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McLEAN AND CO.
DIRECTORY Manager Address Office
Telephone Number ( Office
Facsimile Number ( Web
Sites www.taxreturns.co.nz www.taxreturnz.co.nz Email
Address murray@taxreturnz.co.nz Memberships ** ** Taxation
Institute of |
Page 1
McLEAN AND CO APRIL 2003
NEWSLETTER PAGE 2
BANKRUPTCY-
IS IT THE RIGHT OPTION TO RECOVER YOUR DEBT?
Bankruptcy can be an expensive option for a
petitioning creditor, costing approximately $1,000 for a creditors
petition, over and above the costs of obtaining an initial Order of
Judgement. As a debt recovery
option, bankruptcy is sometimes an inappropriate and expensive choice by
the petitioning creditor. Petitioning creditors often become frustrated when
the New Zealand Insolvency and Trustee Service (NZITS) investigates their
asset-poor bankrupt’s financial situation, and reports back that there
are simply no assets for repayment. This frustration can be avoided by
creditors’ understanding the limits of what the NZITS can achieve with
asset-poor bankrupts. So what can creditors do pre-bankruptcy to help
ensure that bankruptcy would be a good debt recovery situation?
They can do simple checks with credit agencies regarding the
debtor’s financial and asset position.
If the results show that the debtor is a business debtor and/or
asset-rich (including assets that were disposed of within two years prior
to bankruptcy and possibly voidable) then creditors may wish to proceed
straight to bankruptcy. But
if checks show neither of these conditions, then creditors should consider
another judgement action debt recovery option that is ideally suited as a
first step in this situation- an Order for Examination. To access Orders for Examination, a creditor must
first have an order for Judgement from the This simple and inexpensive procedure will be just
as effective as bankruptcy for debt recovery in most asset-poor cases, at
a fraction of the cost and time of obtaining a bankruptcy order.
Alternatively, the means test may also identify whether the debtor
is actually asset-rich and has equity in real estate or other major assets
that can be realised by the NZITS.
In this situation a creditor can then make an informed and
reasonable choice whether to invest the time and money required to make
the debtor bankrupt.
McLEAN AND CO APRIL 2003
NEWSLETTER PAGE 3
CUTTING
COSTS IN YOUR BUSINESS 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 , that have a big
impact on the bottom line. IRD
AND ACC IRD
have now completely ceased all ACC activities.
IRD ceased processing for payments for ACC and SEA (self employed
ACC Levies) from the end of July and all remaining ACC and SEA debt has
been written off. If
you file late returns for 2001 and earlier year, IRD will not bill you for
SEA Levies nor will information be passes to ACC to enable them to bill
you. If
there is any activity that changes the earnings on which levies are
calculated and this results in a refund of SEA, IRD will arrange with ACC
to make a manual refund. For
employer refunds, you should contact ACC directly. For
the 2002 and subsequent years, income tax reassessments arising from
changes to earnings in the relevant key points (Withholding
Payments, active Partnership Income, Self-employed Income, Expenses) on
the IR3 return will result in information being passed to ACC for them to
issue an amended invoice.
McLEAN AND CO APRIL 2003
NEWSLETTER PAGE 4
PRICING
YOUR PRODUCT OR SERVICE The
primary goal of business is to make a profit.
But many businesses
fail to do so because they don't know how to effectively price their
products or services.
Pricing is a pivotal element in achieving a profit and is one
factor that businesses can control. A
common pricing practice among businesses is to follow the manufacturer's
suggested retail prices. Though
suggested retail pricing is easy to use, it may be problematic. Merely
pricing the product or service in this way may either create an
undesirable price image, or not be mindful of the competition. Another pricing
strategy takes a little more research and business management ability.
Consider who your competition really is (another business)
and set your pricing accordingly. Don't try to compete with a larger
company's pricing, Why? Large firms buy and contract in large volumes and
with a broader customer base so their cost per unit or an increment of
time will be less. Instead,
highlight other factors, like customer service. Customers
will often pay more for a good or service if they get courteous, prompt
and personal service.
Make it a goal to be a friend to all your customers so that
they feel like a name, not a number. Let's say you want to hit the pricing issue head on regardless of the
giants in the marketplace. Many shrewd vendors have been quite successful
using this pricing strategy. Since
this angle reduces the profit margin per sale, your
business should reduce its costs only if you can fulfill other
factors. These include obtaining the best prices possible for the
merchandise, locating the business in an inexpensive location or facility,
closely controlling stock; limiting your lines to fast moving items.
If you're going to "price at the lower end of the
market," it also makes
sense to design advertising to concentrate on "price specials"
and to keep special service to a minimum. Remember
that time is money.
McLEAN AND CO APRIL 2003
NEWSLETTER PAGE 5
INDEPENDENT
CONTRACTOR OR EMPLOYEE There is a trend to take staff on as independent contractors for a
number of reasons: · Avoiding the need to pay ACC Levies by the employer
A distinction must be drawn between an employee and
an independent contractor. Payments
to an employee constitute payments of salaries and wages which are subject
to the PAYE system. An independent contractor, on the other hand, is taxed
on the basis that he or she is carrying out a business. In determining whether a person is an independent
contractor or an employee, it becomes for tax purposes a question of fact
or law. IRD and the
courts have developed several tests for distinguishing between an employer
and a contractor: ·
Control-
the employer’s right to control the method of doing the work i.e. the
employer’s right to choose, pay or control the employee. ·
Organisation
or integration- is the type of work or the way it is done the same as work
performed by other staff who are employees?
Is the work an integral part of the employer’s business? ·
·
Intention-
how are the payments for the work made?
Did the worker carry out the same activity as a self employed
person (or as an employee) in the past? ·
Economic
reality- is the worker
genuinely in business on his or her own account? Generally:
MEDICAL,HEALTH EXPENSES NOT DEDUCTIBLE
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. 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 the taxpayer as a human being. DONATION
REBATE CHANGES 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
McLEAN AND CO APRIL 2003
NEWSLETTER PAGE 6
43
IDEAS TO PROMOTE YOUR BUSINESS
1. Advertise in the
classified advertising section of your local newspaper. |
If we can assist further, please email McLean and Co. as follows: