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LAQC Update

We sent you our Special LAQC Alert newsletter in December setting out the Governments proposed changes to the Loss Attributing Qualifying Company (LAQC) regime.  The Government had decided to do away with the LAQC and create a new class of company called the Look Through Company.  At the time we sent you that newsletter, the legislation was only in draft form and many questions were being raised about its contents and how it would work. 

The legislation has now been passed into law with very few changes.  There are still many questions surrounding key features of the legislation, which commentators and practitioners alike are slowly coming to grips with. Thankfully, one change to the final legislation means you now have 2 years to make the transition to a new entity if you wish to, instead of the previous 1 year time limit.

That said, we don’t think it’s necessarily a good idea to leave things until the second year as this can have some negative consequences.  So we are acting quickly to review each of our clients who have an LAQC and, if you haven't already heard from us, will soon be contacting you individually to discuss your options.  It would be fair to say that each and every situation is unique and a great detail of thought goes into our advice before we contact you.     

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Depreciation  

As from the 2012 taxation year, depreciation will no longer be able to be claimed on most classes of buildings.  However, non-building items such as wardrobes, cupboards (which are not built in), carpets, curtains, blinds, water heaters, hot water cylinders, ovens, stoves and fridges etc, can still be depreciated.

It may well be that, in the past, these chattels had not been separately identified and effectively these have been depreciated as part of the building. 

If the taxpayer wishes to continue depreciating those chattels after 1 April 2011, then there needs to be a valuation of the building and chattels effective as at the date of acquisition.  Any chattels purchased since that date will then be dealt with separately.

This does enable the tax payer to continue depreciating the chattels and the depreciation rate will be based on the relevant rate for the particular chattel utilising the book value as at 31 March 2011. 

If you do wish to make this change, arrangements should be made with a valuer to prepare a separation of the chattels.  Obviously, taxpayers will need to consider whether the tax savings justifies the costs involved. 

Lastly, if the building and chattels have been purchased off an associated person, then a higher rate of depreciation may not be available to the tax payer.    

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Employment Fraud

Just recently, the newspapers ran an article on fraud which had been committed by a long term employee (the accountant) in a group of companies.   This case is a good reminder to all businesses to re-examine their procedures. 

That particular case had much of the traditional background that these cases have but perhaps consider the factors in relation to your own organisation:

•   Employee is often a long term trusted team member
•   Lack of scrutiny, by owners or by independent persons of the employees actions 
•   The ability for the person to carry out a multitude of tasks.  The riskiest ones include:

     ·  Preparation and payment of payroll
     ·  Processing and payment of suppliers invoices
     ·  Banking and processing of receivables ledger.

In small organisations, an office person will often have combinations of some or all of these roles and often there is no practical method of dividing them.  However, management should still be aware of indicators such as:

•   The employee is reluctant to take holidays and often claims to be too busy to do so.
•   Employee may come in regularly at unusually early or late hours for no good reason.
•   Secretiveness about the work and reluctance to be questioned by others.
•   Gambling, alcohol or known related problems.
•   The employee is able to become a super user in terms of administration of bank accounts.  Even if
     you have allowed for two approval levels for electronic transactions, a super user can simply
     change the user names and effectively approve it twice.

The points above may give you an indication of areas to watch out for but also remember that often, other staff members will know more about problems than the ultimate owner.  For that reason, keep lines of communications open and encourage your team to report on any areas they consider could be improved or are unsatisfactory.

The main safe guards are:

•   Take an interest
•   Keep in touch with your customers and your suppliers.  Encourage them to forward queries to you if
    the previous response is not satisfactory.
•   Review the wage records in detail..
•   From time to time, check bank accounts for payees and staff against the original numbers given to
     you.
•   Don’t allow holidays to accumulate.
•   Prepare monthly financial operating statements and compare these closely to budgets, last year
    and against expected performance.
•   Review Receivables ledgers and payables ledgers on a monthly basis. 

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International tax – top 10 tax misconceptions for individuals 

International tax compliance can be complex and difficult.  To help you get it right, we’ve compiled the following list of commonly misunderstood tax facts relating to individuals:

1.    New Zealand residents aren't just taxed on the income they earn in New Zealand, they're also
       taxed on their worldwide income.
2.    If you leave the country but maintain a permanent place of abode here, you're still a New Zealand
        resident for tax purposes.
3.    Foreign income including investments (even if deposited in an offshore account or left on a
       foreign credit card) is taxable in New Zealand even if its not repatriated to New Zealand.
4.    Equally, the fact that withholding tax may have been deducted on foreign income doesn't mean
        that this income is no longer taxable in New Zealand.
5.    A foreign tax credit may be available but only where the tax involved is not subsequently refunded
       (even in a later income year), is substantially similar to income tax and can't exceed the tax
        otherwise payable on the underlying income in New Zealand.
6.    Not all overseas pension payments are tax-free, certain ones may be fully taxable in New
       Zealand. 
7.    Special taxing regimes (controlled foreign company and foreign investment fund rules) apply to
       gains on certain foreign shareholdings, retirement schemes and life insurance investments.
8.    Additional disclosures are required in respect of controlled foreign companies and foreign
        investment funds.
9.    Allowances that may be treated as tax-free in other countries (for example, living-away-from home
       allowances) are generally fully taxable in New Zealand.
10. The temporary tax exemption on foreign income for transitional residents expires after 48 months
       and there's no entitlements to Working for Families Tax Credits during the period of the
       exemption.

It’s important to keep the above in mind when preparing tax returns for individuals with international investments.  New Zealand has a large migrant population as well as ex-pat executives, many of whom come from countries with quite different tax systems.     

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Eftpos and PCI-DSS 

Big changes are looming for any client’s who accept credit card or Eftpos payment from customers. 

New Zealand Eftpos providers are working towards a 31 May 2010 deadline to upgrade any old version 5.1 Eftpos machines to the new version 6.0 standards.  After this date, any old Eftpos machines will no longer work and will not be able to accept cards.  It has been reported that 400 retailers had been cut off from the Paymark Eftpos network that day for ignoring requests to update their Eftpos terminals (www.stuff.co.nz Business Day 14 March 2011).  This could have a significant impact on their business, especially if there is a delay in sourcing a new Eftpos terminal.

If you have an older style terminal we recommend you contact your Eftpos provider immediately.  The two major New Zealand providers can be found at www.paymark.co.nz and http://www.smartpayltd.com.  Alternatively you may be with another provider that we have not shown.

For client’s that also accept credit cards, whether just through an Eftpos terminal, or by taking credit card numbers over the phone, you need to be aware of the Payment Card Industry – Data Security Standard, or PCI-DSS for short. You should find references to these standards in your current Bank and/or Merchant agreements.

The PCI-DSS standard was developed by the major credit card companies (Visa, Mastercard, Amex, Diners etc) almost 4 years ago, and has recently been updated to version 2.0.  Application of the standard varies depending on your individual circumstances, centring around the level of involvement you have with credit cards.  The standard mandates various internal controls into your systems, up to 250 controls in the case of a large major multi-site business.

The due dates for implementing PCI-DSS have passed for most credit card companies.  Failure to comply with PCI-DSS, which leads to a breach in security (ie credit card fraud), can result in the credit card companies imposing fines on your bank, who can then turn and impose those fines on you.  There are examples of these fines from overseas ranging from $300,000 to $300 Million!  Industry analysts report that most New Zealand businesses are not PCI-DSS compliant and are unlikely to meet the due dates, exposing themselves to potential fines in the future.

If you are a retailer with an Eftpos machine that accepts credit cards, we recommend you discuss PCI-DSS with your Eftpos provider.  Both Paymark and Smartpay have indicated they have products that are PCI-DSS compliant.  If you accept credit card payment by other means, say taking the card number over the phone, then please contact us to discuss your individual situation.    

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New Team Member
David Bellinger - Manager 
 

We are pleased to welcome David Bellinger as our new Manager.  David replaces Rachael Gibson who has moved on to a Commercial Accounting environment. 

The son of an expatriate engineer, David spent his childhood growing up in and visiting over 40 countries.  The time spent living in Australia, England and Saudi Arabia gave him an appreciation of dealing with people from wide and varied backgrounds and cultures.  David’s family fostered his early interest in computers, which he started using from 8 years of age (back when they had green monotone screens and programs came on cassette tapes).

David’s work experience has been wide and varied.  Starting with a small rural sole practitioner in 1995, he moved on to several large second tier practices in Auckland, Wellington and Christchurch, becoming a qualified Chartered Accountant in 1998.  He even managed to find time for a stint of commercial accounting within the Forestry Industry in Australia before returning to Auckland. 

David has experience and interests in business information systems, business planning and cashflow forecasting, business structures and restructuring, company and trust issues and practical day to day tax aspects.  David is a Xero certified consultant and well experienced with MYOB products.

“I have a real passion for working alongside business owners and their families with the many day to day issues they face.  There is nothing more satisfying than seeing someone achieve the end-goals that they set out to achieve, sometimes many years previously.  At the end of the day, my job is not just to help you get started in the best way possible, it’s really to guide you through to a successful conclusion.  Always look ahead, not behind.”

In his spare time, David is an avid Movie buff (big screen, small screen, Hollywood block buster or fringe festival art noir – he watches them all), live music fan (Vector Arena or local tavern as long as it is loud) and sci-fi junkie (novels, TV series and movies).  He also enjoys the gym, a bit of mountain biking, regular spin-cycling classes and lastly, matching wits with his kids.     

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New Team Member - Vanessa Warrender - Administrator

About two or three years ago I took the plunge and left my full time job to work part-time and run my own massage therapy business alongside my part-time office work.  Since then I have not looked back.

I have had many years experience in PA, Secretarial and Administration type roles in many organisations big and small and now I find myself alongside Prue on the front desk as part of the Stewart and Co family.

In amongst my office roles I have found time to travel and work and have enjoyed being a camp counsellor in a camp in Carmel Valley, California and have also enjoyed working on cruise ships in the Caribbean as a massage therapist.

On Saturdays I play outdoor club netball and although we call ourselves a social team we still train every week and we always strive to win!  I am also passionate about rugby and a big supporter of the Blues, Auckland Rugby and the All Blacks.  Another interest I am keen to work on and learn more about is photography.  I have been a wedding photographer for a few of my friends and I hope to build on that experience and make it part of my business also this year.

If you can’t find me on the netball court you might find me out walking, taking photos or at the beach – wherever the sun is! 

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Easter Wishes 

From Nole, Dale and all the team at Stewart & Co, we hope you have a safe and relaxing Easter weekend. 

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