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Published May/June 2011


Now that we are into the new 2011-12 tax year I wanted to give you an update on changes that have now come into effect.  We don’t usually like to put quite so much ‘tax talk’ into our newsletter but we simply had to this issue due to the amount of tax changes now in play.

 

Employment law changes 1 April 2011

Changes to both the Holidays Act and the Employment Relations Act came into force on 1 April 2011.  These changes are intended to reduce compliance costs, increase business confidence in recruiting new staff as well as speed up the resolution of workplace disputes.  The main changes include:

  • Employees will be able to cash in one week of their four weeks leave
  • Employees who have irregular working hours and pay will now have their holiday, sick and bereavement leave calculated on an average daily pay basis
  • Employers and employees will be able to agree to transfer taking a public holiday to another working day
  • The minimum wage will increase from $12.75 to $13.00 from 1 April, while the training and new entrants’ minimum wage will rise from $10.20 to $10.40, effective as of the same date
  • The 90-day trial period is being extended to all employers (currently limited to those with less than 20 employees) 
  • Employers will have to keep detailed personal files for each employee.  These files must contain signed copies of employment agreements, other terms and conditions, handbooks, as well as any intended agreements (even where these have not been agreed to by the employee).  These documents must be available to employees on request.  Employers have until 1 July to get their files up to the new standard.  We estimate that a good number of our clients will have some work to do here! 
  • Union representatives will need an employer’s permission to enter the workplace
  • Employers will be able to communicate with employees during collective bargaining
  • Minimum requirements establishing a fair and reasonable dismissal process will be set out in the Act and employers will have a much clearer process to follow.  This is great news for our employer clients, who can be fearful of dismissal processes being scrutinised for minor defects.
 
 
 
Working for families tax credits changes

The Working for Families (WFF) tax credits scheme is provided by the Government for families with children aged 18 or younger, to help with day-today living costs.  From 1 April 2011 changes came into force which seek to eliminate perceived loopholes that exist, such as the sheltering of income through the use of family trusts and the use of investment losses, such as from rental properties, to reduce their income used for calculating the entitlement for Working for Families.

The following amounts will now need to be included when calculating a person’s income for family assistance purposes:
  • Attributable trustee income
  • Attributable fringe benefits
  • PIE income other than registered superannuation schemes such as Kiwisaver and retirement benefit schemes
  • Passive income earned by children (includes interest, dividends and rent).  Amounts over $500 per child will be included as family income
  • Worldwide income received by a non-resident spouse
  • Tax exempt salary or wages under specific international agreements
  • Income equalisation deposits made by you, your trust, or a company controlled by you or your trust
  • Certain pensions and annuities – includes 50% of payments from life insurance policies or a superannuation fund (excludes NZ super)
  • Other payments received from any sources that are used for your family’s day-to-day living expenses (but only if the total amount from those sources is more than $5,000).  An example of this might be board received.

In future, when you apply for WFF tax credits, you’ll need to let IRD know about amounts from any of the above sources.

For those clients who receive or are entitled to WFF credits, when we prepare your 2012 tax return, we’ll need to request the above information.  Good records and communication from you will be essential.

 
 
 
ACC levies, no-claims discounts and experience rating

The Government introduced experience rating into the ACC levy system on 1 April 2011.  Here’s how it is likely to work:

  • Small employers (paying less than $10,000 per year in work related levies) will be entitled to a no-claims discount
  • Larger employers (paying more than or equal to $10,000 per year) will be part of an experience rating programme.  This programme will reflect both the employer’s and its industry’s performance in preventing injuries and claims and could create an increase or reduction in levies of up to 50%!
Clearly the Government is trying to provide employers with a financial incentive to prevent injuries as well as make levies fairer by ensuring low-risk employers aren’t paying for high-risk ones.  Having said that, is a no claims discount or loading of minus or plus 10% (the majority of employers will fall into the ‘small employer’ category) really going to incentivise employers to get serious about workplace safety?

Minimising shareholder employee ACC levies

Changes were made last year enabling shareholder employees to be classified under their individual occupation rather than the business activity of their employer company.  This change can make quite a difference to the levies you pay.  For example, the levy rate for an office manager is much lower than that of a factory supervisor.
 
 
 
 

Making the most of the 90-Day trial period

The new Employment Relations Amendment Act 2010, which came into effect on 1 April 2011, extended the 90-day trial period to all employers; prior to the amendment only those with fewer than 20 staff qualified.

The Employment Relations Act legislation requires that in order for a trial period provision in an employment agreement to be valid, the agreement must be in writing and state:

  • That it is for a specific period not exceeding 90 days starting at the beginning of the employment
  • That during the period the employer may dismiss the employee
  • If the employee is dismissed they are not entitled to bring a personal grievance or other legal proceedings in respect of the dismissal.

If any of these elements are missing the trial period is not valid. In addition, the trial period provision provides that the employee has not previously been employed by the employer.

Since the enactment of the trial period provision, there have been several cases heard through the employment courts that give some clarity of interpretation of this legislation. An example is Parkes v Squires Manufacturing Ltd, a recent personal grievance case, the employee received her employment agreement before starting work and signed it at lunchtime on her first day of work. The employer signed it a week later. The Employment Authority found that, as the employee had already started before signing the agreement, the trial period clause was not valid.

In essence, the trial period provides a level of protection if you have sincerely endeavoured to meet the standards expected of a “fair and reasonable” employer.

 
 
Latest tax talk
Company tax rates dropping
The company tax rate reduced from 30% to 28% from the 2011/2012 income year (for most companies, 1 April 2011). 

Building depreciation gone
Depreciation deductions on buildings with an estimated useful life of 50 years or more disappear from the start of the 2011/2012 year (for most of you 1 April 2011).  New rules have been introduced to ensure the fit-out of commercial and industrial buildings continues to be depreciable.






At last some GST simplification 

Sales of land now zero rated

In the past, whether GST should be added or not to the sale of land, has sometimes been a complex matter.  From 1 April 2011 these transactions will be zero rated, as long as the following apply:

  • The purchaser declares in writing  that the property is to be used for a GST activity, and
  • The purchaser is GST registered

 

 

Some interesting facts for you...

TIP is the acronym for “To Insure Promptness.”

“Blue Chip” comes from the color of the poker chip with the highest value, blue.

The NASDAQ stock exchange was totally disabled for one day in December 1987 when a squirrel burrowed through a telephone line.

The term "check" or "cheque" is derived from the game of chess. Putting the king in check means his choices are limited, just like a modern day cheque that limits opportunities for forgery and alteration. 



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