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For many years, the low value asset threshold for depreciation had been set at $500.00. This meant that everything over $500.00 had to be capitalised and depreciated as a fixed asset. The cost of many business items has increased significantly since the rules were last reviewed. At the same time, the useful life of the items has decreased. This is why the government was reviewing the rules and planning to increase the threshold.

The pandemic came along and the under review low value asset rules were a perfect option to allow some quick action to help stimulate business investment. The updated rules were one of the first COVID-19 Business Response measures, announced in March 2020.

The New Low Value Asset Rules

From the 17th March 2020, the low value asset threshold for depreciation has been increased to $5,000.00.

This is a ten-fold increase from the previous threshold of $500.00. The governments intention for this is to spur business investment. It is hoped that businesses will be encouraged to spend more in order to take advantage of the ability to expense items costing up to $5,000.00. This was a direct reaction to the drop in business confidence as a result of COVID-19.

12 Month Time-frame for New Rules

This new threshold is strictly limited and expires on the 16th March 2021. In order to expense a low value asset costing up to $5,000.00, you must purchase it on or after the 17th March 2020 but before the end of business on the 16th March 2021.

There was initially some confusion around when the rules would come into effect. This was largely due to the chaotic situation in the early days of the pandemic and the requirement for the rules to be amended by legislation. The 12-month period is as outlined above and is not in line with the standard 2020-2021 tax year.

Low Value Asset Rules from March 2021

From the 17th March 2021, the low value asset threshold for depreciation will be $1,000.00.

This is double the old limit of $500.00 and is in line with the original uplift intentions signaled before COVID-19.

There is no time limit on this adjustment. It will remain effective until varied by future legislation.

Benefits of the Adjusted Low Value Asset Rules

Benefits for Small Business Owners

If you have been put off investing in your business because you would have to wait years to claim the full tax benefits, this may be the opportunity you have been waiting for. Need a few new computers? Now’s the time to invest. Need to refresh the workspace to make it a bit more inviting and productive? Now’s the time to invest. Need to optimise your online presence for post-covid growth? Now’s the time to invest.

If you run a small business selling to other businesses, this is a perfect opportunity to market the tax deduct-ability of your products. For many savvy business owners, it might be just the sweetner they need to convince them to spend up to $5,000.00 with you.

Benefits for Residential Property Investors and Landlords

The Healthy Homes Standards are a potentially costly burden for may landlords and property investors to bear. These changes offer the ability to implement the required expenses and claim the full tax deduction in this tax year.

This means that you can invest in the new heatpump, glazing or insulation and claim the full amount as an expense (as long as it remains under $5,000.00).

The requirement for you to include a statement of compliance with the Healthy Homes Standards has also been extended by the government. You were required to comply with this new regulation from the 1st of July 2020. This has now been delayed until the 1st of December 2020.

There will not be a better time to get the required upgrades done.

Depreciation Adjustments Announced with Same Legislation

The government also announced changes to the commercial investment property depreciation rules in the same package of tax changes. This will allow depreciation in much the same was as prior to the 0% rules which were passed in October of 2010. If you would like to view the IRD information on this announcement, click here. This depreciation rule may apply to your AirBNB properties.

 

If you would like a run-through of the new rules and how they may benefit your business, feel free to get in touch with us. You can book in a free chat with one of our team or simply flick us an email.

As a small business owner, you’re probably keeping a close eye on every cent you spend. You need to have a good eye on your income and expenses to manage your cashflow, so that’s a good thing. However, it might mean that you are wasting time micro-managing your finances and not hiring people to help give your business a boost. Hiring a bookkeeper can be a great investment fro any small business.

What Does a Bookkeeper Do?

A Certified Bookkeeper will take care of your daily business financial management. They’ll make sure your books are up to date, balanced and reliable so they can support the best possible decision making. They’ll manage your invoicing (accounts receivable), track your receipts and general expenditure and reconcile your accounts payable.

All of the frustrating daily and weekly financial tasks that you hate or that just sucks up half your day, they love doing. Not only do they love that work, they are likely a lot faster and more efficient at doing it than you are.

Hiring a Bookkeeper Saves You Time

Unless you’re a bookkeeping whizz and love those debits and credits, you might find your bookkeeping to be a headache-inducing waste of time. Chances are, you’ll put off your bookkeeping until its a massive chore. This means it takes up more time and you like it even less. Even if you do enjoy it, doing this day-to-day book work is dragging you away from the parts of your business where you should be focusing your energy and passion. Your time is valuable. You’re much better investing your time in value-adding activities like sales, networking and marketing your business.

The time you spend trying to understand your financials could be better spent on tasks you’re good at. A Certified Bookkeeper will be more efficient than you, they won’t spend all day reconciling bank accounts and attaching invoices and receipts. They’ll have it done in minutes. They won’t have as many errors and overall, they will save you a mountain of stress.

Your time, and your sanity, are worth investing in a Certified Bookkeeper.

A Bookkeeper is on Top of Your Cashflow

Hiring a bookkeeper means that you’ll always have someone with an eye on your cashflow.

They’ll help you get paid. Many small business owners have a hundred things to get on and do. It’s easy for things like invoicing and accounts receivable t fall down the list. It is essential to your business survival that you send out invoices as soon as possible. It is equally as important to follow up with late payers to see what’s going on. These are harassing calls, just a friendly, personal reminder that the invoice is outstanding and due for payment. You might feel bad doing this, which is why its the perfect task for your friendly, professional bookkeeper.

Your bookkeeper will also ensure that you don’t end up getting any of those calls from your creditors. They’ll ensure that your bills are paid on time.

Id there any better investment in your business than one that makes sure you’ve always got cash flowing and money in the bank?

Hiring a Bookkeeper Prevents Costly Errors

A Certified Bookkeeper knows their stuff. They are committed to professional excellence and undergo ongoing professional development to make them experts in their field. They won’t make the same mistakes that you’ll make, either because you’re rushed or because you haven’t got around to reading the latest 53 page IRD tax bulletin.

Some mistakes might seem small and insignificant at first. However, data entry errors, mixing up expenses and mis-claiming GST, can all quickly add up. These mistakes cost you more time and more money.

If you are doing your bookkeeping and then relying on your accountant to clean things up a year-end, you’re burning money. What you are doing is then getting your accountant to be your bookkeeper, at accountant’s hourly rates! It also takes a lot longer to unpick and re-reconcile transactions that happened months or even years ago.

At the worst end of the scale, consistent mistakes, even little ones, could flag you for an IRD audit. An audit can cost thousands to resolve, and that’s even if things are nice and tidy!

It’s best, and cheapest, to get it right from day one. Get in an expert to keep your books in order.

Certified Bookkeepers are Experts

Are you up to date on every movement in tax law? Do you understand how small changes to the rules effect your business? A Certified Bookkeeper is. They can advise you about any changes that are coming that may impact on your business and can offer insight into how to prepare and minimise any impact or maximise any benefit.

Hiring a bookkeeper can also provide you with insight into your company’s financial position. If you’re short on cash, overspending in certain areas or struggling to collect accounts receivable, your bookkeeper will tell you. They can also work with you to help remedy these issues. If there is something you don’t understand about your business finances, your bookkeeper can help to explain it to you. Because they are slightly more human than accountants, they can even explain it all in plain English, not accountantese. So your business financials will never be a mystery again.

Hiring a Bookkeeper is an Investment in Your Business

With a Certified Bookkeeper on board, you can sleep easy knowing your business books are in the hands of a professional.

Not all bookkeepers are created equal. At MBP, all of our bookkeepers are trained professionals and are Certified Bookkeepers with the Institute of Certified New Zealand Bookkeepers (ICNZB). The ICNZB ensure that they are professionally competent and that they uphold the highest standards of continuing professional development and ethics. And the best part, our Ceritfied Bookkeepers are about half the cost of an accountant, so you get exceptional value from your investment.

Want some help with your bookkeeping? Get in touch with the team of Certified Bookkeepers at MBP, or book in a chat with us today.

The government’s latest COVID-19 support package includes further measures to try and ease the pain of the lockdown. It includes ‘tax breaks’, business advice funding and guidelines for tenants and landlords.

At first glance it seems this package, unfortunately, may not do a lot for small businesses and leaves a lot to be desired. There are no in depth details available yet, so we will have to hold on, likely until 27th April.

Tax Loss Carry-Back Scheme

A large portion of the package is the tax loss carry-back scheme which will allow some businesses to access previous tax payments as refunds. Essentially this means a forecast loss in the current financial year can be offset against the tax paid on a profit from the prior year. Basically 2 tax years become 1 year.

This scheme relies heavily on perfect forecasting for more than 11 months into the future. Any mistakes in the calculations or forecasts will result in Use of Money Interest being charged by the IRD, likely back to early in the 2020 tax year when the adjusted provisional payments will have arisen originally.

This scheme has the potential to help some larger, more established businesses with steady monthly turnover year to year, but really does nothing for growing or smaller businesses with less certain profitability.

We recommend that in the short-term, your efforts are much better spent looking at ways to make your business thrive after lockdown. Don’t distract yourself with this poorly thought out policy until it actually has some usable detail or some tweaks that make it more applicable to the businesses its supposed to help.

Commercial Landlords and Tenants

The Government has announced its intention to put in place some temporary law changes to support commercial tenants and landlords impacted by COVID-19. The goal is to make it easier to keep lease arrangements and get back to business as usual after the epidemic. Many businesses have been unable to operate due to the level 4 lockdown alert, so they may have difficulty payment rent. Landlords, in turn, may have trouble making mortgage payments.

Important Note: Landlords and tenants will not receive financial support in the form of cash payouts.

The temporary bill that is set to come is designed to give commercial tenants more time to catch up on overdue rent before a landlord can take steps to evict them.

Some details:

  • For the next three months, landlords can’t apply to end the tenancy for rent arrears unless the tenant is at least 60 days behind in rent.
  • Landlords will have to give 30 days notice to cancel a lease, up from the current 10 days.

The official advice for tenants that can’t pay their rent is to let their landlord know right away. Be honest about the situation and get a payment plan in place.

If you will continue to have trouble, you may be able to access financial support from the Government’s Wage Subsidy and Leave Payment scheme that is available to eligible employers and workers.

We hope to have more details on this after April 27th, but please get in touch with us if you have any questions.

The business.govt.nz website is regularly updated with the latest COVID-19 news and announcements for businesses.

Are you Worried about Cashflow?

If you’re worried about your cashflow, please don’t hesitate to get in touch with us.

We will do all we can to help you implement cash management processes and forecasting techniques to help. There are also some finance options available to you as well. Facilities may be provided quite quickly, so just ask if you need some help and we’ll work out what’s best for you. Remember, we are in this together.

We have the ability to provide you with FREE cashflow forecasting software for the next three months. Reach out to the team to talk to us about your options.

Thank You

Thank you for your continued support and patience as we work to wade through government packages, announcements and updates each week. Please get in touch if you have any questions.

We are in this together.

Want to reduce some of your business admin burden but not sure where to start? Here is our list of the Top 10 things we think you can outsource to get started.

1. Outsource Your Payroll

Nothing makes your staff angrier than not being paid properly. Payroll is a lot more complex than just paying your staff their hourly rates or salaries. The Holidays Act is the bane of many businesses, large and small. Its a part of your business that needs good systems and great, highly skilled people so that your business can avoid the bad publicity and expense that comes with screwing it up.

A Certified Bookkeeper or member of the Payroll Practitioners Association are your best options when looking for an expert to help you get your payroll sorted.

2. Outsource Your GST Returns

GST Return processing is a regular and time consuming process. It is also a very easy thing to outsource if you are new to outsourcing. Get in touch with a Certified Bookkeeper and use their expertise to help ease the burden of regular GST compliance.

It is important to use a Certified Bookkeeper or Tax Agent to ensure you don’t create more headaches for yourself in future.

3. Outsource Your Accounts Receivable Management

Cash is king. From drafting quotes to reconciling payment, your accounts receivable process is the core of your business cashflow and will make or break your business. If you don’t have an accounts receivable process, you really need one. Outsourcing the process to an expert can be a great way to get an effective process in place.

Outsourcing your accounts receivable management can help to streamline the process and make sure you keep on top of your debtors. Working with a bookkeeper on your accounts receivable process will help you with:

  • Drafting quotes to potential customers,
  • Managing deposits for jobs,
  • Raising interim and final invoices,
  • Managing debtors and chasing late payments.

Outsourced to a professional, a proper accounts receivable process will help you to keep the cash rolling in while you focus on serving your customers and doing the things you love.

4. Outsource Your Accounts Payable Management

Keeping on top of all of your accounts payable can be a bit of a mission. You don’t want the accounts departments of your suppliers to be getting in touch with you all the time, its just not good business.

Most business owners seem to fall into one of two categories with their payables. You either avoid them and pay them in big batches once a month, or you pay them as soon as they come in. Neither option is desirable and both are bad for cashflow in different ways.

The best approach with your payables is to simply pay them when they are due. You expect your invoices to be paid on your terms. You should pay your suppliers bills on their terms.

Follow a simple process:

  • Review each bill you receive for accuracy and payment terms.
  • Record the bills as you review them into your accounting system.
  • Plan payment dates and set up batches in advance.
  • Set a certain day each week to process batch payments.
  • Send a remittance after making payment.
  • Allocate and reconcile payments in a timely manner.

5. Outsource Your Software Implementation

Software is a great tool to improve your business efficiency. However, for the automation that software offers to have the best benefit, it has to be implemented properly. Unless you’re an IT and implementation expert, it may be best to get someone in to help walk you through the process and make sure it goes off without a hitch.

There are a number of tech savvy professionals that you can use to help you select and implement software solutions. Selecting the right solutions is the first important step. Implementing properly is the make-or-break step. The overall change management process will also be able to overseen by the implementation team. Effective change management can help to avoid issues with your team having to learn new systems and processes.

Implementation experts are also going to be able to train you and your team on the software your are putting in place. Their end to end solutions will help to make what can be a nightmare into a smooth process that boosts your bottom line.

6. Outsource Your Email Management

More and more communication is happening electronically. Getting some help with your emails can help to free up a lot of your day.

A virtual assistant can help to manage your emails, delete spam and filter out the most important communications that require your attention. This means that when you jump into your emails, you’ll only have to deal with the most important communications form customers and suppliers.

7. Outsource Your Marketing Management

Marketing is the life blood of your business. Even successful and established businesses need to undertake at least some marketing to maintain their market position. If you are looking to grow, marketing is even more important.

The marketing activities you can outsource vary from your graphic design through to your Google Adwords management and everything in between.

Get in touch with a few suppliers of these services. It’s important that you find someone who thoroughly understands your business so that they can easily and seamlessly communicate with your target market and have the greatest benefit to you.

8. Outsource Your Social Media Management

Social media is a total time-suck. An hour can disappear in the blink of an eye. This is what makes it a really good task to outsource to a professional.

Getting a professional to handle your social media can help you to avoid the time-suck. You’ll be able to keep up regular posting, engage with your customers and deal with everyone in a personal manner, all while focusing fully on your business.

9. Outsource Your Copywriting

Getting a professional to handle your copywriting can be a real benefit. From SEO to blogs and proofreading, a professional copywriter can have a number of benefits to your business. They will also free up a lot of time for you to focus on value adding activities in your business.

We recommend you get in touch with the team at Spotty Lizard to have a chat about your copywriting needs.

10. Outsource Your Cleaning

Cleaning is one of the main things we recommend business owners outsource. Its a great way to relieve a weight off your shoulders by getting rid of a task you probably hate. Its an outsourced activity that has a great benefit to you personally and professionally as its something that wastes a lot of time and energy and is something that almost no one enjoys doing. The added benefit is that office cleaning is fully deductible for tax purposes while getting your home cleaned can be a part of your use of home claim if you work from home.

It doesn’t have to be business related tasks that you outsource. Anything that helps to make your life easier will free you up to focus on your business and the things you actually enjoy doing.

If you are keen to discuss the things you could outsource in your business or life, have a chat with an MBP Business Support Advisor.

If financially things aren’t looking that great, you may be considering declaring bankruptcy. Making your debts go away may seem like the obvious solution, but there’s a lot to consider before you do. While bankruptcy can clear your debts from the time you lodge a debtor’s petition with the Official Assignee, it’s far from being the end of your problems.

We’re going to take a look at what declaring bankruptcy really means financially and personally, how bankruptcy works, alternatives to bankruptcy, applying for bankruptcy and what happens afterwards.

What Does Declaring Bankruptcy Mean?

When you declare bankruptcy, you are effectively saying that you are unable to repay any of your debts. This means that you are insolvent, and cannot pay any of your debts when they are due. If you have a debt of over $1000 or greater, you are eligible to apply to the Official Assignee for bankruptcy.

If you are declared as bankrupt, most of your assets can be confiscated and sold by the Official Assignee. The exceptions to this are personal belongings, tools for work, household furniture and appliances to a set value, a vehicle worth up to $6500 and cash up to $1300. The Official Assignee can shut down your business and sell its assets, sell your home, take any money you are given, cash out your term life insurance and any other savings.  If you have gifted money to others within the past five years, this can be taken back. The same goes if you transferred your assets to a family trust.

Alternatives to Declaring Bankruptcy

If your debt is smaller than $47,000, you could consider a No Asset Procedure or Debt Repayment Order instead. Both of these are formal alternatives to being bankrupt:

  • No Asset Procedure – best suited if you have no assets and owe between $1000-$50,000. You can only apply once, and it is a less formal situation with shorter consequences to bankruptcy. It is usually discharged after one year.
  • Debt Repayment Order – if you owe less than $50,000 in unsecured debt, a Debt Repayment Order can give you extra time to repay your debts. The Official Assignee and DRO Supervisor will work out a repayment scheme you must follow. Your assets remain in your control and your name is listed on the Official Assignees website. It is discharged once the terms of your order have been completed.

Other things you can try to do to help avoid a bankruptcy include:

  • Sell your assets – things such as clothing, jewellery, furniture
  • Cancel any subscriptions – things such as pay-TV, newspapers and magazines
  • Set a budget –identify ways you can cut costs and pay creditors
  • Restructure your debt – put into one low-interest loan
  • Offer creditors a final sum payment – sometimes creditors will accept a amount smaller than the total debt just to claim back something financially

The consequences of bankruptcy are quite severe, so if you can, seek other alternatives.

Consequences of Being Declared Bankrupt

Yes, once declared bankrupt, you will be released most types of debt that you listed in your application. However, there are other consequences including the seizing of all of your assets, except for the minimum as we mentioned above. Other consequences or implications include:

  • Negative credit rating – this can affect your ability to borrow money or obtain credit in the future. It can also make it harder to rent a property.
  • Banks may close your account or refuse you to open one.
  • All of your income and expenses must be declared to the Official Assignee.
  • Power, phone and insurance companies may refuse to provide services to you.
  • Your employee may not want to employ you anymore based on that your bankruptcy is a risk to their business.
  • Your details and related information can be seen online.
  • The Official Assignee may want to sell assets you own jointly with others.
  • You cannot travel overseas without the permission of the Official Assignee.
  • You cannot run a business or be employed by a relative.
  • You cannot take any legal action against anyone.
  • If applying for credit over $1000, you must declare you are an undischarged bankrupt.

Then there are the social implications, where people treat you differently and this can cause significant difficulties.

How to Apply for Bankruptcy

You can apply for bankruptcy by completing a debtor’s application to the Official Assignee. This can be done online. When filling out a statement of affairs form, you will need to list details about your assets, cash and debts. Once the Official Assignee has declared you as being bankrupt, most of your debts will cease and creditors will not be able to contact you for repayments.

Appointed to administer the Insolvency Act 2006, the New Zealand Insolvency and Trustee Service is responsible for controlling all No Asset Procedures, Debt Repayment Orders and bankruptcies. It is then the job of the Official Assignee to collect and sell your assets to repay your creditors.

Once your application has been made, the Official Assignee will be in contact within 10 working days and ask for any necessary information. If your application is successful, your details will be published on their website, newspapers or NZ Gazette, and your creditors will be sent a report about their next steps in getting their money.

What Happens After Bankruptcy?

Once declared an undischarged bankrupt, creditors can no longer contact you and ask for money. They instead need to work with the Official Assignee. You will though, need to cancel any current direct debits you have made and seek permission from the Official Assignee if you want to go overseas, be self-employed or employed by a relative.

You remain an undischarged bankrupt for three years, but your name remains on the Official Assignee’s website for seven years, or indefinitely if this is not your first bankruptcy. Its is obviously not ideal to be declaring bankruptcy multiple times. If you have paid your debt in full or have a significant change in income and can now pay your debts, you can apply for an annulment. You can also apply for early discharge to the High Court but seek legal advice first.

Once three years have passed and you are discharged from bankruptcy, the restrictions placed on you are no longer valid. You regain control of your finances, can become self-employed and travel overseas when you wish.

It is seriously recommended that you do not wait until things get so bad financially that you have no other option than to declare bankruptcy. We recommend coming and talking with us to discuss your options, which can include budgeting, working out debt repayments, identifying assets to sell or ways of generating additional income. It would also be beneficial to look at ways to improve your financial literacy and consider taking some financial awareness coaching if you are a business owner.

If you have found yourself in a challenging financial situation, please seek advice. We’re here to help.