February 2015 E Newsletter

Welcome

Welcome to the February edition of Focus.

The end of the tax year is fast approaching for most taxpayers, so if you have not yet given us the information to prepare your 2014 tax return, please do so as soon as possible.

Keep an eye out for our newsletter in early March, with your essential tax planning guide including tips and points to consider as we tidy up the 2015 tax year.

Estimating Costs of Hiring New Staff

The government website business.govt.nz has recently created a new “Employee cost calculator” to help small to medium sized business estimate the costs involved in hiring new staff. The tool provides data on average salaries for the industry and work-type (sourced from Trade Me Jobs), and allows you to budget for other costs that are easily overlooked such as ACC levies, FBT, Kiwisaver, insurance, as well as recruitment and training costs.

The calculator can be found at

http://www.business.govt.nz/employeecostcalculator/

IRD Compliance Focus 2014 / 2015

IRD have recently released an information booklet highlighting the key issues that will be focused on in the 2014 / 2015 year.  In this article, we summarise the key areas of focus for Small & Medium businesses:

Employer Responsibilities

1. Deducting PAYE, Kiwisaver and other deductions at correct rates
2. File Employer Monthly Schedules
3. Make payments to IRD when due
4. Proper record keeping of employee details & pay history

GST (Goods & Services Tax)

1. Register for GST if turnover is more than $60,000 in a year
2. Include sales and expenses on your GST Return
3. File GST return with IRD according to basis registered
4. Make payments to IRD when due

FBT (Fringe Benefit Tax)

1. A tax on benefits provided to employees as a result of their employment
2. Common examples of potential FBT liabilities:

• Vehicles used privately
• Low or interest free loans
• Free, discounted or subsidised goods and services
• Gifts or prizes
• Employee entertainment
• Private phone use

3. If an FBT obligation exists, an FBT return could be required to be filed with IRD Quarterly or Annually with payment of the FBT amount

Record Keeping

1. It is important to maintain proper records of all business activities
2. IRD accept paper or electronic records
3. Records are required to be kept for at least seven years

Contractors

1. Ensure that GST / income tax and provisional tax obligations are met
2. Need to account for GST on income where required

If you would like further information about these issues, please contact your accountant at Walker Wayland.

Growing in 2015: Company Culture

I read once that we are programmed to expect things to change with the passing of one year and the start of another. This programming occurs during school years when we move up to the next class and start anew; new teachers, new subjects, maybe new class mates. 

This learned practise is carried with us as we begin our working lives with “New Year’s resolutions” and goals and aided by most companies taking a break between Christmas and New Year. We brace ourselves for it, and hopefully embrace it.
So with 2015 upon us it is the perfect time to look at our business and understand what we are doing well and what we can improve on and where necessary makes changes. 
Some of the things we can change may require a long term focus while others can improve the work environment and outlook on the company in the immediate future.

For instance a strong culture is the foundation to any successful business and will naturally drive your profits in a positive direction. In order to have culture work in your business you need to understand personally what makes your company so special. Without having a clear understanding yourself you cannot ingrain this into your team.  If you love your brand, your staff will too.
Build a culture that you can maintain - and continue to build on - this isn’t a quick fix while you move on to the next thing; it is a continuous area of focus. Some key points that I encourage my management team to work on are:

Encourage teamwork:  Having staff that work as a team ensures efficiencies across all aspects of your business. The staff will naturally keep an eye out for each other and ensure the opportunities for failure are minimised.  A natural camaraderie will also be formed which will lift spirits and make your workplace inviting for existing staff and new staff. 

Share information: Let your team know your goals and make them their goals. If everyone is on board and working towards the common end point then you reduce the risk of someone going off in the wrong direction. With the teamwork already instilled they will all be willing go above and beyond their job description to meet the company goals.

Make time to have fun: Yes you have hired the staff to work but who says you can’t make time to play? Share with the team any wins you achieve or goals you meet and make time to celebrate and reward them. A happy team will rub off on your product and service and the customers will notice. A smile is contagious. 

Be flexible and understanding: While you want to ensure your staff are reliable and trustworthy it is also a give-and-take relationship. Be flexible to the needs of your staff. If your staff know they can ask for time off when something pops up they will feel more appreciated and have higher morale. Flexibility breeds loyalty amongst your staff, they will not take your flexibility for granted as they do not want to lose the trust.

Listen to your team: Make your staff know that you value their opinion. They work in the business just as you do and may have some great ideas that will help your business, product or service.  A little idea could make a big difference and everyone likes to be listened to – and know they have been heard. They may just have the next big thing. Make sure your staff wants to be there. Customers will know and the product and service will reflect it.

Director’s Responsibilities:

New Zealand’s Companies Act 1993 and common law impose duties and liabilities on the directors of a company.

Directors are responsible for managing the company’s day-to-day business. In doing so, directors owe duties to the company, to its shareholders, and to others dealing with the company.

Directors must act honestly in what they believe to be the best interests of the company and with such care as may reasonably be expected of them in all the circumstances.

Directors must not carry on the business in a manner likely to create a substantial risk of serious loss to the company’s creditors (so-called “reckless trading”).

Exactly what this involves will vary from company to company.  General duties as set out in the Companies Act 1993 include:

• Duty to act in good faith and in best interests of company (s131)
• Powers to be exercised for proper purpose (s133)
• Duty to Comply with Companies Act 1993 and Company Constitution (s134)
• Reckless trading rules (s135)
• Director's duty of care (s136 & 137)
• The solvency test (s4)

In today’s commercial environment, directors cannot be expected to know everything about their company, or possess all the skills necessary for business decision making therefore Section 138 provides a (limited) form of relief for directors. It entitles directors, in the course of decision making, to rely upon reports, statements and financial data, as well as professional/expert advice given to them by an employee of the company who is believed to be reliable and competent in the matters concerned (Including another director) or a professional adviser/expert on matters within their competence.

But in doing so, directors must act in good faith, make proper inquiry where the circumstances indicate a need for this, and have no knowledge that their reliance on the information is unreasonable.

Summary:
It’s apparent that the significance and potential consequences of these duties and liabilities are not to be sneezed at. 

Unfortunately, it seems that at present directors are either largely ignorant of these standards or do not take them sufficiently seriously. Perhaps more unfortunate is that it is usually not until a company fails that the extent of these duties becomes relevant – when a director’s decision is reviewed by the Court.

It’s vital to understand that it’s no longer acceptable to sit back and let others run the show. It is clearly established that even directors who are scarcely involved in management of the company can still be held liable when financial difficulties sprout.

Evaluate your position as a director – are you familiar with the ins and outs of the business? Do you read (and understand) the financial accounts? Do you attend board meetings? Do you have a hand in business decision-making? If the answer to these is generally “No”, it may well be that you shouldn’t be a director at all.

Should you need any assistance or more details on the duties of directors, please contact us.