News & Events
The Inland Revenue have issued a policy document to clarify the position of undrawn beneficiary accounts in trusts. From 1 April 2020 a beneficiary of a trust whose current account balance at the end of the income year is not greater than $25,000 do not become settlors.
When you invest in a multi-rate PIE you need to provide them with your prescribed investor rate (PIR) and your IRD number. Making sure you pay the correct amount of tax that applies to your situation is essential so you don’t get caught short at the end of the year.
Inland Revenue (IR) has recently updated its policy for when tax payments are accepted as having been made in time.
With the influence of technology there has been a significant shift in practice to use digital methods for making tax payments. IR encourages customers to use direct banking facilities when they make tax payments (or when refunds are issued).
With the yearend fast approaching or has just been it is important for individuals to remember that they are not required to file a tax return with the IRD if their only sources of income during the year ended 31 March 2020 have come from the following categories outlined below:
When starting a new business with another person, or introducing a new shareholder, there are many aspects of the business competing for your time. Often the relationship between shareholders may be overlooked as you just want to get on with things. However, over time you might find that you and your other shareholders have quite different ideas for the direction of the business and how it should be managed. Agreeing a robust shareholders agreement from the outset should help to avoid problems in the future.
The Trusts Act 2019 (Act) comes into effect in January 2021, providing the first major reform to trust law in over 70 years. Although the Act implements
significant changes, the over-arching purpose of the new legislation is to restate the existing law in a more accessible format, so that it can better assist beneficiaries in holding trustees to account. The Act clearly sets out a range of obligations as well as a list of “Mandatory Duties” and “Default
Duties” to follow. The obligations include a requirement for:
• every trustee to hold a copy of the trust deed and any variations
• at least one of the trustees must hold the rest of the “core trust documents”.
N.B. the Act sets out what thecore documents are.
As the name suggests, Mandatory Duties cannot be contracted out of, and therefore must be followed, whereas the Default Duties can be modified or excluded in appropriate circumstances.
Consumers are increasingly basing their purchasing decisions on the environmental impact of the product or service. As a result, environmental claims made by businesses about their goods or services are becoming more common in advertising.
The Commerce Commission has recently released guidelines for businesses making environmental claims to help businesses understand their obligations and how to avoid breaching the Fair Trading Act (available at comcom.govt.nz). The guidelines emphasise how accurate businesses must be when making environmental claims as the penalties for getting it wrong can be serious (the maximum fine is $200,000 for individuals or $600,000 for corporates).
‘Can I trust ‘my’ Trust if my relationship breaks down?
It is generally well understood that if your relationship comes to an end your relationship property must be shared 50/50 pursuant to the Property (Relationships) Act 1976 (PRA). But, some people believe that if they transfer their assets to a Trust, then those assets will be protected.
This is rarely true.There are a number of provisions available under the PRA and at common law, which would allow a Trust owned home, for example, to be included in the pool for division. Particularly where the house was transferred to a Trust when the couple were already in a relationship (even if at the time the couple were only boyfriend and girlfriend / girlfriend and girlfriend / boyfriend and boyfriend or whatever applies). If contributions have been made from relationship property to the family trust, or contributions from the other party whether financial or non-financial, or if the Trust has provided benefit to the parties in some manner during their relationship, then the trust assets can be fair game.
‘The Heart of a Community’ — BALDISH KAUR BUSINESS DEVELOPMENT SPECIALIST/CREDIT ANALYST, SCOTTISH PACIFIC
At Scottish Pacific, we’re passionate about offering our expertise and support throughout the community growing NZ businesses. Over the last four years we’ve built a solid friendship and strategic partnership with director of The Engine, Catherine Sherwood. As well as being a renowned business advisor and entrepreneur, Catherine brings businesses and communities together to collaborate and share knowledge to build sustainable and long-term success.
There has been much debate regarding what a fair rental reduction is under commercial leases where businesses have been affected by COVID-19. The Government had previously done nothing to assist either Landlords or Tenants in this situation.This morning Government have announced a compulsory rent dispute process where the Landlord and Tenant have been unable to agree on a fair rent reduction during COVID-19 lockdown, which requires compulsory arbitration with Government subsidising the arbitration by about 75%.This new process is to come into effect from today (4 June 2020) but will only apply in relation to businesses with 20 or fewer full-time employees on the site.
On 15 May 2020 the COVID-19 Response (Further Management Measures) Legislation Act 2020 became law. This means that two key insolvency measures aimed at addressing the serious insolvency risks arising from the COVID-19 crisis – the “safe harbour” regime and the “debt hibernation scheme” – are now effective in New Zealand. Martelli McKegg (we) wrote about these measures when they were announced, but before the details had been finalised. We have also written a detailed analysis of these new measures, to be found here. In summary, the following key measures are now in place.Safe HarboursCompany directors of eligible companies are now temporarily exempt from the director’s duties contained in sections 135 and 136 of the Companies Act regarding reckless trading and incurring obligations.
The impact of COVID-19 may be felt for many months to come and will result in a number of people considering a change of direction or career. For some, the prospect of buying a business and being in more control of your own destiny will be appealing. Franchising will be a popular option for those who have not owned a business before and a number of franchisors have seen their levels of enquiry increase over the lockdown period.Franchising gives people the opportunity to own their own business but also to be part of a structured system that provides mentoring and guidance. During the current crisis, it has been valuable for franchisees to be part of a wider franchise system to receive support regarding dealing with suppliers, landlords and understanding the Government assistance available. These are just some of the benefits of being part of a franchise system as opposed to being out on your own.
On Friday, 1 May 2020, the Government announced changes to the operation of the Business Finance Guarantee Scheme (BFGS). As readers might recall, the BFGS was introduced as part of its initial economic approach to the COVID-19 response. The specific change announced was that it would no longer be a Government requirement that a bank which was making a loan of more than $50,000 under the scheme would have to take security against the debtor’s default by way of a General Security Agreement (security over all of the assets of a debtor in the event of a loan default) – although a bank is still entitled to ask for security if it wishes to do so.
Property owners and builders alike will have welcomed the Government announcement this week that the country will move to Alert Level 3 on 28 April, meaning that most on-site construction work can begin again from that date. The initial joy (and relief) of this news, however, will be quickly tempered by the realisation that it is not going to be business as usual for some time yet.
The Government has announced that most, but not all, businesses can start to open when we shift to Alert Level 3. The businesses that do open must take health measures to keep their workers safe and workers must work from home if they can. Retail and hospitality businesses can only open for delivery and contactless pre-ordered pick up. Businesses cannot offer services which involve face to face contact or sustained close contact (e.g. hair-dressing).
On Friday, 3 April 2020, the Government announced significant insolvency law changes in response to the likely economic impact of COVID-19 and the current lockdown (https://www.beehive.govt.nz/release/further-measures-support-businesses ). The Government will amend the Companies Act 1993 to provide additional comfort to directors of companies during the next six months, and will also introduce “Covid-19 Business Debt Hibernation” as an option to help businesses survive the deterioration in the business environment (https://www.companiesoffice.govt.nz/about-us/what-we-do/insolvency-relief-for-businesses-impacted-by-covid-19/ ). Parliament will have to pass legislation to give effect to the proposed changes, although the proposed legislation has not been made public.
If, as an employer I am receiving the wage subsidy on behalf of an employee, do I have to pay GST on the subsidy?
No – it will be treated as exempt from GST.
As an employer, do I have to pay tax on the wage subsidy I receive for an employee?
No, you don’t have to pay tax on a wage subsidy as it’s classified as excluded income.
The latest business restrictions announced by the Government will impact a number of commercial contracts and leasing arrangements. We have been receiving a number of enquiries regarding the impact of these events on commercial contracts and leases and, in particular: Whether contractual rights are suspended under force majeure clauses? Whether there is any rent relief available under commercial leases? We set out below a general overview on each of these topics but it is important to note that each contract or lease needs to be carefully reviewed in order to properly assess your position.
With the nation now in lock-down phase as a result of the Covid-19 crisis, many employers are considering how they can look after their businesses as well as their employees. For some, government subsidies will allow a degree of continuity in staffing whilst others will need to make changes that will adversely affect their employees. We touch upon some key topics below.
New Zealand government has offered some tax relief due to the COVID-19 (novel coronavirus). In regards to provisional tax, you may be able to make an estimate or re-estimate your provisional tax using the estimation option of calculating provisional tax and refunds will be arranged by Inland Revenue if the tax is overpaid. Provisional Tax threshold will be increased from $2,500 to $5,000 from the 2020/21 tax year.
The 2020 Workplace Wellness Business Forum is to be held on 22 July 2020 at The Lula Inn, Viaduct, Auckland. The Engine & Business Strategy NZ with main sponsor Scottish Pacific Business Finance have brought together experts Tony Alexander (Economist), Charlotte Lockhart, CEO 4 Day Week Global & John Shackleton (Resilience & Mindfulness Coach, Trainer & Speaker) on this topic. As well as practical information for your business you will walk away with 20+ new business connections.
IRD have just advised that this year they are specifically targeting the Hospitality industry and will be contacting clients in this industry and thanking them for keeping their books in order and also encouraging owners to put their records right if they’ve left anything off their past tax returns.