpayers should contact the department as soon as possible if they have lost their tax records in the recent flooding in the central North Island .

Colin MacDonald, General Manager Business Development and Systems, says that IRD will approach each situation on a case-by-case basis.

"We are also aware that there may be some taxpayers who have tax due dates coming up. If they have concerns about meeting those dates it is important that they contact us as soon as possible, before the payments are due," says Mr MacDonald.

Inland Revenue's 0800 numbers are available weekdays from 8am to 8pm and from 9am to 1pm on Saturdays. For personal tax enquiries please call 0800 227 774, and for business enquiries, call 0800 377 774.



All employees aged 16 years or more must be paid the statutory minimum wage. Minimum wage rates for all employees aged 16 and over, as well as the age when the adult rate applies, take effect from 24 March 2003 as follows:

the minimum wage for youths is $6.80 per hour, $54.40 for an 8 hour day, and $272 for a 40-hour week.

This youth rate applies to those aged 16-17 years .

the minimum wage for adults is $8.50 per hour, $68 for an 8-hour day and $340 for a 40-hour week.

This adult rate applies to those aged 18 or more.

The statutory minimum wage does not apply to:

people who hold an  exemption.
people doing recognised industry training. Here you will be paid the minimum training wage - equivalent to the minimum youth pay rate above.  

The statutory minimum wage applies even if an employee is paid partly or wholly by commission or by piece rate. It applies to all types of jobs and employees, including homeworkers, casual, temporary and part-time employees.  


An exemption from the minimum wage lets a person work for less than the minimum wage. Labour Inspectors can grant an exemption to a person with a recognised disability that significantly slows his or her work and makes him or her incapable of earning the minimum wage.




Employers must keep wages and time records for each employee, for six years. Employees and their representatives have the right to see these.

These records must include the following information:

1.       the employee's name

2.       the employee's age, if under 20 years

3.       the employee's postal address

4.       the type of work the employee undertakes

5.       the type of employment agreement, individual or collective

6.       the title, expiry date and employee classification in any applicable collective agreement

7.       where payment is calculated by the hour, the hours and days of employment in each pay period

8.       the wages paid each pay day

9.       details of employment relations leave taken

10.    details of annual leave taken

11.    details of statutory holidays worked and days in lieu provided

12.    details of salary deductions, such as PAYE and agreed superannuation contributions.

Employers have obligations to keep holiday records. These may be kept as part of the wages and time records.



The Government has announced that businesses will be able to post their payments of GST, PAYE and Fringe Benefit tax free from the beginning of this year.

The Government stated that the move is part of the Government’s ongoing project to reduce compliance costs and is a way of recognising the work business does on behalf of the tax system.



School children are liable to income tax in the same way as other taxpayers.   However, school children whose total earnings from all employment does not exceed $20 per week or $1040 per year are not required to provide their IRD number to their employer and it is not necessary to deduct PAYE.   PAYE or Withholding Tax  must be deducted if the school child is earning more than the threshold.  

Where a school child does not provide an IRD number, and total earnings exceed the threshold, you must deduct PAYE at the "Non Declaration" rate of 45c in the dollar.  

If you pay your own children to work in your business, the pay rate should reflect the effort put in and the market rate for similar casual or part-time work.  

There is no threshold for university, polytechnic, and tertiary students.  PAYE or Withholding Tax should be deducted from their wages or contract payments.  Tertiary students working part-time should be encouraged to apply for a Special Tax Certificate.  Otherwise they will pay tax at the normal rates and have to lodge a Tax Return to get a refund.   Applications for a Special Tax Code are made on Form IR23 BS.   





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