The Taxation (Annual Rates for 2018-19, Modernising Tax Administration, and Remedial Matters) Bill was introduced into Parliament in June 2018. The Bill seeks to improve tax administration and modernise the revenue system by making tax “simpler and easier” for individuals. However, the majority of the proposed improvements are heavily reliant on the success of the Inland Revenue’s shift toward increased automation.

The key proposals seek to help individuals pay and receive the right amount of tax during the year, for example by:

• enabling IRD to help individuals determine their appropriate tax rate or code;
• using tailored tax codes;
• automating tax refunds; and
• streamlining the administration of donation tax credits.

The proposals aim to minimise the need for tax adjustments at the end of each year. Current year-end processes, such as personal tax summaries and IR3 forms, will be replaced with pre-populated accounts based on information that is provided directly to IRD. Consequently, individuals who only earn “reportable income”, such as employment income and bank interest, should have the right amount of tax deducted throughout the year via a tailored tax code. This will be verified by an automatic tax calculation at year-end, with any refund automatically paid directly to a nominated bank account.

Taxpayers with additional income, such as self-employment or rental income, or those that want to claim deductions, will still need to disclose this to IRD via the existing IR3 process. The proposed changes are expected to come into force on 1 April 2019, and will be adopted for the 31 March 2019 year-end process.

For charitable donation rebates, the planned changes will allow donation receipts to be submitted electronically throughout the year. The current IR526 year-end return will remain in place for those preferring this method. The option to electronically submit receipts will offer individuals greater flexibility and reduces the risk of receipts being lost or forgotten.

In addition to streamlining year-end filing processes, the Bill also aims to make it more straightforward for taxpayers to correct errors in their prior year tax assessments. If a taxpayer discovers that they made a mistake in a previous tax return, they will simply be able to include the amendment in the current year tax return if the amount of the error is equal to, or less than, both $10,000 and two percent of either the taxpayer’s taxable income or GST output tax liability. This will be more practical than the current system where taxpayers are often required to make a separate voluntary disclosure.

A further welcome change is in respect of IRDs process governing private binding rulings. The binding ruling process allows taxpayers to seek confirmation from IRD of the stated tax consequences of specified commercial arrangements. However, the current process is costly and typically only used by large taxpayers. The Bill seeks to simplify the application process, and also reduce IRD’s fees for providing a ruling, with the hope that smaller entities and those with lower value transactions will be encouraged to use the system.

The changes being introduced by the Bill will result in fundamental changes to the way individuals are taxed.

The idea of a four-day working week might previously have seemed like a dream, but one Kiwi company is looking to make it a reality. Perpetual Guardian recently concluded an eight-week trial of the shortened working week, with managing director Andrew Barnes, claiming it was a “massive success”, adding that he wants it to become a permanent fixture.

The trial began in March, with employees enjoying ongoing three-day weekends with no sacrifice to their salaries or adjustment to their normal daily working hours. To measure the results of the trial, Barnes invited academic researchers to observe the impact on staff productivity. The results found that staff stress levels dropped by 7%, work life balance improved by over 20%, and team engagement levels improved. The results disproved original suspicions that staff may become more stressed as they worked to achieve the same objectives in a shortened timeframe.

Christine Brotherton, head of people and capability for Perpetual Guardian, added that the trial allowed staff to bring a similar level of focus to home life as they did to work. With their extra day off, staff could complete their “life admin” tasks and were able to better engage in hobbies, meaning that they were often more energised upon their return to work.

Despite the idea being novel in New Zealand, similar trials conducted overseas generated comparable results. In Sweden, working hours for nurses were reduced to six-hour days with results showing increased job satisfaction and a drop in sick leave. Amazon is also trialling a reduced working week for a selection of employees. The employees working a 30-hour week are entitled to receive the same benefits as full-time employees, but only earn 75% of their salary.

Alternatively, an increasing number of companies have looked to introduce “compressed” working weeks. A “compressed” working week still requires employees to work 40 hours per week, but over just four days. Advocates of the “compressed” week argue that productivity is increased, while simultaneously decreasing overhead costs. However, critics consider that increasing the number of hours worked in a day could increase health and safety concerns. With a growing number of cases coming before the courts citing overwork as a cause of adverse health effects, increasing the number of hours worked per day may be met with resistance. 

Employers looking to implement any changes will also need to consider the legal ramifications. Current employment law is very much focussed on the number of hours worked, hence for a 4 day week or compressed hours to become common place, legislation would need to change accordingly. Logistical issues are also likely to provide challenges in terms of when staff might choose to take their day off, particularly in manufacturing and service sectors.

While the results of the trial have no doubt got employees excited by the idea that a four-day week could become a reality, it is likely five-day weeks will persist until the legal fish hooks can be addressed. In the meantime, we can all look forward to our next long weekend in October.

There’s an old truism that you have to keep telling people they are doing the right thing when they buy from you and in today’s noisy marketplace they like to know more than just what you do. They want to know who you are, what you stand for and why you matter in their lives.

Successful companies and brands consistently, clearly and appealingly articulate in every word and deed their vision, values, strategy, culture and personality to influence and engage people’s hearts and minds and earn trust, deliver results and build a reputation as an asset.

Can you do that? Or is your business story locked inside you or scattered in disconnected pieces across different social, print and digital media? Are you unsure about what to say and how to say it your way and in your own voice?  You would be in very good company as a leader if you answered yes and recognise that you are struggling to communicate effectively and inspirationally to galvanise action.

There’s a solution. You need a coach to work alongside you – one on one or with your team – to build your communication skills – and confidence – and find the voice, hooks and memorable, meaningful, relevant stories to influence and guide what people experience, think, feel and believe about your brand – and the company behind the brand.

Here are some of the skills you and your communications coach can work on:

• Expressing your vision and values with a great story and messages that can be told again and again wherever people meet your brand and company
• Articulating your strategy, goals and ideas in a simple, appealing way
• Finding your voice and tapping into personal stories and experiences that shape your brand
• Telling stories and sharing experiences that inspire and motivate customers and employees to take action and give them reasons to trust you
• Speaking with confidence in formal and informal situations to excite discovery and build awareness and recognition of your company and brand offer
• Building high performing teams that share the vision, live the culture, know what’s expected and are motivated to deliver the goals
• Strengthening relationships with your colleagues, customers, communities of influencers
• Projecting the qualities and capabilities that distinguish you as a leader – or prospective leader and influencer
• Listening, feedback and conversation skills
• Having confidence to be your whole and real self.

To get advice & help email susan@robinson-derus.co.nz to see how we can custom-make a coaching programme that transforms you into a great business storyteller able to bring to life your company, brand and your own personal brand. You can read Susan’s story at www.robinson-derus.co.nz

When an asset, such as a bach or a boat, is used both privately and to generate income, prescriptive rules exist within the Income Tax Act that determine the extent to which a tax deduction is available.

Expenses broadly fall into three categories: fully deductible, non-deductible and apportioned. An expense is fully deductible if it is incurred solely to generate taxable income. Non-deductible expenses arise directly from any private use of the asset. Finally, apportioned expenses arise when an expense relates to both income-earning and private use of the asset, with a tax deduction available based on the number of days the asset is used to derive income, as a proportion of the total number of days the asset is used for either purpose.

Private use is defined as the owner’s personal or family use of the asset, and any other person who pays less than 80% of the market value for the use of the asset. For example, if a bach is rented to your sister for full market rent and a friend for 70% of the market rent, both instances qualify as private use and the income is exempt from tax. Similarly, expenses relating to this use of the asset are non-deductible.

Keeping a bach in mind, an example of a fully deductible expense would be advertising costs. Conversely, if the owner of the bach purchased a kayak that was unavailable for tenant’s use, the cost would be non-deductible. While general holding costs such as rates, general repairs and insurance are apportioned based on the proportion of days the asset is used to derive income.

If a net loss arises from the asset, that loss is typically ring-fenced and cannot be offset against other income. Instead, the loss must be transferred forward and offset against future profits from the asset.

In addition to Income Tax, there are separate GST rules that apply to mixed-used assets. GST recovery is broadly based on the anticipated split of private / income use. However, unlike the income tax rules summarised above, GST can be recovered on use by the owners and their family, providing market value is paid for use of the asset. Hence, different recovery percentages can arise between income tax versus GST.

Before you consider putting the bach up for rent, it is worth checking whether the mixed use asset rules will apply and what records you need to keep to ensure you can apply the rules correctly.