"WHERE SUCCESS
BUILDS SUCCESS"
“One possible
outcome of the
review could be
that many
small and
medium-sized
companies
would no
longer have a
legislative
Newsletter for BKR Walker Wayland Limited
Spring
2007
Foreign Currency Investments and Bank Accounts
A person advised that they had put cash into foreign
currency and had made some gains. This investment
was in anticipation of an overseas trip. They asked
how to avoid being seen as a trader.
Assuming no such investments totalled over $1m,
any gain is tax assessable income in the year realised.
There is no such thing as a non traded currency
investment. The only possible exemption is if it
falls within the definition of a "private or domestic"
arrangement which is an "excepted financial
arrangement" which could apply to surplus holiday
travel funds. If the currency 'investment' was 100%
for a private holiday i.e. a personal purpose and there
was a currency loss, there is no deduction. A loss is
only deductible if it relates to the gaining or
producing of income (gains are taxable regardless).
Where some people have accumulated foreign
currency from travel, and left that in an overseas bank
account, to be used for future travel - gains are always
assessable; losses may or may not be deductible.
Delay of the Mandatory Adoption of New Zealand
Equivalents to International Financial Reporting Standards
for Certain Small Entities
In December 2002, the Accounting Standards
Review Board (the Board) announced that it had
decided that New Zealand entities would be
required to apply International Financial Reporting
Standards (IFRSs), issued by the International
Accounting Standards Board (IASB), for periods
commencing on or after 1 January 2007.
As a consequence, the Board has decided that the
mandatory adoption of NZ IFRSs should be delayed
for certain small entities that meet specified criteria.
One possible outcome of the review could be that
many small and medium-sized companies would
no longer have a legislative requirement to prepare
NZ IFRSs compliant financial statements. If that
requirement were to be removed, the costs of
changing from existing financial reporting standards
to NZ IFRSs now are likely to outweigh the
benefits, hence the deferral of mandatory adoption.
prepare
In September 2007, the Minister of Commerce
advised the Board and FRSB that a government
review of the financial reporting requirements
applying to small and medium-sized companies
under the Financial Reporting Act 1993 will
commence in mid-2008.
compliant
Unsolicited Electronic Messages Act 2007 (NZ Anti-Spam)
requirement to
financial
statements.”
Independent
member of
BKR
With thanks to Gillespie Young Watson, Solicitors, Lower Hutt / Wellington
1. The Unsolicited Electronic Messages Act 2007
(the "Act") prohibits electronic spam with a New
Zealand link. Spam is referred to as "unsolicited
commercial electronic messages" and includes
emails, instant messaging, cellphone text or
multi-media messaging and other mobile phone
services. Spam can include a message sent to a
single recipient. Responses to earlier requests,
warranty or safety information, factual
information about a subscription or similar
ongoing relationship or messages that facilitate a
commercial transaction the recipient previously
agreed to are not considered spam pursuant to
the Act.
2. If you are sending electronic messages you must
clearly identify your business and your contact
details. In conjunction with this you have the
obligation to provide the recipient of any
electronic mail message the option of
unsubscribing. This matter can be addressed by
simply containing a line in the message stating "if
you do not wish to receive further messages, send us
a reply with UNSUBSCRIBE in the subject line".
3. There are substantial penalties that can be
imposed for failure to comply with the Act. A
business found to be in breach of the Act may
result in a penalty of up to $500,000.00 and an
obligation to pay the victims of any spam
compensation for loss of profit.
If you are intending to undertake an email advertising
campaign, we would encourage you to seek
professional advice to ensure compliance with the
Act.
Chloe and Fred
“The IRD
inspector duly
arrived,
accompanied by
a clerk whose
job was to
This couple were in their early fifties, and ran a
motel; they had not been married long - it was
'second time around' for both of them. The IRD
wrote to them, saying that they were carrying out
an investigation of their tax returns, and asked for a
face-to-face meeting. The accountant suggested that
it be held in his office.
Their accountant had met Chloe several times
before and knew that she was ..... what can we say?
...... a trifle garrulous. She was one of those people
who can't stop talking; it was always hard to get a
word in edgewise. She couldn't answer a question
without adding masses of irrelevant information.
And, in the event of a gap in a conversation, she
would leap in to fill it.
With this in mind the accountant got Chloe and
Fred to come in about ten minutes early so that he
could give them some advice about how to handle
the interview. The accountant said "The vital thing
is to get this over as soon as possible. Answer
questions with a simple 'Yes' or 'No' if you can.
Otherwise keep your answers as brief as you can. If
you don't know the answer, say so. Don't volunteer
any information. Don't ask any questions."
+
write down the
questions and
answers. The
first few went
smoothly,
then the IRD
inspector
paused to
consult his
notes. Silence
reigned for a
few seconds.”
Chloe said "I want to ask the IRD man why they're
investigating us." The accountant already knew the
answer to this question. Fred had been investigated
previously by the IRD - before he'd met Chloe - had
been found wanting, and no doubt had a black mark
on his file. They must have decided to see if he was
still up to his old tricks. Obviously he hadn't told
Chloe any of this, so of course the accountant
couldn't.
The accountant said "Don't ask. You'll only get a
noncommittal answer, like 'We're looking at all
motels this year, or at everyone who's name starts
with 'J'."
The IRD inspector duly arrived, accompanied by a
clerk whose job was to write down the questions
and answers. The first few went smoothly, then
the IRD inspector paused to consult his notes.
Silence reigned for a few seconds.
This was too much for Chloe. She said "I want to
know why you are investigating us." The
accountant's heart sank - she hadn't listened to a
thing that he had said. The IRD inspector, as the
accountant expected, gave a vague specious reply,
obviously a carefully-rehearsed stock answer.
There were a few more questions and answers, duly
recorded by the clerk, and then another pause.
Chloe couldn't stand the silence. She waded in.
She said to the IRD inspector "You have no idea
how difficult running a motel is. We have to be on
duty all day and night, every day of the week, we
never get a moment's peace. People often phone at
midnight to make bookings. We only bought the
motel because it was run-down and we thought we
could build it up and then sell it for a capital gain"
Resignedly the accountant watched the clerk write
this comment down in her notebook. Eventually
the IRD inspector finished, and he and his clerk
left. Chloe and Fred looked at the accountant
expectantly and asked "How do you think that
went?" The accountant said, choosing his words
very carefully, "I did tell you not to volunteer any
information, but you told the IRD that you only
bought the motel to build it up and sell it, and that
means that the profit won't be a capital gain, it will
be taxable."
They protested "But you don't pay tax on capital
gains!" "Right," said the accountant, "if they are
incidental gains. You wouldn't have had to pay tax
on this one, except that you said your intention was
to make a profit"
The accountant saw them out to the lift. Fred
entered it looking grim, his hands clenched by his
sides. They stood at the back, facing their
accountant, their faces frozen. It was obvious that,
as soon as the lift door closed, Fred was going to
strangle Chloe.
Eventually they sold the motel and moved out of
Auckland, and the accountant lost track of them.
However there was a sequel. Fred's brother, who is
a solicitor, phoned the accountant several years
later. He said that the IRD had assessed Chloe and
Fred for tax on the capital gain they'd made on the
motel, and he was contesting it - and did the
accountant remember anything about it? It wasn't
at all difficult for the accountant to recall the facts.
He related the story. The solicitor sighed deeply,
realising that there was no defence.
There's a moral to this story, but we're not going to
be indelicate enough to set it out!
Self-employed? .... and want to reduce your ACC Levies?
With thanks to Jacqui Dunphy, Freedom Financial Services Limited.
When establishing ACC cover a self-employed or
shareholder employee is able to nominate the
amount they receive should they suffer an injury
for which ACC will pay a benefit through the use
of ACC Cover plus extra. They may select an
amount up to the maximum (as close as possible to
their actual income) or they may choose a minimal
amount and therefore incur lower ACC levies.
By having income protection insurance in place as
well, the difference in what ACC would usually
cover is replaced by the income protection insurance
(subject to any stand down periods agreed in the
insurance arrangement).
Guarding Your Assets From Internal Fraudulent Behaviour
Fraud is a growing concern in business today. It is
vital that businesses implement measures to protect
themselves from the possibility of fraud by having
good supervisory controls and an awareness that
fraud exists. Implementing solid supervisory
procedures is particularly important. Fraud is
motivated by opportunity, ability and need. The
opportunity to conduct fraudulent transactions is
provided by improper internal controls.
*
Review bank statements for unusual deposits or
withdrawals;
“Generally,
*
Conduct regular inventory counts and tie in
with perpetual records;
fraud
*
Examine purchase orders and related invoices;
*
Approve all write-offs or transfer of goods;
*
Attend job sites and account for inventory used;
Two ways that companies protect themselves from
fraud are prevention and detection; with most
companies preferring to use an effective prevention
strategy. Generally, fraud prevention techniques
involve two main elements: understanding the
risks your company faces and putting in place
measures to guard against them.
*
Examine the payroll to ensure that individuals
on the payroll work for you, are paid for hours
worked and at the correct rate;
*
Approve all major changes;
*
Review accounts payable listings for new or
unusual suppliers, unpaid amounts or high
growth suppliers, credit issued;
*
Follow up on all differences or irregularities.
Use the following list of controls to help your
organization guard against internal fraud:
*
Limit bank authority;
*
Approve new suppliers;
*
Approve all new customers and establish credit
limits;
*
Examine the accounts receivable listing;
*
Issue monthly statements to clients;
Financial software provides the means for both
monitoring the operational health of the business
and safeguarding its assets. Understanding how to
use the software to access the financial data will
reduce the possibilities of misappropriation or theft,
advance your understanding of business operations
and improve the bottom line.
prevention
techniques
involve two
main elements:
understanding
the risks your
company faces
and putting in
A Remuneration Policy Aligned to your Organisation's
Objectives
A Remuneration Policy should articulate the goals
and principles of pay and has become an essential
tool for effective management. Common objectives
of remuneration policy include principles such as;
*
Attraction and retention of key talent;
*
Ensuring external (market) competitiveness
*
Ensuring remuneration decision-making is fair
and defensible
We are not necessarily good at providing feedback
on poor performance and 'going to the hard place' in
terms of addressing issues with staff.
However, from a commercial perspective, there's a
strong argument that it's not actually an employers
responsibility to ensure that an employee can buy
the same milk, bread and petrol with their
remuneration dollar that they could buy this time
last year.
A zero percent increase at salary review time sends a
very clear message to employees - but it's a message
that a lot of managers shy away from sending.
To others, for whom performance is a vital part of
business success, 'fair' will mean something quite
different. It will mean;
And fairness? This is defined as "considering
everything that has an effect on the situation, so that
a fair judgement can be made".
*
Remuneration and rewards are commensurate
with performance and contribution;
*
Demonstrating, through the differentiation of
remuneration, the value of respective employees
to your business;
*
using remuneration as a means of recognition to
support/reinforce organisational objectives;
*
Rewards being directly linked to performance,
with managers confident to justify pay based on
performance.
In addition, there is often the expectation that at
salary review time, 'across the board' increases
should be provided and that these should reflect
CPI movements as a minimum.
For example, a challenging position, good
development opportunities, and a good relationship
with your manager are often cited as important to
employees, potentially even more important than
remuneration.
place measures
to guard
against them.”
E-newsletter - Information for Landlords
“That Act says
that if you
offer to issue
shares to the
public, that
you must have
a prospectus.
A prospectus
can be a very
Landlords can now subscribe to receive a quarterly
electronic newsletter from the Department of
Building and Housing. The newsletter provides
information about new tenancy tools and resources,
current tenancy topics of interest and links to
Visit the tenancy publications section of
www.dbh.govt.nz to view the first issue of the
newsletter and to subscribe to future issues.
Seeking Shareholders for Closely Held Companies
There are restrictions on how you go about
getting new shareholders to invest in a
company under the Securities Act 1978. That
Act says that if you offer to issue shares to the
public, that you must have a prospectus. A
prospectus can be a very expensive document to
prepare. For an SME the cost of a prospectus
can outweigh the benefit of getting in a new
investor, therefore, it would be preferrable to
seek investors who would not be considered
"members of the public" under the Securities
Act. Investors who respond to an
advertisement, or who are contacted through
business associates but not personally known,
will be considered to be “members of the
expensive
TXT B4 U BUY
document to
When you buy a vehicle privately TXT B4 U BUY
to check if money is owing on the vehicle before
you pay any money. If you don’t, you run the risk
of the vehicle being repossessed! Start a new
message, enter the vehicle registration plate then
TXT to FIND (3463). This service will only cost
you $1. You will get a “Yes” or “No” response and
also an SMS ID you can enter on
www.ppsr.govt.nz to get a full printable report.
prepare.”
relevant articles and information on the
Department's website.
public” for the purposes of that Act. Likewise,
if you were going to advertise for investors, any
investors who respond would also be considered
to be members of the public.
There are exceptions as to who is considered a
“member of the public. In particular, people
who are habitual investors, are not “members of
the public.” Potentially you could advertise for
investors, but state in the advertisement that it is
a condition of the investment that the investors
be able to prove to you that they are habitual
investors under the Securities Act. It would be
prudent to consult with a solicitor before
proceeding.
We strongly recommend that in any check you
include the Vehicle Identification Number (VIN)
number and / or chassis number of the vehicle as
well. Simply enter one of the following, or all if they
exist: Registration Number, Vehicle Identification
Number (VIN), Chassis Number. Separate each
identifier by a ? then TXT to FIND (3463).
Independent Member
BKR
Firms in Principal Cities Worldwide
New Zealand Independent Associates:
Level 7, 53 Fort Street
PO Box 2175,
BKR Munro Benge limited
Cleland Hancox Ltd
Shortland Street, Auckland1140
New Zealand
Telephone: 0-9-968 4440
Facsimile: 0-9-309 9042
Email: [email protected]
Auckland, N.Z.
Wellington
Hamilton
All are independent Members of
BKR Walker Wayland
National Association,
Australia.
All information in this newsletter is to the best of the authors’ knowledge true and accurate, but of necessity is of a general nature. No liability is assumed by the authors
for any loss suffered by any person relying directly or indirectly on this newsletter. It is recommended that clients consult us before acting upon any of this information.