McLEAN AND CO.
EMAIL NEWSLETTER  SEPTEMBER 2002

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. 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. Travel and Capital Expenses

  2. Overseas Travel Expenses

  3. Taxpayer's Spouse and/ or Family Members Accompanying Taxpayer

  4. Characteristics of Entrepreneurs

  5. Industry New Zealand Business Funding

  6. ACC TimeOut

  7. ACC Levies- Loss Situations

  8. ACC Levies- Part time Self Employed

 

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:

 

 

TRAVEL AND CAPITAL EXPENSES

Generally , travel expenses incurred in conection with the purchase of plant or other items of fixed capital are regarded as expenditure of a capital nature and therefore not deductible.   The expenses are looked upon as part of the cost of the machinery, and thus should be capitalised and depreciated at the appropriate rate.  However, a deduction is allowed for travel expenses  incurred on trips undertaken to make a general survey of new machines or new processes.   A deduction is also allowed if the object of the travel is to buy trading stock.

 

OVERSEAS TRAVEL EXPENSES

Overseas travel expenses are deductible to the extent that they are incurred in the course of the taxpayer's business.   Any element of holiday expenditure  is not deductible.

IRD generally requires full details of the expenditure where the taxpayer is the sole or principal shareholder in business on his or her own account or a partner in a partnership, is accompanied by his or her partner and family or has not recently ever travelled to the countries visited and the business is such that the need for the trip is not apparent.    The information obtained should include the itinerary, firms visited, business conducted, diversions from the business itinerary for private purposes, items of expenditure and the total cost.
Where a trip contains a private or capital element, an appotionment of the costs may be necessary.   Each case will depend on its own partcular  facts:
An example of the latter is given in the Tax Information Bulletin Volume 7, No. 12. August 1995 P 14.   Fred owns a tin can store.   He  is running short of stock so he travelled to Australia to buy some rubbish cans.  While he was overseas, Fred took the opportunity to spend a couple of days with his old friend Bert.   Fred spent a total of three day's in Australia.  The allowable deduction in Fred's case was the total cost of the airfare, and the cost of accommodation and meals for the day he spent on business.  The holiday aspect of the trip is incidental to the main purpose of travelling overseas for business.  Fred only visited Bert because he was there for business and took the opportunity to see him.
 
TAXPAYER'S SPOUSE AND/OR FAMILY MEMBERS ACCOMPANYING TAXPAYER

A member of a profession who is accompanied by his or her spouse when attending an overseas conference as the leader of a delegation, a member who is the only accredited delegate or a member presenting a paper may claim a deduction for the spouse's expenses.  Another situation where a deduction may be claimed is when an associated overseas organisation expects an employee should be accompanied by a spouse or the person travelling overseas must be accompanied because of ill health. A deduction may be allowed for travel to and from the conference and accommodation while at the conference and on normal stopovers during the journey to and from New Zealand.  Details of the claim should be sent in with the tax return.  Any expenditure which is of a holiday or private nature may not be claimed.

 

CHARACTERISTICS  OF ENTREPRENEURS

An examination of successful entrepreneurs reveals that they show the following common behaviours in the development of their business empires:

**   they started business on their own.

**   they recognised business opportunities at the start and have continued to do so thereafter.

**   they set themselves goals and carried these through.

**   they have vision.

**   they have the ability to deal with people.

**   they project a positive image.

**   they have a positive mental attitude.

**   they have a determination to achieve success.

**   they have energy and excitement for the work and are highly motivated.

**   they work hard and long hours.

**   they introduced innovation an product and service.

**   they provide a product/ service which the shareholder/ client/ customer wants and gives value to that party.

**   they have astute business minds.

**   they took risks, but with astute judgement.

**   they are flexible and always seeking new ideas, new technologies and new opportunities.

**   they strive to be one step ahead of the competition.

**   they strive to be the best in the business.

 

INDUSTRY NEW ZEALAND FUNDING

 Industry New Zealand provides grants from its Business Growth Fund.   This fund allows businesses to receive up to $100,000 over three years on a dollar-for-dollar basis.  This funding is not for "business as usual".   It is intended to help with new inititiatives that have the potential to significantly improve the companies results.

Companies applying for business growth funding need to have a sound management team, adaequate financial and business resources, a knowledge of the market and a good track record.   They also need to have a robust project in mind that they believe will generate substantial returns for themselves and the country.    Companies need to show that by pursuing an opportunity and gaining support from Industy New Zealand, they could double their turnover in the next three to five years.  It is important that the product or service is capable of being competitive on the world market.

The grants can be used to help companies find funding for business growth, undertaking feasibility studies and technical assessments, prototype design and testing, business and strategic planning, skill development, intellectual property protection and mentoring or project management.   Funding is generally for work undertaken by third parties.

Industry  New Zealand  can be contacted by telephone at 0800 224 480 or website www.industrynz.co.nz.

 

ACC TIMEOUT

ACC TimeOut is an income protection product you can purchase from ACC Corporation when you plan to take a break from work, such as for study leave, overseas travel or for domestic reasons.

Anyone who has had at least 12 months continuous employment, is presently employed or self -employed and is aged between 16 and 65 years can apply.

Under ACC TimeOut, if you are injured while taking a break you can receive a weekly payment of up to 80% of the amount you were earning before you took your break (subject to the maximum compensation levels).  The option provides compensation for your loss of earnings for a maximum of 5 years from the date you became unable to work.   It also provides personal planning help to get you back to work or a normal life.   If you were in the same situation and did not have ACC TimeOut cover, you would be classified as a non-earner and would not be entitled to compensation for loss of earnings.

In addition to weekly compensation, you will continue to receive the following benefits:

 

ACC TimeOut can be purchased up to one month after you finish work.   You can get an ACC TimeOut quote from the ACC Business Service centre, freephone 0508 426 837.

 

ACC LEVIES- LOSS SITUATIONS

For persons in full-time self employment ( i.e. they have no earnings as an emplyee and therefore are assumed to be in full-time self employment) in a loss situation, ACC will charge levies based on the regulated minimum liable earnings.

For mixed earners ( i.e. those with earnings as an empoyee also) operating in a loss situation , the minimum levy of $32, which covers the non-income related levy, is payable.

 

ACC LEVIES- PART  TIME SELF EMPLOYED

Part time workers are people who work fewer than 30 hours average per week in self emplyment.    Following the removal of the ACC Panel in the IRD IR3 Income Return Form, ACC will now determine part time status using historical information.

When this is not provided (i.e. for those who are newly part-time) ACC will determine status based on whether there are self employed earnings declared in an income tax return.  If there are and the person is not a mixed earner, ACC will bill them as full time.  ( N.B. a part timer will  only be billed at the level of the self employed earnings or nil if these are a loss if the earnings are less than the regulated minimum liable earnings applicable to full timers).

Therefore, where a person is newly part time or circumstances have changed, ACC will need to be advised of the status.

Newly part time self-employed people are not eligible for weekly compensation.  However they are eligible for other entitlements, including emergency care, medical treatment costs, support services such as home help and childcare, support services to help them return to work, lump sum payments for permanent impairment

Established part time self employed people will be eligible for weekly compensation

 

 

If we can assist further, please email McLean and Co as follows:

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