Our client Dr David Beaumont in the Listener

We are chuffed to see our client Dr David Beaumont featuring in this months Listener magazine. The article addresses the benefits of getting back to work after an illness or injury. Championing for the cause our client and friend Dr Beaumont speaks to the topic in this extensive article.

TRENZ Crew Arrive in Wanaka Town

World renowned for its spectacular beauty and thrilling activities, the Southern Lakes will be on show to more than 300 influential international travel Buyers and media during TRENZ 2011 (22-25 May), the tourism industry’s premier trade event.

“This is the first time we have held TRENZ in the Southern Lakes, one of New Zealand’s most popular visitor destinations, incorporating Queenstown, Fiordland and Wanaka,” says Tourism Industry Association New Zealand (TIA) Chief Executive Tim Cossar.

He says the host region has been a real incentive in attracting about 290 Buyers to TRENZ 2011, in excess of pre-earthquake targets.

“As well as the main business activity in the Queenstown Events Centre we are ensuring the international travel Buyers and media will get to experience what makes this a favourite visitor destination.”

TRENZ networking and social events are being held at a variety of locations around Queenstown, including the Skyline and the vintage steamship Earnslaw. All delegates will have an opportunity to try out some of the activities on offer by the region’s TRENZ Exhibitors, ranging from skydiving, bungy jumping and jetboating to a Lord of the Rings tour, wine tasting and golf.

About 50 Southern Lakes tourism operators are exhibiting at TRENZ 2011, amongst them several who are attending the event for the first time.

"We've got more Southern Lakes Exhibitors than we've seen for a number of years - it's great to see local operators embracing the opportunities TRENZ brings to the region," says Southern Lakes Chairman Dave Hawkey.

"It's a win-win situation with the local tourism industry able to put itself in front of many of the world's most influential Buyers and media, and with the buyers and media having the opportunity to really experience one of New Zealand's most popular and diverse visitor destinations."

Eco Wanaka Adventures Director Chris Riley Director says, "Having TRENZ in the Southern Lakes is the perfect opportunity to show international Buyers how many varied activities are available here. Through TRENZ the world's Buyers can also see for themselves what sets Wanaka apart and makes it such a memorable destination."

NZONE General Manager Robynne Williams says, “Hosting TRENZ in Queenstown makes sense, after all we are New Zealand’s top international destination.” She adds TRENZ is a valuable opportunity for the region’s operators to give Buyers a first-hand view of the popular visitor destination.

Thanks to TIANZ for this article.

The Tax System- Explained in Beer!

Suppose that every day, ten men go out for beer and the bill for all ten comes to $100. If they paid their bill the way we pay our taxes, it would go something like this:



The first four men (the poorest) would pay nothing.

The fifth would pay $1.

The sixth would pay $3.

The seventh would pay $7.

The eighth would pay $12.

The ninth would pay $18.
The tenth man (the richest) would pay $59.

So, that's what they decided to do. The ten men drank in the bar every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve ball. "Since you are all such good customers," he said, "I'm going to reduce the cost of your daily beer by $20." Drinks for the ten men would now cost just $80.



The group still wanted to pay their bill the way we pay our taxes. So the first four men were unaffected. They would still drink for free. But what about the other six men? How could they divide the $20 windfall so that everyone would get his fair share? They realized that $20 divided by six is $3.33. But if they subtracted that from everybody's share, then the fifth man and the sixth man would each end up being paid to drink his beer.



So, the bar owner suggested that it would be fair to reduce each man's bill by a higher percentage the poorer he was, to follow the principle of the tax system they had been using, and he proceeded to work out the amounts he suggested that each should now pay.



And so the fifth man, like the first four, now paid nothing (100% saving).

The sixth now paid $2 instead of $3 (33% saving).

The seventh now paid $5 instead of $7 (28% saving).

The eighth now paid $9 instead of $12 (25% saving).

The ninth now paid $14 instead of $18 (22% saving).

The tenth now paid $49 instead of $59 (16% saving).



Each of the six was better off than before. And the first four continued to drink for free. But, once outside the bar, the men began to compare their savings.




"I only got a dollar out of the $20 saving," declared the sixth man. He pointed to the tenth man, "but he got $10!"



"Yeah, that's right," exclaimed the fifth man. "I only saved a dollar, too. It's unfair that he got ten times more benefit than me!"




"That's true!" shouted the seventh man. "Why should he get $10 back, when I got only $2? The wealthy get all the breaks!"


"Wait a minute," yelled the first four men in unison, "we didn't get anything at all. This new tax system exploits the poor!"




The nine men surrounded the tenth and beat him up.




The next night the tenth man didn't show up for drinks, so the nine sat down and had their beers without him. But when it came time to pay the bill, they discovered something important – they didn't have enough money between all of them for even half of the bill!


And that, boys and girls, journalists and government ministers, is how our tax system works. The people who already pay the highest taxes will naturally get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up anymore. In fact, they might start drinking overseas, where the atmosphere is somewhat friendlier.

Budget Summary - Goal is to be All Black soon...

The budget announcements last week had a focus on reducing our borrowing and getting the bank balance back in the black. Pun intended the ‘Key’ points were:

No more new spending: This budget takes $5.2b from existing government spending offering up $1.2b a year over the next four years for new operating spending. The belt was tightened on KiwiSaver, Working for Families and students loans and distributed back through health, education and focused on reducing deficit. A delicate dance within departments will create a reshuffle of the allocation of $1.5b. The third budget announcement from Bill English sees Health and Education raising a glass!

The Canterbury Earthquake saw the Earthquake Commission and ACC shelling out a tasty measure of $3.3b of the $8.8b price tag- plans to tackle this expense are included in this announcement. A government Canterbury Earthquake Recovery Fund of $5.5b over six years covers the Government's infrastructure, assets and emergency response costs, $740m comes from existing funding in the budget, from a new Canterbury Earthquake Kiwi Bond with the difference from other government bonds.

In order to raise around the $5b - $7b mark partial assets sales in the form of state owned energy companies will be offered up. A reduction in the shareholding on Air New Zealand will also play a part in raising these funds.

Purse strings will get the pull on KiwiSaver, Working for Families and Student Loans.

- For KiwiSavers that means a halving of the member tax credit while their employers will now pay employer superannuation contribution tax. From 2013 employees will have to contribute at least 3 percent (up from 2 percent) while bosses will have to pay the same amount more.

- Working for Families changes will revise abatement thresholds so wealthier people are less likely to be eligible.

- Student loans will be restricted for those with overdue payments and people aged over 55 will only be able to get loans for tuition fees. Part-timers will be able to borrow less and the repayment holiday for students who go overseas will be reduced to one year from three.

The big winner is the Health sector gaining $1.7b new operating funds and $40m capital funding over 4 years. Education is popping the Champagne with $1.3b new operating and $109b capital funding.

So a fairly well shaped revamp to sharpen the coffers in the wake of a mighty disaster and couple of hard years. Lets hope this budget reshuffle is the start of getting back on track!

Another Doozy from Lake Wanaka Tourism!

Revealing Lake Wanaka - Calum Macleod from Tim Pierce - Zeros&Ones on Vimeo.

Outline of Changes to LAQC Rules

In the May 2010 budget, the government announced it was going to make changes to LAQC’s. On the 15th of October, the government finally released the draft legislation for those changes.This article outlines those changes.

(1) There is a new tax entity called a Look-through company (LTC)

Rather than making lots of changes to the existing LAQC companies, the government has instead created a new company called a Look-through company.

(2) The end of the LAQC

The one and only major change to the LAQC rules is that any loss will no longer be attributed to the shareholders from 1 April 2011. This change means it will no longer be suitable to have a rental property that makes a loss owned by an LAQC.

If you have a rental property that makes a profit, you could leave your property in the LAQC to take advantage of the 28% company tax rate. However, the government is still reviewing the dividend rules so this may not be a good idea if the ability to pay any future capital gain as a tax-free dividend without liquidation is removed.

(3) Transition from a LAQC to a LTC

While LAQC’s will no longer be suitable for the vast majority of investors, there will be an easy transition to change an LAQC into a LTC. An election will be required to be signed by all shareholders by 30 September 2011.

(4) Transition from LAQC to Partnership or Sole Tradership

There are rules allowing an LAQC to be changed into a Partnership or Sole Tradership. However, a liquidation or legal transfer of the property is required to do this making this type of transition expensive.

(5)Loss Limitation Rule

Under a LTC, any loss allocated to the shareholders is now limited to the amount of that shareholders contributions. There’s no need to worry about this for the vast majority of property investors as the definition of shareholders contributions includes a share of the company debt to the extent to which it is personally guaranteed. So, the amount of the shareholders contributions should be vastly greater than any loss in most situations.

(6) Sale of Shares

Under an LAQC, shares could be sold to another person such as a spouse relatively easily. Sometimes an LAQC re-election was required and that was all. There was no impact on the underlying property owned by the LAQC.

Under a LTC, a sale of shares means a transfer of that portion of the underlying property owned by the LTC. So, if a person that owned 50% of the shares in a LTC sold their shares, they may also have to pay tax on 50% of any depreciation recovered at the same time.

There are two application exemptions for this:

(1) If the company owns a property that has a cost price of $200,000 or less; or
(2) If the sale proceeds do not exceed the shareholders share of the tax book value of the property less liabilities (net assets) by more than $50,000

So, the second exemption will apply where there hasn’t been a lot of unrealised capital growth in the properties owned by the LTC.

Let’s take a typical example of a LTC with a property with a tax book value of $350,000 and a bank loan of $320,000. A 50% shareholder’s net assets would be $15,000 ($350k – $320k x 50%). So, if the sale proceeds for the shares was less than $65,000, then there were be no tax implications for the existing shareholder.

While it has always been important to transfer shares between family members at an accurate market value to ensure the IRD couldn’t charge you with gift duty, it’s even more important now as you will need to calculate whether the exemption above applies to your sale of shares.

(7) Working Owners

Under an LAQC, if one shareholder earned significantly less than the other and that person managed the properties, the LAQC could pay them a shareholders salary to compensate them for their time. The benefit was that tax would be paid at the lower personal tax rate which would increase the other shareholders refund at a higher personal tax rate.

Doing the same thing under a LTC is much more difficult as there is no automatic deduction if the company engages in holding property, even if a written contract is present.

Thanks to Tony Thorne and the NZ Property Investors website.

What's It Mean?

Current Market Value … is the value of assets expressed at current values as distinct from the value of fixed assets contained in most balance sheets which are effected at the original cost which is known as the ‘historical cost’ for the acquisition of the fixed asset.

Fixed Assets… are items owned by the business which are not expected to be converted into cash in the short term but are used to generate business revenue. For example, land and buildings, motor vehicles, fixtures and fittings etc.

Long Term Liabilities… are amounts owed by the business which, in the normal course of events, are not due for payment within the next 12 months.
Example: Component of a loan which, in the normal course of business, is not due for payment until 12 months’ time.

Implementing Best Practice in Human Resources

It is challenging to employ outstanding staff and retain them. Staff selection is expensive and time-consuming but if you get it wrong it’s infinitely more so and you won’t have much to show for it except the headache and the mess poor choices leave behind them.

Now is a good time to review your human resources policies. Successful business operators articulate the vision that they have for the business to their team members. This involves communication and leadership from the employer so as to encourage teamwork. It is people who create the difference and give a business a competitive edge! The better your team are trained, motivated and rewarded (in most situations), the better your organisation will perform.

All businesses operate in a highly competitive environment. The ongoing investment in people is a crucial key characteristic of a successful business. As part of the planning process, now is a good time to review the systems that have been implemented relating to:

§ job rotation

§ formal training and development of team members

§ induction of new team members

§ professional development

§ team appraisals

§ constructive feedback

§ listening to team members

§ flexible working hours and

§ ensuring that there is some fun in the work place

In addition, it’s important to make sure all human resources documentation is in order. Changes to employment law have made requirements for employment documentation more exacting. Employer advice organisations such as Employers Assistance can help you assess whether your records meet requirements.

If you would like some assistance with the implementation of team appraisals, team inductions or other aspects of your human resources strategies, please do not hesitate to contact us.