McLEAN AND CO. Chartered Accountants

Accounting                               Taxation                                   Business Advice and Development Assistance                                        

 P.O. Box 10 , Clive         133 Main Rd, Clive           Tel. (06) 8700952          Fax. (06) 8700955 

Email murray@mcleanandco.co.nz                                  Website www.mcleanandco.co.nz

 
EMAIL NEWSLETTER  OCTOBER 2013
 

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

 

NEW CLIENTS

We are happy to accept new clients.  We would be happy to assist colleagues and acquaintances as new clients.

 

INDEX

  1. Office Closures

  2. Customs Match Identifies Student Loan Defaulters

  3. Posted GST Returns- Put a Stamp on It

  4. Taxing Cashed Up Annual Holidays

  5. Deductibility of Travelling Companions Travel Expenses

  6. Business Strategies- Your Choice of Three

 

OFFICE CLOSURES

The Office will be closed for two periods prior to this coming Xmas.  They are:

 

CUSTOMS MATCH IDENTIFIES STUDENT LOAN DEFAULTERS

IRD can now use data from the New Zealand Customs Service to identify student loan defaulters when they enter or leave New Zealand.


IRD will contact borrowers who have defaulted on their loan, and been identified through the match, to discuss the unpaid Student Loan amount and arrange repayment.

 

POSTED GST RETURNS- STICK A STAMP ON IT

From the beginning of October 2013 IRD willl no longer provide postage-paid envelopes for people who file paper GST returns.

 

TAXING CASHED UP ANNUAL HOLIDAYS

Employees can “cash in” up to one week of their annual leave entitlement if the employee and employer agree. The payment for this annual leave should be treated as an extra pay or unexpected bonus. Because it’s taxable income, PAYE should be calculated using the rates for extra pays. If your employee usually has Student Loan or KiwiSaver deductions made from their pay, deduct these from the cashed-in annual leave as well.

Your employees may need to check that the correct amount of PAYE has been withheld over the tax year. Your employee’s Child Support liabilities and Working for Families Tax Credits entitlement may also need to be adjusted if their family income has changed.

 

DEDUCTIBILITY OF A TRAVELLING COMPANION'S TRAVEL EXPENSES

In order to be deductible, the companion’s travel expenses will have to satisfy the general deductibility provision. If the companion is accompanying the taxpayer simply for companionship or to attend social functions, then this expenditure will not have a sufficient nexus with the assessable income of the taxpayer’s business. However, a deduction may be permitted where the companion supports the taxpayer, to a reasonably substantial degree, in the business being undertaken.

This only applies to individuals, sole traders and partners in partnership. It does not apply to companies, where different rules apply (e.g. FBT and dividends).

 

BUSINESS STRATEGIES TO ADOPT- YOUR CHOICE OF THREE

Ultimately you have to settle for one of the three business strategy options, and it is important that you are clear on what one you are going for.  

Your business strategies choices are, at the end of the day, very simple.   The big question is, how do you want to position yourself in relation to  your competition.  Basically your options are:  

  • To be the cheapest
  • To be the best
  • To dominate a market niche

Many small businesses go for the first option, in the mistaken belief that it is the only way to survive.   The problem is, there will always be someone who can do what you do more cheaply than you can.  

A cost leadership strategy is only really suitable for big businesses that have substantial economies of scale.  They are able to spread their overheads thinly over large volumes, and charge low unit prices.   So, if you are running a small business, this strategy probably won’t work for you.  

If, as a small business, you build your business reputation on being the cheapest, you are operating from a position of weakness.  Even if you can survive with your low prices, you will not be able to withstand a price war with a bigger competitor.  

The second strategy, being the best, can be used to build a powerful competitive advantage.  It means, however, that you have to have a unique product.  Otherwise you will have to spend a lot of money on research and development to stay ahead of the competition.  

You need deep pockets to win with this strategy.  Unless, of course , your product is so specialised that no one else is producing it.  And big companies, for whatever reasons, don’t want to produce it either.  That would give you dominance over a niche of your own.  Generally speaking, a product leadership strategy is only for the big boys.  While being the best in the category and staying that way can be a powerful strategy for highly specialised small businesses, it is just not sustainable for most.  

Dominating a market niche in your industry is the most suitable business strategy for most small businesses.  By adding value in a way that attracts a particular kind of customer, you can steadily build your business success. You are able to charge a premium.  And you don’t have to be the “best”.  

The trick, of course, is to clearly identify your niche market, and convince your target market that you provide the best solution to their problem.   For nearly all businesses, finding a niche and dominating it provides a solid foundation for building a business on.  

It is very important that you are absolutely clear on what generic strategy you are relying on.   Your business direction, by definition, is supported by a number of strategic tactics, whether you are aware of using them or not.    If you aren’t clear about your overall strategic direction, you may end up using conflicting strategies. For example, focusing customers on your low prices at the same time as you introduce best of class products.  Doing this means your profitability suffers and you fail to attract the customers you want…. not good!   Deciding on the generic strategy that will create the business success you are looking for, clarifies your thinking.  And it helps you see clearly what tactics you need to use.

 

McLEAN AND CO KNOWLEDGE CENTRE AND ARTICLES ABOUT TAXATION AND BUSINESS IN GENERAL PRESS HERE FOR BUSINESS STARTUP KNOWLEDGE CENTRE PRESS HERE
FOR INFORMATION ABOUT COMPANY INCORPORATION PRESS HERE FOR PREVIOUS MONTH EMAIL NEWSLETTERS PRESS HERE

FOR PROPERTY INVESTMENT AND TAX INFORMATION PRESS HERE

FOR FRANCHISE INVESTMENT AND TAX INFORMATION PRESS HERE


The information provided in this email newsletter is for informational purposes only.   McLean and Co. accept no responsibility for the opinions and information expressed in the information provided and it is provided "as is" without warranty of any kind.    The user assumes the entire risk as to the accuracy and use of this document.   Readers are asked to seek professional advice pertaining to their own circumstances.    The McLean and Co. email newsletter may be copied and distributed subject to the following conditions:
  • All text must be copied without modification and all pages must be included.
  • This document must not be distributed for profit.    

 

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