Welcome again to the McLean and Co. Newsletter in which we discuss current taxation and business matters. We trust you find it informative.  Any feedback would be welcomed.

McLean and Co. has installed Norton Antivirus software to minimise risk of virus transmission in the provision of this service.

McLean and Co. is a home based chartered accountancy practice based in Clive, Hawkes Bay.    Readers are invited to peruse the practice website www.mcleanandco.co.nz,  which lists services provided, gives contact details and indicates how to become a client, contains an extensive base of articles on business and taxation matters,  and has links to other websites that may assist your business.    Being a small firm itself,   McLean and Co. strives to provide a personal and professional service largely to a self employed person and small business client base.  Enquiries are welcomed.

INDEX

1. Relevant Business and Taxation Articles

2. Ceasing business- Advising ACC Corporation

3. Donation and Rebate Changes

4. Cancelling GST Registration

5. Ten Rules for the Good Life   

6. Medical and Health Expenses- Not Deductible

7. Reimbursing Employee for Use of Vehicle

8. Cutting Costs in your Small Business

RELEVANT BUSINESS AND TAXATION ARTICLES

The McLean and Co. website contains an extensive number of articles prepared by McLean and Co. relating to taxation and business matters.    Here are a selection that will be of interest:

• The Companies Act 1993- A Summary               www.mcleanandco.co.nz/Page99.htm

• ACC- Glossary of ACC Terms                           www.mcleanandco.co.nz/Page101.htm

• Finding Customers                                              www.mcleanandco.co.nz/Page82.htm

• 43 Ideas to Promote your Business                    www.mcleanandco.co.nz/Page97.htm

We are happy to accept new clients.  Please contact ourselves at the contact points highlighted above if we can assist you in your accounting and taxation requirements. Our website lists information required for this in the following link:

When ceasing business, there are a number of procedures to follow regarding ACC for both employers and self employed people. Note that, for both , Inland Revenue Department does not notify ACC that you have ceased business.   If you dont you will continue to incur ACC Levies.

If, during the levy year, you are ceasing your business, part of your business or ceasing to employ staff, it is important for you to notify ACC as soon as possible.  You will need to complete an Emplyer Levy Adjustment Form (ACC417). The information you provide on this form will enable ACC to reassessv your provisional tax invouce, or make the approriate adjustments to your final invoice. 

If you are ceasing your business it is important for you to notify ACC as soon as possible.  You will need to complete a Self-employed Cessation Form (ACC 416). The information you provide on this form will enable ACC to calculate the levies payable on your final invoice.

Legislation has now been passed to increase the maximum charitable donations threshold from $1,500 to $1,890 for the 2002-2003 income year onwards.  The legislation was passed on 26 March 2003 and now means taxpayers can claim a maximum of $630 for this rebate from 1 April 2002.

If you are stopping all taxable activities you must let IRD know you are cancelling your GST Registration. If your taxable supplies for the next 12 months will be less than $40,000, you may choose to cancel your registration.  You need to complete your GST Return and include all taxable supplies made and received from the beginning of the taxable period to the date you cease.

If you are keeping your assets after cancelling your registration you'll have to make an adjustment in Box 9 of your return.  This includes any assets acquired before GST was introduced.

• for retained assets acquired after GST was introduced (1 October 1986) output tax will be calculated on the open market value

• for retained assets acquired before GST was introduced, output tax will be calculated on the lesser of, open market value or cost. 

This adjustment applies both to those assets kept for use in another business and to those kept for private use.   If your business has stopped before you cancel your registration, you must make sure you have accounted for GST on all money owed to you by debtors and all money you owe to creditors.

1. Never put off till tomorrow what you can do today.

2. Never trouble another for what you can do yourself.

3. Never spend your money before you have it.

4. Never buy what you do not want because it is cheap, it will never be dear to you.

5. Pride costs us more than hunger, thirst, and cold.

6. Never repent of having eaten too little.

7. Nothing is troublesome that we do willingly.

8. Don't let the evils which have never happened cost you pain.

9. Always take things by their smooth handle.

10. When angry, count to ten before you speak; if very angry, count to one hundred

(This is a list of "Thomas Jefferson's ten rules for the good life")

The IRD's view is that expenditure incurred to remedy injury or disability to the human body is expenditure of a private or domestic nature, even if the expenditure is to enable the taxpayer to resume earning income by having his or her health restored. It is deemed that such expenditure is not incurred in the course of deriving gross income, nor is it an overhead or functioning cost in a taxpayer's business. Instead, it is a health maintenance cost for a taxpayer as a human being.

The IRD allows you to reimburse an employee for using his or her private vehicle for work related purposes.  The reimbursements are tax free to the employee. The employer is entitled  to a tax deduction for the amount paid.  You can choose either:

•  to reimburse actual costs incurred by the employee, or

• to use the IRD mileage rates.

The IRD usually considers petrol costs to be the only costs that can be reimbursed

The IRD rates for motorcars are:

• either: 

• 1 to 3000- kilometers- 62c per kilometer, and 3001 kilometers and over- 10c for each kilometer over 3000, or

• a flat rate of 28c per kilometer

Do you know where to start? You know when something big goes wrong in your business when a contract isn't renewed, or a product line doesn't sell. But not every business owner knows when little things go wrong. little expensive things, that have a big impact on the bottom line.

When business is good, it can be easy to ignore the little things and spend your energy on the bigger picture. but when the economy takes a downturn, it really pays to take a good hard look at every aspect of your business.

Which of your customers are actually costing your money? I'll bet there are more than you think. Customers who require a lot of support, who aren't satisfied with the work you do, who demand large discounts or special deals, who never seem to appreciate your service or product. Find out who they are - it may be time they looked elsewhere, and you concentrated on the customers that value your company.

SUPPLIERS

Don't take things for granted.  While it's true that long standing relationships with trusted suppliers can make things smoother and easier, you need to be aware of competitors' prices and services. you want to be sure you're getting the very best deal you can on every transaction. And don't be afraid to ask for a discount.

Got a feeling that someone's not pulling their weight? Think you might have to downsize, but don't know where to make the cuts? Keep track. Get people to write down what they do each day.  Find out who's doing what and how long it's taking them. Because without that knowledge, you'll end up hiring and firing on a hunch. And you might just lose your most valuable employees.

OVERHEADS

Negotiate, reduce, cut. But first, find out how much you're paying now. What does your phone cost per month - is there a cheaper plan out there? How many color copies, faxes, printed and bound reports does your company produce each month? Do you track and charge for them? What about travel expenses? Stationary supplies? Rent? Before you start cutting, you've got to know where to cut. If you're not keeping track and recovering this type of cost, you're loosing money.

BIG PICTURES PAINTED WITH SMALL BRUSHSTROKES

Being successful during difficult economic times means paying attention to each small brushstroke that makes up the big picture of your profitability. Because what you don't know will hurt you. And what you do know will help you build a stronger, leaner, more profitable company.