Please be aware that this is a scam and should not be opened nor replied to under any circumstances. The most useful piece of information that you need to know is that the IRD does not send emails and if you ever receive any emails from the IRD they are bogus and insecure.

QB 11/03 states that if all that has changed is that the LAQC has become an LTC, then interest deductions previously allowed will continue to be allowed, subject to the limitations on deductions in ssHB11 and HB12 of the Income Tax Act 2007 that apply to LTCs.  The position would be the same where a person sells their family home at market value directly to an LTC and the LTC holds it as a rental asset and rents it to a third party on an arm’s-length basis.

Starting Up your Business

• Immediate access to your account balances and cash flow 

This service is invaluable for the initial stages of your business when every financial decision you make is based on the black and white issue of “is there enough money in the account for this?”

Within a few minutes you can establish your daily balance and make decisions on the spot and with confidence.

• Daily control of cashflow

The degree of control you have with Xero gives you confidence to make important decisions about the bigger investments in setting up your business – plant and machinery, advertising etc.  These costs can be tracked and kept separately to once again enable confident decisions to be reached, on-site and without delay.

• Setting  yourself financial targets

At the same time you are dreaming up your targets the system is motivating you to reach them.  Establishing a pattern of setting and reaching targets in the early stages of business start-up will set up an invaluable management tool for expanding and adding value to your business over time and in a controlled manner.

Running your Business 

• Xero releases you from the tyranny of “doing the accounts”

Because it’s a matter of inputting and letting the system do its work you get the results you want without the workload.  This freedom gives you time, time to plan and make projections about where you want your business to go.

•  Managing debtors and creditors

By advising you on payment due dates and account receivable information you are able to identify and categorize your debtors and creditors and take action according to the results.  You can chase the poor payers or pay your own accounts on time and know where you are with your transactions at any time.

• Planning and attracting investment 

With this degree of financial control and information there is no delay in planning for capital investments, or in attracting investment.  You can show your current financial statements to potential investors at meetings on screen, without any delay in preparing written reports – this degree of efficiency has the capacity to impress prospective investors with your business acumen.

• Making decisions on taxation planning

Net profit is calculated easily. Current rates of taxation can be loaded in and modeled against future earnings, giving you invaluable planning information.

• Surviving and IRD Audit

If the IRD want to audit your business, all your information is there and up to date for a smooth process.  There is less likelihood of an audit being prolonged as the accuracy of your accounts is less likely to be disputed or questioned because the system’s “checks and balances” take care of the mechanical processes.

• Expanding and applying for Finance

Your financial reports are all ready for the bank or a broker to assess – the system is widely used in the financial sector and you are off to a good start with a computer system already trusted in the industry.

• Integrating with other online services to set up tailor made systems for your business.

 Xero integrates seamlessly with a range of payroll, CRM, inventory management and other business systems for a variety of uses. For example taxes can be paid directly to the IRD on a regular basis to avoid one-off bills, GST is taken care of easily without fuss and the efficiency and flexibility of the Xero system means that it can be set up for your particular needs – giving you the ultimate tool for running your business. 

Selling your Business 

• Information is accessible to potential purchasers

Information on the position of your business is available and accessible for potential buyers. Just imagine how good it will look if you turn on your laptop and immediately show an up to the minute breakdown of the business trading account to a potential buyer, it makes you and your business look like you really know what you are doing and that this could be a great investment for the buyer.

• The business is easy to value

Valuation of your business is easier because of the financial details readily accessed.  Instead of a lengthy meeting with the valuer and lots of to-ing and fro-ing to give them an overview of your business, a quick look at Xero answers all their questions.

• Online efficiency 

With all financial statements online it is easier to convince an out of town buyer about the efficiency and profitability of your business -  all reports and details are ready for a speedy handover.

Wise Advice are Xero Platimun Partners and can answer any queries you may have about the system, assist you in getting set up in Xero and transferring your existing data as well as offering full training and ongoing support:

Contact us today for more info on: 09 639 1004

There is no doubt that investment in a business that works gives a better return than almost anything else available for soaking up your capital.  There is no reason why a sensible approach and a bit of working capital should not result in business success.  However… (and it’s quite an involved ‘however’) there is a lot of homework to do before you sign anything to do with a business or franchise purchase.

You may need to adopt a suspicious nature to dig and delve into a business on offer.  You need to listen carefully to the agent to get a feel for why the business is for sale and you need to get some professional ‘diggers and delvers’ to make sure the business is valued correctly and that the financial statements are as they should be – that way you know what you are buying and that you are paying the right price for it.  It’s the same as getting a building inspector to examine a house before you buy it or the ‘AA’ to do an inspection on that second hand car you may want to buy.

The first to engage would be an accountant or a valuer.  Either way these professionals will give you their opinion of the value of all the assets – age and condition of plant, contracts, leases applicable, the suppliers and their terms, an opinion on the financial status of the business and the presented accounts (are they correct for one thing?), and an opinion on the financial status of clients.  The value of these can be used to reassure you, or as a tool to negotiate the price down.

The reason to sell is a big factor – you need to feel this out – has the entire story been disclosed or are there important clues as to the health of the business that are being glossed over?  Like buying a house with a building inspection that still turns out to be leaky; buying a business involves many intangibles that can’t be seen on the surface – take ‘goodwill’ for example, does it exist or are customers disgruntled and going elsewhere.  You may be able to ask for testimonials and references for customers so you can check them out yourself.  Location is another one – “yes we have lots of walk-in customers” – go and park in the street and see for yourself if lots of street trade is apparent – “yes we’ve got great sales figures” – get a Bizstats report to follow up the sales history – this will give you a rough guide to value as well.

If you are looking at a franchise the Franchise NZ website is the place to start.  An extensive list of questions will prompt you to look in a variety of different areas for details as to the health of the franchise and the franchisor.  Be careful to ensure that ongoing involvement with the franchisor is the experience of other franchisees as sometimes they disappear when you need their support.

A main part of any successful business exchange is the ability of the buyer to make the ongoing business work – what you pay for a business, as long as it’s reasonable and not inflated, is just the beginning – if you have your business plan in place and have done the groundwork and homework – if you have the management skills to make it work and employ the staff who believe in your dream then sign that contract and get started!

Wise Advice are Accountants and Business Advisors and can assist you during the due dilligence phase in assessing whether or not the business is a good investment for you:

Contact us  for a no obligation discussion : 09 639 1004

Darrell Earl Antonopoulos plead guilty to three charges of aiding or abetting his company, Whonere Holdings Limited, trading as La Casa Pasta restaurant, to provide false Income Tax returns and 24 charges of providing false GST returns to Inland Revenue with the intention of evading tax. Mr Antonopoulos was charged under the Tax Administration Act.

“Mr Antonopoulos admitted to knowing his tax obligations yet deliberately filed false Income Tax and GST returns on behalf of his company over a four year period and dealt in cash,” Assurance Manager Investigations, Tony Morris, said.

“An examination of the restaurant’s daily sales receipts and bank deposits showed that a significant number of customers were paying in cash. The company did not disclose any of these sales and MrAntonopoulos diverted that cash for his own benefit”.

Mr Morris said that an initial analysis of Mr Antonopoulos’ financial records showed that the restaurant’s gross profits were low when compared to other similar businesses.

“Benchmarking the performance of businesses within the same sector enables Inland Revenue to identify taxpayers likely to be suppressing income.

“Once identified, Inland Revenue has a number of techniques and tools at its disposal to verify whether cash sales have been omitted and to quantify that omission.

“Businesses and individuals doing the right thing can be confident that Inland Revenue will detect those evading their obligations. Those cheating on their taxes should be aware that Inland Revenue has allocated substantial resources and is using increasingly sophisticated methods to detect tax evasion and will take action against serious non-compliance.”

Inland Revenue has recovered $361,000 from Mr Antonopoulos and just over $88,600 remains outstanding. The restaurant, La Casa Pasta, has been sold and is under new management.”

IRD Media Release Oct 2011 – www.ird.govt.nz

Wise Advice are Accountants based in Auckland and offer an affordable fixed price monthly package which includes the Xero accounting system and the preparation of GST and End of Year returns:

Contact us  for a no obligation discussion : 09 639 1004

It has been standard practice in New Zealand for people to sell assets to their trust and have a debt back to themselves. Every year they would forgive $27,000 (the maximum amount without incurring gift duties prior to this recent change) this meant that if a couple owned a house worth $520,000 it would take 10 years of gifting $27,000 each to forgive the entire debt. Each year they would have to see their lawyers or accountant, complete paperwork and pay for the gifting to be done. Under the new regulations this gifting regime will no longer be neccesary – it is now possible to give an asset directly to the trust with no debt back as their is no longer any gift duty payable. This is great news for those of you with trusts as you will be able to gift one lump sum and will no longer have the hassle and expense of  on going gifting.

If you are a trustee of a trust you should be aware however that in some circumstances it may be appropriate to still loan money to the trust and have a debt back to yourself rather than to gift the entire amount. When deciding whether or not to forgive the debt from your trust you need to get proper advice take into account certain factors including:

• the identity of beneficiaries
• residential care subsidy entitlement
• preservation of rights
• solvency & creditor protection
• relationship property considerations

For those of you wanting more information CCH has published a useful guide – Abolition of Gift duty – options and risks

According to the papers we would expect the competition for rental properties in Auckland to get worse or better – wherever you are standing.  We have all read the stories of the 200 or so turning up for one property and offering over the asking price to get in.  But is this somewhat of an urban myth?

The latest figures show the peak rental inflation in Auckland to have reached a ‘massive’ 8-9% p.a. in February in the best responding areas (Sandringham and City Bays) and an average 3% everywhere else in Auckland. (figures from Crockers Market Research).

I think it’s going to be a fair while before investors start to reap the rewards of a shortage of rental properties driving up rents way over the top of mortgage finance costs for the foreseeable future.  There may be a bump in August/October when the Rugby World Cup followers start paying over the odds for rental properties but obviously any thought of permanence will end after the last whistle is blown.

Next year may be different, there is a chance that the steady increase in Auckland’s population combined with the flat property market and the very real downturn in new residential building, may lead to a bit more demand in the rental area.

Who really knows – we have a black and blue budget coming – signals have already been given for cutting government expenditure (read jobs) and the effect of Christchurch on all facets of the economy cannot be underestimated. The overall effect of cutting here and spending there will mean some pretty flat lines on a variety of graphs for 2011/2012.

So what do you think?  It seems that every man and his canine companion has a valid opinion on where we are going in the economy.  It is more about your personal philosophy of the proverbial glass half empty or full than anything else, but the collective power of an optimistic attitude should not be underestimated.  If we all envisage that things are going to get better if we just hold steady and keep on doing what we can to improve what we do, time will take care of the economy; we will trust the interest rates not to jump; we will buy property again; rents will rise; Christchurch will be rebuilt as a beautiful new modern centre and everything will be hunky dory…. Right?…

Brad Golchin, Accountant

Wise Advice – Xero Gold Partner

Tel: (09) 639 1004

Email: brad@wiseadvice.co.nz

I would say that very few people enter the world of property investment thinking foremost about the way that they will benefit from being able to depreciate assets and thereby gain an annual tax rebate.

I would also hazard a guess that most people think that they will buy this property at this price, set the rent to cover the mortgage and expenses and because we still believe that property goes up in value year to year, at some point in the future the property will be sold for profit.  This could be anything from five to twenty-five years down the line, and may be part of a superannuation scheme. The taxation implications don’t really come into this equation as essentially the tenants pay the mortgage  and expenses – this is what most people believe when they enter this market and if they have stuck to the fundamentals of property investment – good location, solid property, good cash-flow they will be fine with the new tax arrangements.

The knowledge that income will occur from depreciation usually comes to the novice investor as a minor and welcome surprise following a year of worrying about whether the investment was a good idea or not.  It’s something back at least.

Up to now (April 2011) investors have been able to claim depreciation and have losses counted against other income and taxed accordingly, which mostly results in an IRD cheque. Over the years, investors have probably relied on this income as a direct benefit of having an investment property – it looks like income, smells like income and you can spend it.

In actual fact in the broad sense, it is not really income, it is merely like a loan and when the underlying asset is sold – the depreciation recovery steps in and you have to pay it back – at your tax rate.

In the new tax scheme, you will not be able to claim depreciation losses against income any more.  If your fundamentals are right, you may be making a small profit, maybe even considering a rent increase in the current market and you will be thinking about how to protect your asset in the long term.  For you the best advice is a visit to your accountant to look at the figures and the options of transferring to a trust, or becoming an LTC.  Under the new structure an LTC (Look Through Company) will be your best option if you are running at a loss.  An LTC will enable you to offset the company’s losses against your other income, and if the company makes a profit, this will be apportioned and taxed as income.

Whatever you choose to do, if in doubt, talk about it.  Ring us to discuss your options.  There are hidden costs in some of the changes that are quite substantial.  There are also the questions of provisional tax, asset protection and mortgage restructuring that may come into the mix.  Best advice is to talk to one of our accountants; we deal with these matters on a daily basis and will put you on the right path.

Brad Golchin, Accountant

Wise Advice – Xero Gold Partner

Tel: (09) 639 1004

Email: brad@wiseadvice.co.nz

If you sell your family home and are lucky enough to make a good profit to help with the purchase of your next family home – don’t worry about it – if it’s all straight up and uncomplicated and the time factor is reasonable and you are doing what you say you are doing the IRD won’t be interested as the profits from the sale of a family home are generally not taxable.  You will need to declare it on an IR3 – as an individual tax return and tell the IRD what you are doing and how all the figures are worked out.

On the other hand, if you are in the business of buying and selling property, even in a small way, you need to pay tax on any profits made.  As an individual or partners (married, de facto, civil union) the IR3 is the way to go and you will need to show clearly how you worked out your profit (income less expenses) and that figure is added to your other income to calculate your tax.

If you are in this business, you will probably exceed the provisional tax level of $2,500 – This tax is not in addition but rather an installment based system of paying tax against your expected tax at year’s end.

If there are two or more of you in your group or partnership who are buying or selling as a business you need to file an IR7 and the group will have to have an IRD number (by completing an IR596).  This means you only have to send in one set of accounts.

If this group or you as an individual are making over $,60,000 as an annual turnover, then you also need to register for GST.

Get it done as soon as you can, because the IRD is focusing on property as one of its areas of enforcement.

Brad Golchin, Accountant

Wise Advice – Xero Gold Partner

Tel: (09) 639 1004

Ad: Level 2, 703A Manukau Rd, Royal Oak, Auckland

XERO is the easiest online accounting solution in the world and here are the top 10 reasons why people love XERO:

1. Automated daily bank feeds, so you don’t have to enter your bank statements.  Every morning when you log in you can see all of the in and out transactions.
2. Fast, simple and customized invoicing. You can set up automated weekly invoices for rent that can be emailed to your tenant and will be reconciled with payments coming through every day so if they don’t pay the rent you will see the invoice as overdue and can follow up straight away.
3. Available anytime you’re online, from anywhere so you can control your investment when you are on holiday.
4. Work together as a team on financials. This will help your accountant and other financial advisers to have access to your accounts if you give them permission.
5. It is safe and secure.
6. Smart reports with quick links to the source transactions. You would be able to see your financials everyday if you want! As a smart investor you need to know your financials and balance sheet at all times.
7. Dashboard gives a clear financial overview and you can also see your overdue rents. If you have more than one property you can monitor them individually.
8. Awesome support at no additional cost.
9. No installation or IT maintenance required.
10. Pay as you go and no up-front costs and no contract.

You can watch this brief video about XERO or try it for free here.

Brad Golchin, Accountant

Wise Advice Limited – Xero Gold Partner

Tel: (09) 639 1004

Email: brad@wiseadvice.co.nz