Dellow Financial Services
|Posted on 3 November, 2019 at 3:00||comments (0)|
AIA Insurance Special Offer EXTENDED 5 February 2020
Income plays a vital part in accumulating wealth and preparing for retirement. What would you do if your income was to unexpectedly stop. Have a plan.
Join AIA Vitality between 5 August and 5 November 2019 and get the first 12 months of membership for free.
On joining AIA Vitality a discount will be applied to your premiums as a Vitality member of 10%. There are a number of other discounts and free-bees with a focus on rewarding improvements to your personal health. AIA Vitality is an exciting new concept in the NZ insurance space.
In addition you may qualify for a multi-policy discount of 10% - 15% depending on the qualifying insurance products you wish to take on. Health insurance is not part of the multi-policy discount offer.
For example if taking out a life insurance policy and income protection insurance you would receive a 10% discount on the premiums by joining AIA Vitality, and an additional 10% discount via the multi-policy discount offer.
This is a great deal with potential discounts in excess of 20%, airpoints, and various other discounts to health related services.
Please contact James Dellow for a no obligation life and health insurance discussion.
|Posted on 2 November, 2019 at 14:35||comments (0)|
Dellows Financial Mid Year Checklist:
1. Financial Snap-shot
It’s a good idea to check in on your financial figures. The easiest way to do this is by looking at your business profit and loss report, and analysing your net worth: your assets (what you own) minus your debt (what you owe). This gives you a snapshot of how you’re doing financially and it helps you decide where to focus your efforts. For example, should you purchase another property, or do you need to increase earnings.
2. Adjust your goals
The great thing about goals is they give us direction. It’s a good idea to review your financial goals regularly. If you set goals for yourself back in January, do they still make sense? If un-attainable can your goals be split into more manageable objectives over this and next year? If you have already accomplished your goals - should your focus be on a new goal or was your plan to enjoy the victory for a certain period of time.
3. Check-in on your budget
Hopefully, you have a budget. Maybe you don’t track your spending meticulously, but you know how much you can spend and how much you aim to save. Take a moment this mid-year to check in on that budget. Are there places where you’re overspending? Have you gotten into some less-than-desirable spending habits that you want to break? There are various budgeting apps available. Should you feel help is needed engage someone straight away, what you do with money is far more important than how much you have.
4. Plan for summer spending
Summer is social time with Christmas, New Years, and holidays. There is always something to do, somewhere to go, and someone to meet. But all of this summer fun can leave your bank account feeling drained. Embrace trade-offs — if you know you’re going to be spending a little extra on things you don’t regularly do, find some places to cut back so it evens out. Cutting back on bills may help over the summer period, this can be as easy as suspending subscriptions: computer software, games, movies; making your lunch, and negotiating payment holidays. Planning early and saving the balance of usual regular payments into a non-break savings account may allow for a large balance of funds to be built up and available for holiday spending.
5. Check in on your kiwisaver contributions
It is very important to plan in advance for retirement, while a home and some investments are great, cash is required also. If you don’t make kiwisaver contributions each year sufficient to obtain the maximum government contribution, you can’t make up for it with additional contributions the next year. Since kiwisaver comes with great employer and government contributions, and tax benefits, it’s pretty important to prioritise planning of your kiwisaver to ensure you are maximising your savings for retirement.
6. Research your pricing
Mid-year is the perfect time to start looking at what competitors are doing and bench-marking your prices. If earning more money was part of your financial plan this year, it’s better to ensure your pricing is right earlier, rather than later. If there are reasons your pricing is low issues should be addressed as soon as possible. If it appears your pricing is low then a plan should be made to increase to pricing as soon as possible.
|Posted on 2 November, 2019 at 14:30||comments (0)|
RENTAL PROPERTY "RING FENCING" OF TAX LOSSES
Legislation was passed in mid-2019 which ring-fences residential rental losses from the beginning of the 2020 income year.
A staged implementation was suggested but did not make the final cut. Instead, the last opportunity for residential rental property investors to offset their rental losses with other income was the end of the 31 March 2019 tax year.
The loss ring-fencing rules do not apply to mixed-use properties, such as the family bach, they do however apply to overseas residential rental properties as well as New Zealand residential rental properties.
For those with a residential portfolio, rental losses of one property can be offset against rental profits from other portfolio properties, or against taxable gains from the sale of properties.
Together with the new "Healthy Homes Standards", and "Bright-Line Test", being a Landlord in New Zealand may not be as desirable going forward for negatively geared investors.
The housing market may have further surprises in store, with talk of potential loosening of LVR restrictions, and further drops in the OCR.
The property market is undoubtedly out of skew with domestic household earnings. Many landlords may find holding properties an un-desirable short to medium term investment option - especially with the removal of the ability to obtain an annual tax refund.
If you would like to discuss the impact of the new loss ring-fencing rule, please contact James Dellow.
|Posted on 2 November, 2019 at 14:25||comments (0)|
AIA strive to help our customers live healthier, longer, better lives by encouraging them to make positive lifestyle changes one small step at a time.
AIA's partnership with the AirpointsTM programme delivers great additional value to customers with Airpoints at no cost to them.
New policy offer: Your customers can earn 5x Airpoints DollarsTM for every $100 premium paid for 3 months, on new eligible policies applied for between 16 October 2019 and 29 February 2020.
Terms and conditions apply.
|Posted on 24 July, 2019 at 14:55||comments (5)|
There are lots of things to consider when buying or selling a business.
Valuing the business
A business valuation can provide a sound platform from which to start negotiations. Business brokers provide generally accurate market appraisals after a brief discussion and review of your financial statements. In New Zealand small businesses are usually sold for between 2 - 4 times EBITD (earnings before interest tax and depreciation). There are however industry specific rules of thumb aswell - such as accounting practices are often based on a multiple of revenue, trade based businesses are often difficult to sell at all unless there are significant staff and assets involved. The general idea is that a person will want a return of their initial investment within a 2 - 4 year period. Cashflows from a business directly impact on its value, together with adjustments for risk and industry factors. Any valuation is speculative until tested in the market, a business being truly worth the maximum amount a buyer is willing to pay for it.
Conducting due diligence
Due diligence is surprisingly often overlooked and is of great importance to buyers before committing to an acquisition. Chartered accountants carry out due diligence on your behalf, this is similar to an audit or a review engagement and is very worthwhile. Records are reviewed and reconciliations performed to ensure the information being presented is accurate and truthful. A number of other non-financial areas are reviewed to ensure the business is being held out appropriately. Due diligence analysis can help a buyer to weigh up the business in advance ensuring it is what they really want. When selling a business it is important that the information provided is factual and matches tax returns and bank records. This can really help during due diligence process as any misrepresentations, or even honest errors can deter a buyer.
Preparing the business for sale
As would be expected to prepare a business for sale you want to make it as desirable as possible. Leading up to a sale there should be an effort to increase sales, manage expenses, and record larger profits. In addition record keeping should be tidied up, client lists, phone and email details, systems, processes and procedures. Software commonly used should be implemented and systems should be streamlined to be inline with the industry best practice. For a seller this can sometimes be daunting, effectively sorting out a lot of the reasons they may want to sell in the first place, and then selling the business as they would have liked to have been running it all along. There is no option for a business owner wishing to achieve a successful sale to run away, any issues need to be sorted out before the sale to ensure the business achieves the best possible price.
Developing exit strategies
Planning an exit strategy is worthwhile. There are various options available in regards to an exit, succession, shareholder buy outs, employee buy ins, market sales, competitor mergers, asset sales, gradual buy outs, vendor finance, share swaps, etc. Planning an exit strategy on a personal level in advance is essential to achieve a good overall result. Preparation of the business for sale can start years in advance, and the process needs to be managed effectively, tax issues, timing, right through to investment of the realized monies from the sale.
Please contact James Dellow should you wish to discuss your business value, succession plan, or exit strategy.
|Posted on 18 July, 2019 at 3:35||comments (0)|
Documents play an essential role in protecting the interests of the business and business owners over the course of a company’s lifetime.
Company Constitution - do you have shareholders other than yourself in the company? Do you want to retain the control of your company? Are you a shareholder or investor in a private company? Do you want to have ensure you have a say in how the business is run? If you answered yes to any of these questions you need a constitution for your company. Company constitutions enable a company to impose rules and obligations on incoming shareholders without separate agreements being required.
Shareholders Agreement / Partnership Agreement - a shareholders agreement outlines what each parties obligations are such as the introduction of capital and expertise. Other clauses sch as the amount of salary to be paid to working owners, dividend policy, and any other matters that form the overall agreement can be included.
Annual and Special Resolutions - Companies are required to prepare annual financial statements, it is important for shareholder and director resolutions to be prepared and signed off on an annual basis, accepting the financial statements, salary levels, and dividend policies. In addition major transactions should be accepted by special resolutions throughout the year. If the company is trading while insolvent it is important to consider the impact on directors and prepare a solvency resolution with shareholders agreeing to financially support the business operations.
Buy/Sell Agreement - the buy/sell agreement is a useful addition to a shareholder or partnership agreement when there is one party providing capital as a silent partner and the other partner wishes to eventually buy them out. The method of determining the share price should be outlined, together with the time-frame and process of calling the buy/sell option.
Employment Agreements - employment agreements should be drawn up for all employees including shareholder employees. Contractors should have agreements drawn up. Employment is a major area of risk for businesses and having the correct paperwork in place is essential.
Trade Terms - when carrying out work for a client a contract can help to determine the work that is to be included and how the customer is to make payment. Trade terms are important as a good trade credit policy ensures all costs associated with chasing a debt fall back on to the client. Where stock is involved ownership can be retained until payment is made in full.
Business Plan - Cashflow and Budget - before making a start in any business a plan should be drawn up, further a basic budget is always useful to plan for financing requirements and growth.
|Posted on 23 June, 2019 at 3:30||comments (0)|
IRD with increased funding is able to engage in more audits, and compliance reviews.
For example: IRD recently undertook a Client Risk Review of a financial services business. later this expanded into a full Audit in respect to GST and Income Tax matters. The total professional fees of $17,850 were fully covered by the Audit Shield Master Policy.
Dellows utilises Audit Shield and offers audit protection insurance to all clients annually.
The policies are low cost and tax deductible. All professional fees are covered on the event of the IRD auditing or conducting risk reviews of your business.
This is particularly useful when there are indicators that you will be targeted by the IRD at any time. Our office may strongly suggest the cover when we know the IRD will have significant queries. The policy does offer peace of mind to taxpayers seeking tax refunds, or expecting IRD action. Once the policy is in place all prior years taxes are automatically included in the policy.
Audit shield is simply a low cost insurance policy, paying all professional fees required to address any IRD audit or review of your business taxes.
|Posted on 23 June, 2019 at 1:10||comments (0)|
If you are a member of a KiwiSaver scheme or a complying fund you’re eligible for the Government contribution, provided:
you’re 18 or over
not elegible to withdraw your savings, and
mainly reside in New Zealand
The Government will pay 50 cents for every dollar of member contributions up to a maximum payment of $521.43. This means that you must contribute $1,043 annually (before 30 June) to qualify for the maximum payment of $521.
Kiwisaver year end is 30 June 2019.
First Home Owners
You may be able to withdraw some of your KiwiSaver savings to put towards purchasing your first home.
You must have been a KiwiSaver member for three or more years. You can not withdraw funds for an investment property.
If you have owned a home before, in some circumstances you may still be eligible to withdraw your savings. Your scheme provider may require you to contact Housing New Zealand to determine if you're in the same financial position as a first home buyer.
In addition to withdrawal of funds, after 3 years of contributing to KiwiSaver, you may be entitled to a KiwiSaver HomeStart grant. The grants are administered by Housing New Zealand and will be paid directly to your solicitor.
HomeStart grants available are:
For purchasing an existing home, the grant is between $3,000 and $5,000 based on $1,000 each year of KiwiSaver membership.
For building or purchasing a new home, or for purchasing land to build a new home on, the grant is, in effect doubled to, $2,000 per year of membership in the scheme, up to a maximum of $10,000 for five years for each member.
To be eligible for a KiwiSaver HomeStart grant you must:
-have been contributing the required minimum amount to KiwiSaver for at least three years
-be 18 years or over
-be purchasing or building your first home
-have a household income (before tax) of less than $85,000 per year (for one person), or less than $130,000 per year (for two or more people)
-have a deposit that is 10% or more of the purchase price, including the addition of the grant
-be planning to live in the house for at least 6 months from the settlement/completion of the property.
KiwiSaver is very flexible if you're self-employed. You're not required to contribute a set percentage of your pay.
You can either:
-make lump sum payments when you choose, or
-set up regular payments.
If you're self-employed you can enjoy all the benefits of KiwiSaver except the employer contributions. When you join, if you're eligible:
-the Government will pay an annual member tax credit.
-you'll be able to take advantage of the first home buyer's benefits.
Employer contributions for shareholder employees who pay themselves on PAYE are tax deductible, however please keep in mind ESCT taxes are deducted from employer contributions before funds are added to the employees fund. Overall there are no tax advantages for shareholder employees in making employer contributions to themselves.
Withdrawal on Retirement
You become eligible to withdraw all your savings as a lump sum when you qualify for NZ Super (currently at the age of 65), as long as you've been a KiwiSaver member for a minimum of 5 years.
Any withdrawals from your KiwiSaver account are tax-free.
Talking with your bank or an investment adviser is worthwhile before making withdrawals, "open-PIEs" and "Managed Funds" may be preferable options.
|Posted on 23 June, 2019 at 1:10||comments (0)|
How to reduce your tax bill
If wanting to reduce your taxes planning is required.
Timing involves paying taxes due at a later date, prolonging amounts due for as long as possible. Strategies include pre-paying expenses i.e. buying travel in advance; including accruals i.e. ensuring all accounts payable and trade accounts owing to suppliers at year end are included, weighing up payment basis vs invoice basis for GST, and if GST is even required. Timing is very important when it comes to taxes, for example if given a choice to make a large sale this year and pay 33%, or next year and pay 17.5%, given the choice it would be better to wait and pay tax on the sale at the lower rate. There are a number of other options such as GST payment periods 2, or 6 monthly, provisional taxes, and PAYE vs shareholder salary considerations that can all impact on the timing of tax payments. When ever possible paying tax later is the best idea to achieve savings.
Deductions include ensuring that all expenses are included, this may involve costs associated directly with your activity, together with overhead costs such as vehicle costs, depreciation on assets, and home office costs. There are a number of different categories of expenses to consider. In general the more information provided at year end the better. Include all expenses that allowed you to "continue in business" and to "earn your income". There are a number of tax rules that can be taken advantage of such as the FBT de-minimus allowing companies to make tax free distributions to staff of $300 per 3 months, for gym memberships, or the child de-minimus allowing $2,340 of income to be paid to school children without any PAYE being deducted.
Structure is an important consideration ,for example if expecting large losses on a start up a "look through company" is an ideal option. Losses should not be carried forward when paying tax on other income in the same year. Considering your structure can also ensure that income is available to be distributed to owners with lower personal marginal tax rates. Many small family businesses have both husband and wife as shareholders of the business. Trusts are a good option in some cases allowing income to be distributed to any of the beneficiaries and taxed at their marginal tax rates.
No CGT allows a significant advantage for asset owners to generate non-taxable income. How taxable income is spent is very important if wish to take advantage of the tax system. Property continues to be a very good option, tax losses resulting from investment property are available to be offset against all other income. Restructuring is available allowing your home to be mortgage free, and all debt applied against investments. Capital gains are not taxable if the timing of sales fall outside the "bright line test" period. Capital gains on business sales, shares, and other investments are also tax free. Investment in general is very desirable if looking for a greater return while minimising taxes.
The lack of a capital gains tax in NZ certainly provides a major advantage for investors to potentially make significant tax free gains.
|Posted on 23 June, 2019 at 1:05||comments (0)|
ACC Coverplus Extra - CPX
It's that time again, ACC has started mailing out their Cover Plus Extra renewals for business owners and self-employed.
This is their agreed value version of the cover for self-employed, if you are not on it, you should be. This solves the primary concern people have about defining how much their weekly compensation claim is. Haven't got it or have questions about it, message us and we can chat.
Options include reducing ACC cover and replacing with personal income/mortgage protection insurance, health insurance, and trauma cover. We can offer free no obligation quotes and advice.